The announcement by Satellite Information Services (SIS) that there will be a 7.8% increase in fees to UK betting shops for the supply of pictures and data from 1 September 2010 should not have come as a surprise to anyone who has been following The Racing Post this last 12 months.
On 22 July 2009 Arena signed a five-year term with SIS commencing 1 January 2012. Total revenues receivable under the contract are estimated at £106m – compared to the current contract that delivers £55m over its five-year term. SIS made advanced payments of £32m receivable by Arena over the next two years.
The increase, which only reflects the media costs and does not take account of the inflationary increase in SIS transmission charges, could not come at a worse time for the High Street betting shop.
With over the counter gross profits in decline due to the recession, the growing unpopularity of the horse racing product, and lower margins, the extra burden of increased payments through media rights will hit hard.
Media payments are a fixed cost. Regardless of how much money the betting shop takes, the cost is the same for all, which is why these costs are particularly onerous for the small to medium sized units.
Inevitably the rate of shop closures will increase and the burden of media rights will be borne by the ever decreasing number of shops that remain.
It used to be that when a shop closed the competitor mopped up the business but this does not appear to happen these days. The business just seems to disappear, some will go to the Internet and some customers will just stop gambling.