The never ending anti FOBT Campaign

The bookmakers have come out of the Triennial review with flying colours, having presented a case based on fact rather than misguided rhetoric. But this has not pleased the Daily Mail, Guardian and various lobby groups that are content in telling people how they should live their lives according to their principles.

The other complaint is that the UK High Street is awash with betting shops. While there does appear to be more shops the fact is that there are some 6,000 fewer than there were in the 1960s. It is just that they are more visible nowadays. 

For those that are impatient in allowing the market to work and to let the number reach a level desired by the public I have a useful business comparison for you that should set your mind at ease.
The country’s largest operator of ‘pop shops’, or pawnbrokers, is Albemarle and Bond plc. They had a nice business producing good profits. Pawnbrokers lend against the value of gold jewellery, so from July 2008 to July 2011 the price increased from $750 an ounce to $1800 an ounce – an increase of 140%. So gold purchased during this period would be sold at the profit margin plus the price increase of gold making super profits.
The price has now fallen from $1800 to $1250 a fall of 30%. Albemarle and Bond is now losing money yet they managed very well back in July 2008 so what has changed? 
The answer is that they borrowed money to buy and expand into more outlets. They took long leases in High Street position thinking that the good times would last forever. Their competitors followed suit and three things happened: 
1. The market became saturated. 
2. People ran out of gold to pawn, many had sold it through ‘cash4gold’ online. Volumes dropped. 
3. The gold price fell so the loans made were less and the interest paid did not cover the overhead. 
Does this ring a bell?
Bookmakers used to site shops where there was a good pub because betting and drinking were complementary to each other. Not anymore. Bookmakers have moved onto the High Street and are now paying big rents. The market in such locations is becoming saturated even though the number of shops is down from historic highs.
Basing the location of a business to suit one product is fine so long as that product is sustainable and it should be as long as the Government continues to base decisions on fact rather than misinformation. We do have a coalition Government, however, and all parties are within a hair splitting them from winning the next election. In such circumstances it is easy for even the strongest Governments to wilt.
So what is the answer? It is not easy, it really is not. 
Bookmakers could agree a code of practice limiting the number of shops on the High Street. Sounds reasonable except it would be illegal under competition law. Powers could be given to local authorities to restrict numbers through planning. Not a good idea when it comes to betting. Local politicians would seek to win votes by whipping people up into an anti-gambling frenzy based on perceptions rather than fact.
In other countries that we look at shops are restricted according to location for example, proximity to a church or school. Insane of course, a major High Street near a church would have no betting shops at all and that would lead to illegal gambling.
I think there are two choices. Bring back the demand test, it had its faults, no denying that, I recall applying for a licence in Dudley, Worcestershire where the majority of magistrates were Methodist, I was 100/1 from the outset. You could have presented the most perfect evidence it would have made no difference the result was in before you got to court.
Alternatively you can let the market work, and it will, because it always does, but it does take time. Patience is a virtue.
 

Gambling in Europe: winners and losers in 2013

The end of 2013 cannot come soon enough for several sectors of the European gambling market. Many gambling operators have suffered tough times over the last 12 months as the impact of the Eurozone crisis continues to weigh heavily on consumer confidence and spending on leisure activities. But even though the gambling sector wants to say a quick farewell to 2013, it might not want to welcome 2014 much more warmly.

Global Betting and Gaming Consultants (GBGC) forecasts that the entire European gambling market’s revenues will grow by just 1.7% in 2013 to US$ 120.3 billion (EUR 90.0 billion). Within that total figure some sectors perform better than others, as do certain countries. For example, revenues from gaming machines (outside casinos) will fall by just over 0.5% in 2013 but lottery revenues will grow by 0.5%.  

GBGC Europe gambling growth


These pan-European figures, however, do disguise the fact that some countries are performing a lot better than others. The dire economic performance in Greece has seen the country’s total land-based gambling revenues fall from a peak of EUR 2.15 billion in 2008 to an estimated EUR 1.26 billion in 2013. That represents a precipitous fall of 41% in the space of six years. Greece’s casinos have suffered particularly badly in 2013 and could bring in only around EUR 315 million this year. 

That would be a decline of 60% from the 2008 peak as tourists stay away and local consumers have less to spend.
Spain is another country that finds itself in a similar sinking gambling boat to Greece in 2013 but on a much larger scale. Spanish gambling revenues peaked at EUR 10.2 billion in 2008 but were only EUR 8.7 billion in 2012 and could fall below the EUR 8 billion mark in 2013.
Spain’s domestically licensed internet gambling sector is a good indicator of the state of the market. Prior to the new licensing regime being introduced in 2012 many online gambling companies opted to pay back taxes on activities in Spain to ensure they could continue to participate in Spanish e-gaming. Bwin announced that it would pay EUR 25.6 million of taxes. 

Sportingbet declared that it was in discussion with the Spanish tax authorities and will pay EUR 14 million in retrospective taxes. 888 announced that following discussion with Spanish authorities it would make a one off payment of EUR 7.4 million. Some of those companies will be wishing they had not been so eager to pay those taxes, given the performance of the market in 2013. No sector of the newly regulated e-gaming market has shown the sort of growth in 2013 – the first full year of operations – that many of the licence holders would have wanted. In addition, the high taxes the licensees are paying on the revenues they do make are also hurting their profitability.



GBGC Spain Online Sports Betting GGY

Looking across Europe as a whole, GBGC forecasts the internet gambling market will grow by 6% in 2013. This growth seems quite healthy when set against the economic performance of some European countries in 2013. But in GBGC’s opinion e-gaming growth should have been higher given the extent of local regulation that has taken place in jurisdictions like Denmark, Spain, and Germany in 2012 and 2013. GBGC estimates that 57% of European e-gaming revenues will come from locally licensed operations in 2013, up from 55% in 2012. Again, the fact that 43% of revenues are still coming from offshore jurisdictions suggests that the new regulatory models have not worked.



GBGC Europe Locally Licensed Internet Gambling

The online poker sector in Europe has had a difficult 2013. Many of the regulated markets have performed below expectations, particularly France and Spain. But offshore poker operators have also seen negligible growth overall. GBGC forecasts that the total online poker market in Europe will fall by 4% to 5% in 2013, with a GGY of US$ 2.7 billion (EUR 2.0 billion). In 2014 the market will grow by 2% and then be static for subsequent years. 



GBGC Europe Online Poker

The crisis in the Eurozone has bought mixed blessings for internet gambling operators. The governments in Europe have turned to gambling as a way to raise tax revenues and have been forced to consider regulation of e-gaming, whereas previously they were strongly opposed to it. But the governments’ need for cash has meant they have set the gambling tax rates too high, so the newly regulated markets have not been a great (profitable) success for many licensees. It does not seem as though 2013 will bring an end to this trend. 

In 2014 Portugal is planning to introduce regulation for internet gambling and it will almost certainly follow the likes of Spain and set a gambling tax rate of 20% – 25% of GGY. 2014 is also the year when the point of consumption tax at 15% of GGY is introduced in the UK, reducing the profitability for many operators in one of the largest and most competitive European e-gaming markets.
Certain individual companies have had what they would call “transitional” years in 2013 and 2014 will have to see them start delivering on their new strategies and technology. 

Ladbrokes is a prime example of this. 2014 will have to bring about a change of fortune in its digital division after several investor warnings about its poor performance. A crucial part of the recovery will down to Ladbrokes’ deal with Playtech and, to a lesser extent, what advantage it can gain through the Betdaq betting exchange it acquired. Betfair, meanwhile, is going in the opposite direction and in 2013 has been expanding it fixed-odds betting service, as it diversifies away from its betting exchange. Bwin.party is another company that began implementing a new strategy in 2013 with a new “volume to value” plan. It also unveiled its new Party Poker software in late 2013. A consequence of these changes has been a poor financial performance for the three companies. Ladbrokes’ profit before tax fell 28% to GB£ 10.8 million (EUR 13.0 million) in the first half of 2013. 

Betfair and Bwin.party both posted pre-tax losses. So the new year will be an important one for all of the companies because their plans will have to bring about substantial improvement.
But GBGC does believe that 2014 will be an improvement upon 2013, if only for the fact that 2014 is a World Cup year. The football tournament in Brazil will provide a marketing boost for sports betting companies and will help increase the number of new accounts that are opened. Some surprise results in the tournament would also help gross win margins. 2014 will also present new opportunities in both the land-based and online sectors. Several regulators in Eastern Europe are bringing in legislation for internet gambling, which continues the process of domestic licensing seen in Western Europe. Elsewhere, Cyprus is planning to issue a licence for a large casino resort and Ireland has legislation to allow a number of smaller gaming venues. But only a sustained recovery in the Eurozone will help bring growth back to the struggling gambling markets. Gambling is a discretionary spending activity and is underpinned by consumer confidence. 

The best, but least practical, option for certain operators might be to go into hibernation for a few years, emerging again in 2018 when the Eurozone problems might have lessened, if not been resolved, and also just in time for the next World Cup.   

GBGC Global Gambling Report Updates December 2013

GBGC Global Gambling Report Updates
The 8th edition of the Global Gambling Report – Raising The Stakes includes the following new features and updates

• Full global gambling appendices for 2011 (sequence now runs from 2007 to 2011) 

• Updated gambling forecasts until 2017 
• Key Markets Database with data from 2001 to 2017f (in local currency and US$) 
• A new “at a glance” spreadsheet” of operators by category for each jurisdiction 
• Gambling spend per capita 
• More photos of gambling outlets and venues
http://www.gbgc.com/2013/04/global-gambling-report-8th-edition-raising-the-stakes/ 
The report includes company summaries for the likes of: Camelot (UK), Ladbrokes (UK), William Hill (UK), Churchill Downs (US), Codere (Spain/Latin America), Las Vegas Sands (US), OPAP (Greece), SJM Holdings (Macau), amongst others.

Updates include:
Ongoing updates to the country summary data – incorporating the latest population estimates and economic performance 

Asia 
China: the IPO of lottery agent 500.com; Cantor Gaming opens a lottery club 
Japan: new football matches for the BIG lotto
Macau: gaming tax and government budget 
Malaysia: government budget and a possible increase in gaming taxes 
Singapore: developments on plans for internet gambling regulation 
Sri Lanka: news on the proposed casino resort investments
  

Europe 
Cyprus: new licence holder might get a temporary licence 
Germany: issuing of sports betting licences 
Gibraltar: updated list of licence holders 
Isle of Man: updated list of licence holders
Italy: updates on the machine fines for operators; new range of sports bets permitted; possible plan to licence software suppliers 
Poland: lotteries to go online; Totolotek begins offering internet betting 
Russia: further raids on illegal gambling; Altai grand casino plans 
Spain: internet gambling data added for the third quarter of 2013 in Spain 
Turkey: lottery privatisation plan returns; Intralot takes stake in lottery agent Bilyoner 
UK: the agreement of the 53rd Levy; Gala casino sale; review of gaming machines’ stakes and prizes
  

Latin America 
Colombia: Sun International’s plans in the region 
Panama: Sun International’s plans in the region
  

Africa 
South Africa: 2013 data by province for betting, casino, gaming machines, and bingo
  

North America 
US Intro: updated with 2012 and 2013 data where published 
Alabama: Wetumpka casino to open in mid-December 
Arizona: Internet cafe raid in Flagstaff 
Kentucky: preliminary lottery data added for 2013; keno launched 
Delaware: revised 2012 data for sports lottery, casino and lottery; 2013 data added 
Minnesota: 2012 data added for racing and card rooms; 2013 preliminary lottery data 
Montana: Montana Expo Park holds live racing after 2 inactive years, similar plan for 2014 
New Jersey: internet gambling goes live in the state of New Jersey 
Native American gaming updates for: California, Alaska, Michigan, Arizona, Wisconsin et al.

Reverend Flowers and lessons for gambling regulation

Reverend Paul Flowers is the hapless man at the centre of the recent Co-operative banking scandal that has brought the ‘ethical’ bank to its knees. The Rev Flowers is a Methodist Minister. You will be familiar with his church: they don’t like drinking alcohol or gambling and oppose any legislation that relaxes the law on either. He was supposedly qualified to run a bank because he worked for NatWest when he was 19 years of age for four years. When questioned by MPs he said “I would judge that [working for Nat West] experience is out of date in terms of the needs of contemporary banking.” Few would disagree.

He then went on to tell the select committee of MPs that the Co-op bank’s balance sheet was worth £3 billion in assets when the answer was actually £47 billion.
Then we come to his personal misdemeanours. The list is long and not necessary to repeat.
But the question I ask is what were the regulators doing who are supposed to interview the applicants for a senior post at a bank, scrutinise their past performance and history to see they are fit and proper and have the ability to run a bank.
The answer might be found in the dog collar. 

Men of the cloth are supposedly upright and proper and that alone seems to persuade people not to investigate as well as they should.
Janice Turner wrote in The Times that the Co-op should return to its Methodist roots and inspire the fight against drink, gambling and addiction. Of course she had to draw attention to the number of betting shops on the High Street, Wonga and the 2005 Gambling Act which she says allowed all this. In fact it did not. It was the gross profits tax which created the value punters like so much on fixed odds betting terminals (FOBTs).
Turner urges Labour to turn to its Methodist roots, something I doubt Ed Milliband will do. 
From 2007 to 2010 the number of Methodist churches fell by 4%, membership by 10%, the community roll by 12%, baptisms and thanksgivings by 7%, marriages and blessings by 12%, average adult Sunday attendance by 7%, and average adult midweek attendance by 11%. The Methodists are trying to sell a religion with which no one can identify. No wonder no fun makes Jack a dull boy. 
The problem with excessive regulation, as I have said before, is that the consumer feels protected and does not do their own due diligence.
In recent years the UK gambling industry has seen the payout to customers reach an all time high because of competition between operators and with very high standards of probity. But the sector is now being exposed to more regulation, red tape and total nonsense that benefit no one, least of all the consumer.
Can anyone tell me please what benefit the UK’s Gambling Act 2005 has had from the gambler’s perspective? In what way is he better off because of it? You can email me on warwick@gbgc.com 
Compliance with the Act is taking on new heights as we now approach the regulation that will surround the introduction of Point of Consumption Tax. Respected gambling lawyer Peter Wilson tells me that the proposed new Act will require:
– that all software suppliers must be licensed in the UK as well as the operator;
– The proposed social responsibility code means that operators will be responsible for contractually obliging third party suppliers to comply with all the LCCP and they commit an offence if they don’t have this in their contracts and act upon it.
The irony is that the Rev. Paul Flowers and his followers have probably been advising Government about gambling law. So what does this debacle mean for the finance industry and gambling? More not less regulation.
Government has not cottoned on yet that the regulators cannot put a plaster on every sore, stop every misdemeanour before it happens and regulate accordingly. Strange as it may seem, the regulation of the finance industry often spills over to the other transaction based industries so when you think bankers are getting their just desserts just remember more, not less, regulation will be coming your way too.

Yield makes Ladbrokes look attractive

The fortunes of Ladbrokes seem to be of continued interest in gambling and City circles, almost like a barometer of the health of the wider sector. I suspect the interest in Ladbrokes has always been there since Cyril Stein ran the business in the 1960s when they had a high marketing and PR profile.

I was talking the other day to Paul Usher the knowledgeable and previous finance director of Ladbrokes. He said that when he joined the company Ladbrokes was the 28th biggest company in the UK they are now 180th in the FTSE 250 index. 

The one index where Ladbrokes has been a member since 26 July 2005 is the FT30 index – the first and oldest index in the world.
Michael O’ Higgins, a well known investment analyst on Wall Street, invented a stock picking system that picked the 10 highest yielding stocks from the thirty stocks listed in the Dow Jones Industrial Index. It was nicknamed the dogs of the Dow. 
Newspapers in the UK have tried to copy the formula using the FTSE 100 index but they are using the wrong index. The Dow has 30 stocks and its purpose is to reflect the performance of the US economy through the share price movements of companies that are selected.
The correct index to use for the UK to follow the system is the FT30. Why? Because with 100 stocks you will be overbuying on one bombed out sector.
Higgins has written two books on how the system works but in a nutshell this is it: stocks with high yields have been oversold and when the market realises this they will bounce back. In the meantime you are collecting a really good dividend. At the end of the year you look for the ten highest yielding stocks again and replace the ones that are not in that category.
Does it work? Yes, the returns have been stellar. 
That is until 2007 when you would have done your brains. The O’Higgins system did not take account of a global banking crisis the likes of which we have not seen before. That is the problem with systems, they take account of circumstances that have happened in the hope that they will repeat.
I have another theory. Investors in those high yield stocks have been burned and they force management into action and use every resource to get the company back to where it was. 
Applying this system to the FT 30 index Ladbrokes is listed fifth on the highest dividend payment list with a yield of 5.17% and according to the system is a buy.
The last time I wrote about Ladbrokes I said the shares were not for widows and orphans. At that time they were £1.90 and they duly dropped to £1.60. That led to the purchase by Teddy Saggi (Playtech) of 3% of the stock and since then we have seen the price move back to £1.90 only to fall as a plethora of poor results and profit warnings from gambling companies hit the press.
What will cause Ladbrokes to rise from the ashes and make the O’Higgins system work? Will it be a management restructure? Improved performance because of Playtech, or a takeover. I am betting on a takeover.

Trouble in Manchester gives gamblers a tough weekend

This weekend’s football had some surprising results which, I’m presuming, many people would have not bet on at all. Only two draws this weekend, but that was easily replaced by four title favourites losing points in games which should cement their title bid.

First scalp of the weekend happened at Old Trafford. They faced a Newcastle side, who were much fresher than the hosts as they had only two games in the week to United’s three. Although Newcastle’s season has been going from strength to strength, they were still placed at odds of 6/1 to take down the once almighty United. United were considered heavy favourites at 8/15, but their loss to Newcastle was also the gambler’s as Newcastle eventually took all three points with a 1-0 score line. 

Next game had two huge relegation candidates as Crystal Palace played Cardiff at home. Crystal Palace only managed their first home win on Wednesday and were placed at 9/5 to repeat that. Favourites were Cardiff at 7/4, but, they didn’t have much of a say in the game and lost the game 2-0 to a rejuvenated Palace.
Liverpool then took on West Ham, two teams who are having very different seasons to their last. Liverpool, looking like actual title contenders and West Ham, getting ready for the possibility of life in the Championship. 
So, it came as no surprise that the bookmakers felt that West Ham had little chance of winning this, giving them odds of 11/1 to do so. 90 minutes later and a Luis Suarez gave Liverpool a comfortable 4-1 win over the Hammers.
Next was the clash between Southampton and Man City. Man City have had a pretty bad season on the road, only gaining 7 points from 7 games. Southampton though, have had a good season at home, despite only being in the premier league just under two years. 
Man City were still heavy favourites with odds of 3/4. It started off well with an early goal from Aguero, but, this was short lived and City ended the game with a draw with odds of 14/5.
The second scalp of the weekend took place at Stoke City, as they entertained Chelsea for the evening. Chelsea’s record is like Man City’s; excellent home form but don’t produce the goods away from home. This match ended up being quite similar. Chelsea were given odds of 4/7 to beat Stoke. Stoke were only given odds of 11/2 despite being at home. 
The game seemed like it would end a draw until a 90th minute winner from Stoke gave them all three points.
Final 3 o’clock game saw West Brom take on Norwich. West Brom were considered the favourites, with odds of 5/6 as Norwich are finding it hard not to concede at the moment. They’ve conceded 15 in their last 5 games, only managing to score 5. Still, the visitors ended up winning the game without conceding as the game ended 2-0.
Last game of the day had Tottenham travel to the North-East to face Sunderland. Even though Sunderland have won only one in their last 5 and only 2 games overall this season, they were given good odds of 7/2 to beat a strong Tottenham side. They started off well, grabbing the first goal, but Tottenham ended up winning due to an own goal from Sunderland. 
Sunday began with Aston Villa challenging a Fulham side who have had a run of 7 consecutive defeats. Despite this, Fulham were given odds of 7/4 to overcome Aston Villa. Villa were given 9/5 to do the same. Two goals in the first half for Fulham ensured the 3 points and ended that bad run.
Last game of the weekend had Arsenal entertain Everton. Both sides are in great form but many would argue that Arsenal are the better of the two sides at the moment. 7/10 to take down Everton and Everton given 19/4. The game seemed like it would be without goals until the 80th minute. Cheers were short lived for the home fans as Everton grabbed the equaliser to stun Arsenals title bid.
This weekend has been great for the bookmaker. Last weeks results were very poor for them, only 2 draws and favourites won their games, but, this week is definitely a winner in their eyes. The only thing they could have asked for is a few more draws.
 

Liverpool’s upset gives bookmaker little joy

Nearly 30 goals were scored in this weekend’s fixtures, an average of 2.9 scored in each one, but the problem for the bookmaker is that the majority were scored by the favourites which led to a bad weekend for the poor old bookmaker.

First game had Aaron Ramsey return to Cardiff for the first time in the premier league with high flying Arsenal. The league leaders, although away, were given favourable odds of 4/6 to take down Cardiff. Aaron Ramsey’s two goals helped increase Arsenal’s league position with a 3-0 win over Cardiff.
Everton then took on Stoke in a very one sided affair. Everton, definitely the better performers this season, were placed odds of 4/6 to beat Stoke City. Stoke, who haven’t won away yet this season, were placed at odds of 11/2. The game finished a very flattering 4-0 to Everton. 

Next had two teams who were early contenders for relegation this season, with each treating this as a six pointer as Norwich City took on Crystal Palace. Norwich City were the better placed team with odds of EVENS to take all 3 points. Crystal Palace have lost 6 out of 7 away games, so the 7/2 odds for winning seemed quite fair. In the end, Norwich looked the better team and deserved the 1-0 win. 
Next was the London derby between West Ham and Fulham. Derbies are always harder to call for the bookmaker, they always have a more eruptive crowd which can play a hand in deciding the game. The home side were given fairly low odds of 18/19 to beat Fulham, with Fulham 18/5 to beat them. The weekend seemed to be following a pattern as the favourites won again, another 3-0.
Last game of the early kick off had Aston Villa entertain Sunderland for the first time this season. Aston Villa were given EVENS to win, with Sunderland outsiders at 10/3. The game produced a boring display from both sides and the 31/10 odds on a draw proved victorious here when it ended 0-0. 
The late Saturday kick off had a strong Newcastle side take on West Brom. Newcastle had won every game in November before this game with their odds to complete the month at 20/19. West Brom, who only managed one win out of their last six games, were placed at 3/1. A draw seemed more likely, ranked at 28/11, still, this was not to be as Newcastle wrapped up all 3 points to complete a winning month with a 2-1 score line.
Sunday began with a huge game between Tottenham Hotspurs and Manchester United. 

This game was obviously considered to be a tight one as Tottenham were given odds of 9/5 to overcome United and United given a more favourable 17/10. The bookmaker would have been happy with the 2-2 outcome at the end, although many may have stayed away from this one due to the strength of each sides.
Next game saw the only major upset of the weekend when classy Liverpool visited Hull City. Hull weren’t exactly enjoying the best form, losing 4 out of their last 5 games before this game. Due to this, they were given odds of 23/4 to take down Liverpool, despite being the home side. Liverpool, on the other hand, had been enjoying quite good form going into this game, with their odds placed at 8/13 to take all 3 points. Many accumulators must have been broken as Liverpool fell to a 3-1 defeat to Hull City to make the shock of the weekend. 

Chelsea then welcomed an outstanding Southampton team. Chelsea have been one of the teams of the season so far and were placed at 4/7 to take down Southampton. Southampton had lost their first game in their last ten last weekend but were given unfavourable odds of 6/1 to overcome them. Despite Southampton scoring the quickest goal of the season, 13 seconds into the game, Chelsea finished 3-1.
Last game of the weekend had Manchester City face Swansea City. Swansea seem like a team who are facing troubles balancing the Europa League with Premier League as they look nothing of last year’s team. They were given the task of facing the only team in the premier league who have a 100% record in home fixtures with odds of 12/1 to do so. Manchester City though, placed at 3/10, recorded their 7th home win of the season with a sublime 3-0 victory over Swansea.
This weekend was very weak for the bookmaker. Only two draws and one upset and one of the draws, Tottenham v Manchester United, seemed like a game which most neutral bettors would have avoided. Disregarding the Liverpool game, the teams most people expected to win, won, which closes a miserable weekend for the bookmaker.  

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