Looking through the published accounts of both William Hill and Ladbrokes, the market leaders in retail betting, it is evident that Ladbrokes has been drawing ahead of William Hill in revenue per Fixed Odds Betting Terminal (FOBT).
A number of factors could be at play which influences the revenue per machine:
• Shops located in the south of England have higher revenue than shops in the north, the distribution of the estate would affect revenue.
• Opening hours: if shops stay open longer then there is more time for customers to play. This has to be balanced against potential overtime paid to employees, unsocial working hours leading to hiring problems, risks with security, higher energy costs.
• The actual machine design: more than 80 percent of play is on roulette but other content and cabinet design are still important influences.
• Number of machines per shop.
Ladbrokes does pay quite a lot for exclusive content but so far as revenue per machine is concerned it seems to be paying off.
Chart 1 below shows the differing performance by Ladbrokes and William Hill in terms of gross win per terminal. The recent interim results saw William Hill report a gross win per terminal figure of £998 whilst Ladbrokes reported a figure of £1,083; a performance gap of £85 per terminal per week.
Chart 1: Machine gross win per terminal trends
The number of machines per betting shop (machine density) can indirectly influence the gross win per terminal figure. Both Ladbrokes and William Hill have been looking to maximise their allowance of 4 machines per LBO and, therefore, it is equally valid to consider the machine gross win per shop alongside per terminal comparisons.
Despite changes in machine density over time, the machine gross win per shop trends show a similar picture with Chart 2 showing a very similar trend to chart 1.
Prior to 2012, Ladbrokes had underperformed on machines relative to William Hill. During 2012 and 2013, the machine performance of both companies was much more aligned. From the start of 2015, however, the Ladbrokes machine performance has seen sustained growth which has not been evident in the William Hill estate.
Chart 2: Machine gross win per shop trends
The most recent interim results reported that William Hill have around 9,300 gaming machines in their UK retail estate. With a performance gap of £85 per terminal per week, closing this gap to Ladbrokes would be worth over £40 million per year in gross win to William Hill. Needless to say that if William Hill were able to restore the performance premium they enjoyed over Ladbrokes prior to 2012, the true value could even be double this figure. But this takes no account of profit, and that can be determined by an offset of longer opening hours should it apply, and what the operator is paying the machine supplier, and the content on those machines.