The betting shop and horseracing

UK horseracing is getting more out of the betting shop than ever thanks to media rights and the horserace levy. But Minister Tracey Crouch MP will at sometime in the future bring in a replacement to the levy. The question arises, what form will it take and how much will be paid by the bookmakers? In my experience nothing is ever replaced where the new cost is less (or even the same). If that were the case, racing would not ask for it.


The number of betting shops is in decline. If new draconian regulations are passed on Fixed Odds Betting Terminals (FOBTs), then the decline will accelerate.

Shops used to be sited in localities that were good for the “over the counter” punter catchment, near to a good pub, restaurants, post offices and banks where there is footfall and a modicum of leisure facilities, enabling people to congregate. As the high street started to lose sales to internet retailers, shops became vacant. Rents fell and bookmakers started to think more about trading on the High Street.

The FOBTs made that move possible – a reliable, weather-proofed business product that produced reasonably consistent returns. The terminals, coupled with lower rents, caused a migration from the back street to high street.

Bookmakers are now trading next to the likes of Top Shop, Tesco Express and Costa. Members of Parliament do not seem to like that! So having legalised the business in 1963 where should they trade? In the middle of a field where no one lives or works?

I suspect that some form of restriction on FOBTs may be introduced that will cause the closure of shops.

The fall out will hit bookmakers and racing. High street shop leases taken in good faith on reasonably long tenures will be closed, and landlords will be invited to offer reversed premium terms in which to hand back the lease.

Racing will be hit quite hard because experience shows that when you have three shops in a locality and one closes, the revenue from the closed shop seems to evaporate into thin air rather than going to the remaining shops. Some revenue maybe picked up, but not much. The two shops left will not match the turnover of the three shops had they all stayed open. So there will be a levy loss, but more important these days is the loss in media payments which are collected on a per shop basis. Racing will have to cut its cloth accordingly, something it finds hard to do.

Betting shop windows given over to advertising horse racing will disappear, the local newsagent near the closed betting shop will sell fewer copies of the Racing Post and interest in racing will decline.

You would think that given the problems and the symbiotic nature of racing and betting that both would be able to settle the issue pragmatically. It has not happened in fifty years, I doubt it will start now. The falling value of betting shops demonstrates there is no more fat left to eat on the meat of betting shop profits.

by Warwick Bartlett

Croatian lottery boosted by online casino

When the online sports betting market opened in Croatia in 2010, the national lottery was late to the party, launching three months after the World Cup, after its private bookmaker competitors. But since then, the lottery has been making the most of the opportunities afforded by interactive channels.


When the lottery did launch its online sports book it demonstrated the power of its brand, with the Internet channel showing solid revenues. Interactive growth was further stimulated by launching online-only e-instants.

The lottery first showed an interest in online casino games three years ago, but it was only in the first half of 2015 that online casino games were launched with heavy advertising even before the launch. Undoubtedly helped by the fact that the lottery has no locally-licensed competition in this segment of the market, the iCasino has proven successful.

The land-based casino industry in Croatia is very fragmented, with the vast majority of operators having only one venue. It is the smallest sector by revenues, with most venues catering to both domestic patrons and tourists and located on the coast. The licensing fee is also very high, with the cost of an Internet licence (HRK 3 million≈€ 400,000) equal to the fee for six land-based casinos. For this reason GBGC believes there will be limited competition for the lottery in the Internet casino market in the short term.

The lottery has used its monopoly position in the Internet casino sector well, with the restructuring of the entire company, closing down of unprofitable land-based gaming venues and focusing on profit-making enterprises.

Thanks to the launch of the iCasino, the lottery’s casino GGY doubled in 2015 to HRK 28 million. The iCasino revenues of HRK 18.9 million in the first year were more than double the land-based casino revenues, even though the iCasino was not operational for the entire year. The iCasino’s margins are also much lower than in the land-based casino.

The success was helped by very low minimum stakes of just HRK 1. For now, the online casino offers four types of Roulette, three kinds of Blackjack, 46 slot games and four kinds of video poker, with the offering constantly expanding.

The introduction of the iCasino in 2015 has helped increase the share of the total lottery’s sales made over the Internet from 22% in 2014 to 47% in 2015. It seems that, with the iCasino, the Croatian lottery has finally hit the jackpot.

Betting shops hit rock bottom

A deal has finally been announced for the sale of 359 betting shops from the newly-merged Ladbrokes and Coral to comply with CMA regulations. The price is earth-shattering. Not because the price paid was high but because the value of a betting shop has fallen so much.


Betfred is to acquire 322 shops for £55 million and Stan James 37 shops for £500,000. Of the shops being sold, 185 shops are currently trading as Ladbrokes, and 174 shops under Coral.

Recent press reports suggested the sale would achieve a valuation of £100 million.

Carl Leaver, the CEO of Coral, is on record as saying that a higher price was offered but in the current regulatory uncertainty they were unable to proceed. GBGC understands that private equity, various bookmaking concerns, and a consortium led by Chris Bell, the former Ladbrokes’ chief executive, all expressed interest. But the bigger picture is the completion of the merger and the time delay in applying for operator’s permits with the Gambling Commission for new entrants might have held that up. Shareholders have had to take less than they would have got if time had been on their side.

So far as investors are concerned the sale of the 359 shops must raise serious questions about the value of the estates of both William Hill and the newly merged Ladbrokes and Coral, where two thirds of profits come from the retail estate.

Betfred has paid GB£ 170,807 per shop (contrast that with the GB£ 512,000 it paid per shop in the Tote deal in 2011) and Stan James paid just GB£ 13,500 per shop in the deal. Betfred will now become a major force in retail betting with 1,700 shops.

As GBGC has said before, regulation, taxation and media rights have taken their toll on profits which in turn has reduced valuations. The message to those wishing to take more from bookmakers is clear: there is nothing more they can give. It also offers a lesson for e-gaming: what happens to the land-based business can also happen to the internet too.

by Warwick Bartlett

GCHQ raises idea of UK firewall

The UK’s new National Cyber Security Centre, a division of Government Communications Headquarters (GCHQ), is due to open this month (October 2016). The centre has been given the task of creating a “cyber force” and being the “authoritative voice on information security in the UK”.


One element of the centre’s defence against cyber attacks being considered is a “national firewall” to block incoming attacks. The idea was outlined by Ciaran Martin, GCHQ’s director general of cyber security, at the Billington CyberSecurity Summit in September 2016.

As well as being used by government agencies to protect themselves, Martin also suggested the national firewall could be used by commercial internet service providers in the UK:

“Finally, we’re exploring a flagship project on scaling up DNS filtering: what better way of providing automated defences at scale than by the major private providers effectively blocking their customers from coming into contact with known malware and bad addresses? Now it’s crucial that all of these economy-wide initiatives are private sector led. The Government does not own or operate the Internet. Consumers must have a choice. Any DNS filtering would have to be opt out based. So addressing privacy concerns and citizen choice is hardwired into our programme.”

When national firewalls are mentioned, China is often the first jurisdiction than comes to mind. Such initiatives can start out with the most laudable of aims “in the national interest”. But over time the scope of what is in the national interest could be broadened to cover internet activities, like gambling, that are deemed not to be “good” for society.

If it is developed for the UK, a national firewall just makes it that bit easier for a future UK government to control the internet traffic its citizens can view.

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