From 1 April 2019 the maximum stakes on FOBTs will be drastically reduced to GB£ 2 a spin. In anticipation of this event, a trial has been conducted in a number of betting shops in the Birmingham area with the new lower stakes in operation.

It is rumoured that bookmakers have seen a drop in gross win of up to 55% across the shops taking part in the trial. If accurate, this equates to an industry-wide loss of around GB£ 1 billion.

Independent bookmakers in the area who did not take part in the Birmingham trial reported an upsurge in machine revenue. It seems punters have not engaged as well as expected with the new machines intended to mitigate the lower stakes.  

What was noticeable was that “over the counter” (OTC) business in both the independents and the major bookmakers did not materially increase during the trial.  This has significant implications for horse racing, SIS and even the Racing Post.

It was supposed that the internet would be a major beneficiary of the stake restrictions. But it appears that shop customers have been prepared to travel to shops outside the trial just to play the unrestricted FOBTs.  It could be the appeal of betting in cash or perhaps some customers have no access to a bank account (estimated to be 1.5 – 2 million people in the UK).  

(Betting shop companies that offer a cash card to the unbanked thus enabling internet play could do well.)

Interestingly, clothing and furnishing Next plc announced its results in March and said it planned to shut stores in favour of the move to internet sales but that some high street shops would remain open at a marginal loss to enable “click and collect” sales.  Retail outlets, including betting shops, still have a purpose.

There remains the inconsistency, however, that after 1 April 2019 a gambler cannot bet more than GB£ 2 per spin on a FOBT in a betting shop but that restriction is not in place online.  And if the government was hoping to see an increase in OTC horseracing stakes, early results suggest it will be disappointed. 

Curse of the FTSE

For public companies, admission to the FTSE 100 index carries a great deal of kudos. For gambling companies, however, it seems to be a curse.  GVC Holdings left the FTSE 100 in March 2019 after entering at around 70th position.  Kenny Alexander, Chief Executive of GVC, said it would soon be back but a few days later sold a large proportion of the shares he holds in the company. 

PartyGaming has been and gone and is now controlled by GVC Holdings.  William Hill, once ranked around 90th, is now #126 in the FTSE 250. Paddy Power Betfair is hanging on at position #97.  

I recall a business school professor telling me that once government starts to take an interest in your business or sector, sell!  No good ever comes of it.

by Warwick Bartlett