Could this be the final nail in the coffin for bricks and mortar betting?
After years of back and forth debates, in April 2018 the UK Government finally made the decision to reduce the maximum stakes on fixed-odds betting terminals (FOBTs) – with enforcement expected to occur in 2019. Within the terms of the crackdown, it was decided that those looking to gamble on an FOBT would be restricted to a maximum bet size of just £2 per spin. This is in stark contrast to the current state of play, which allows punters to wager up to £100 per spin, or £50 per spin without the assistance of a betting shop employee.
The key reason behind the Government’s decision to implement a significant stake reduction was in direct response to social responsibility concerns. In other words, it is widely believed that FOBT terminals are highly addictive, which is why the phenomenon is often described as the “Crack Cocaine” of gambling. One of the most vocal arguments from campaign groups was the sheer speed at which players could gamble. For example, virtual roulette – which is believed to constitute up to 90% of FOBT revenues, allows players to gamble at a rate of 20 seconds per spin.
FOBT profits keeping betting shops afloat
Prior to the introduction of FOBT machines in the late 1990s, the vast majority of betting shop revenues were derived from traditional markets such as greyhounds and horse racing. Moreover, sports betting, such as football, cricket and rugby, also played a major part in bookmaker turnovers. However, as per the installation of the Gambling Act 2005 – which is still the primary framework that governs UK gambling, betting shops were afforded the opportunity to install up to four FOBT machines per shop.
To put FOBT profits in to perspective, it is highly relevant to take a quick look at the statistics. Firstly, recent figures indicate that there are more than 34,000 FOBT machines located across almost 9,000 betting shops. This illustrates that bookmakers have fully utilized the provisions found with the aforementioned act. In terms of profits, it is estimated that in 2017 alone, FOBTs earned their respective betting shops more than £1.7 billion in gains. Furthermore, and potentially most importantly, this represents more than 50% of all betting shop revenues. Therefore, the recent UK ruling could have a seriously detrimental effect on the sector as a whole.
One of the key reasons for this is that FOBT machines are able to operate in a somewhat autonomous nature. Unless punters attempt to stake more than £50 per spin, there is no requirement to interact with a member of staff until the player decides to cash-in their winnings. Right up until this point, players simply need to insert cash in to the terminal, gamble and then print their winning receipt. What this means from a revenue perspective is that betting shops do not need to utilize resources on staff, insofar that little interaction is required.
This is the reason why single-staffed betting shops, a term used to describe a particular bookmaker that employs just one member of staff, have become so popular.
What are the consequences of the recent decision?
Whilst it is too early to say with any certainty, many from within the industry believe that the FOBT stake reduction will seriously harm the sector. Those employed from within leading bookmakers go one step further, by adding that the reduction will lead to significant job losses, which in turn, will lead to a substantial reduction in taxation revenues for the UK government. This could potentially be true, especially when one considers the aforementioned reliance on single staffed betting shops.
If the doomsday theory listed above carries an element of truth, then it is a logical counter argument to suggest that the money will ultimately transition over to an entirely different space from within the UK gambling industry. The most realistic outcome in this respect is that the vast majority of the estimated £13.8 billion that was lost in FOBT machines in 2016/17 will find its way over to the remote sector – otherwise referred to as online gambling.
The main reason for this is that the underlying products available within a FOBT machine are available online. Whether its roulette, blackjack, slots or video poker, the online markets facilitate a significant amount of games.
According to Gambling Commission statistics – the regulatory body that oversees the UK gambling industry, UK based gambling sites made a reported £4.9 billion in the period between October 2016 and September 2017. This represents a 3.7% growth increase from the previous period.
The age of digitalization could be about to dominate the UK market
On top of offering players a significant range of games, online gambling platforms can solve the FOBT reduction overnight. This is because stake sizes are significantly higher than their bricks and mortar counterparts. One of the reasons this can be facilitated is the process that players must go through prior to making a withdrawal.
As per the UK Money Laundering Regulations 2017, online casinos must identify each and every player that opens an account. This most commonly consists of an upload of Government issued ID, such as a passport or driving license, and a copy of a bank statement. This is a process that UK betting shops are not required to install.
Once these documents have been uploaded, players can begin their online gambling journey. Most importantly, this ensures that the threats of money laundering and terrorist financing are significantly reduced, subsequently allowing players to gamble with higher stakes.
One such organization that envisioned the recent Government decision to reduce FOBT stakes to £2 per spin were SlotBettors. The online review platform believed that it was only a matter of time before UK legislation put a serious dent in to FOBT derived profits and as such, are strong proponents of online betting.
The ultimate selling point from those involved in the remote gambling space is that users have the opportunity to gamble at the click of a button, 24 hours per day. Whether it’s from within the comfort of the players home or on the go through a smartphone device, the age of digitization looks set to disrupt the UK gambling space in its entirety.