General

Why racing should worry about the increasing pressure on FOBTs in betting shops

This Telegraph article is the latest in what appears to be a growing trend of publicising the effects on problem gamblers of FOBT machines in betting shops. The article has a link to another story reporting that the Lib Dems have FOBTs in their sights with a proposed reduction in maximum stake per spin to £2 (currently £100).

I suspect this will develop into a full-blown campaign against FOBTs and bookmakers ought to be making D-Day scale preparations to defend their rights to have the machines. Those preparations should, of course, include the welfare of addicts and potential addicts – that should be very high on the list. But I fear they might win the early skirmishes then lose the war. High emotion, sympathy for affected families and the still outdated perception that bookmakers are shady characters fleecing innocents in smoky backrooms with Find-the-Lady-type scams will win the day.

For those with an appetite for facts over emotion, the latest Gambling Prevalence Survey (July 2012) undertaken by The Gambling Commission reports a steady overall reduction in the % of population playing machines:

Virtual gaming machines in a bookmaker’s
2.5% (2009)
1.8% (2010)
1.8% (2011)
1.6% (2012)

Some more info on that study is below:

All gambling participation (including by remote means) Over the year to June 2012 (that is, an average of figures for September 2011, December 2011, March 2012 and June 2012), 58.1% of the 4,000 adults surveyed said they had participated in at least one form of gambling in the previous four weeks.

This figure of 58.1% compares with the 2011 calendar year figure of 57.3%, the 2010 calendar year figure of 55.5% and the 2009 calendar year figure of 55.2%.

The most popular gambling activity was National Lottery tickets (48.2% of respondents), followed by National Lottery scratchcards (13.1%) and tickets for society or other good cause lotteries (10.3%).

Betting on horse races, private betting with family, friends or colleagues, and gambling on fruit or slot machines were the next most popular activities (4.0%, 3.5% and 3.1% respectively). Those participating in gambling were more likely to be male than female, and were more likely to be aged over 45.

My personal take on FOBTs is that there would be fewer addicts were they not available. There is no point in denying there is a problem, but the percentage of the population who admit to being problem gamblers – across all gambling opportunities, not just FOBTs – is 0.9%.  (3% of the population are class A drug addicts and, depending on the criteria used, “more than 3%” of the population are alcohol addicts: source – Independent article)

This is a huge baby in comparatively clean bathwater that risks being thrown out. I spoke to the MD of a large betting organisation about two years after FOBTs with casino games were introduced. “What  would you do if they were outlawed tomorrow?”  I asked. “I’d close 80% of my shops”.

I’ve always believed that the downside of FOBTs for bookmakers was the massive temptation to treat them as all the eggs in one basket. That is pretty much what has happened. In some businesses, FOBTs are almost certainly subsidising racing via media rights payments. If FOBTs go, or are seriously restricted, expect to see the effects hitting racing quickly and hard.  If enough bookmakers remain to pay something toward racing by way of media rights and Levy (or its equivalent), it will be way below current figures – think Setanta and the SPL when the Irish broadcaster hit trouble.

As the anti FOBT campaign gathers pace, Racing ought to be very afraid. It had best start making its own plans for survival.

 

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8 replies »

  1. I guess there is a ‘conflict of interest’ here with the likes of Harriet Harman knocking the fact that she cannot walk up the high street without finding another licence having been granted worrying about members of the general public becoming fixated on machines. Turn the situation around and we know that as many as half the shops in the country could close if the machines were banned. What exactly do the government want?

  2. There is a valid school of thought that racing would be significantly better off without FOBTs in shops.

    If they were to be removed/restricted then bookmakers would need to (once again) start taking bets on horse racing rather than hiding behind the guaranteed profits generated by the machines. I know numerous people who have been advised by betting shop staff that the focus is only on guaranteed profits (from the FOBTs) and, as a result, the company don’t want to accept the (unnecessary) risks of taking bets on horse racing. Lots of new money/interest is being lost to horse racing because bookmakers are severely restricting bets to strangers of as little as ten pounds in some instances. This in the face of trying to avoid the warm money at the expense of discovering new customers!

    It could be suggested that if the profits from FOBTs were severely restricted then a re-evaluation by the bookmaking fraternity would lead to a significantly healthier Levy. It is scaremongering to suggest a significant % of shops would close overnight. What else would they do for a living?

    BTW, I accepted your free download offer of one of the Eddie Malloy series Joe and as a result read all three in quick succession. Back to the (good) old days of the early Dick Francis novels and you need to kick on a write more. Great stuff

    Steve

    • It’s kind of you, Steve, to comment about the books – many thanks, I’m glad you enjoyed them.

      I know bookies aren’t promoting horseracing and my take on it is that the media rights and Levy costs have made it such a marginal business for them, they’d simply rather not have it. That’s a shame but I wouldn’t expect any business to operate differently. The danger for racing is that courses have media rights cash – the Horsemen are trying to get as much of it as possible and everybody sees it as a Golden Goose – they’ve committed the cash to projects well in advance and if FOBTs go, there will only be a fraction of the cash available for media rights.

      Gross Profits Tax was supposed to be the saviour of racing. What actually happened was that it reduced margins by almost 10% just as Betfair were getting a foothold. Betfair’s influence sliced margins even thinner and that plus the running costs – mostly payments to SiS and TurfTv –
      leaves racing close to a loss leader for many bookmakers. I’m not scaremongering, I assure you. Radical changes to the way FOBTs are run which seriously damage their profits will see thousands of shops close.

      Joe

      • All valid points Joe as always.

        However, the industry needs a shake (before it really is too late) and horse racing has become a loss leader for bookmakers because they don’t want to take a bet so turnover is down. When turnover is down then so is gross profit (actual not percentage). If gross profit is down then fixed costs (SIS, Turf TV, anything else with a hand in the pot) have a significantly greater impact on bottom line. All common sense.

        When the bookmaker doesn’t accept a bet (not naive enough to suggest they should accept everything offered) then two things happen. Firstly, his potential to make profits must be impacted and secondly, and perhaps most importantly, the customer quickly becomes disillusioned. Such disillusionment has gone too far now and bookmakers have simply encouraged potential customers to spend their leisure pound elsewhere by discouraging them to place a bet. This all to the detriment of horse racing (both in terms of Levy and attracting a wider audience).

        As a further point, two industries are perceived to be seriously struggling in the UK. Bookmaking (traditional, not machines) and the pub trade. Currently the law allows any customer to place a bet from a pub on his own account and to enjoy racing from the licensed premises. It is however illegal, and punishable, to ask another individual (say landlord or a friend) to place a bet on that customer’s behalf. A marriage made in heaven (for two ailing industries) would be to allow licensed bookmakers to provide a facility within a public house so customers of the pub can have a pint and a bet and enjoy the racing. In this way horse racing could be widely promoted/marketed and both the betting industry and the pub trade would benefit from this wider exposure.

        This seems to make sense but the biggest group lobbying against change are the major bookmakers, hiding behind social responsibility to the man who’s had a drink and shouldn’t therefore be allowed to bet. It would appear however that no one is considering that the major bookmakers have all built their significant high street estates by being as close to these same pubs without actually being inside the pub. No customer who has had a pint in the pub next door then goes into the betting shop to place a bet is turned away on the basis he’s consumed alcohol so social responsibility is a total red herring.

        They, the majors, would be the biggest losers if an independent bookmaker was allowed to negotiate with individual pubs/breweries to operate within a pub/group to maximise profits for all parties – racing (Levy), the bookmaker (potential for increased profits) and the publican/brewery (more customers equals more beer sales, food sales, etc.). The High Street bookmakers therefore resist and argue against any legislation to allow betting within pubs.

        This yet another example (this is two now, none promotion of horse racing in betting shops/not accepting bets and seriously opposing legalised/properly regulated betting in pubs) of the major bookmaking chains actively acting against the best interests of racing yet no one in authority (in racing or Government) seems proactive enough to make changes.

      • Steve, I’m no longer employed by a bookmaker although my Gamtrain software is on sale to the industry (that in the interests of full disclosure). I do not blame any business, even bookmakers for trying to maximise profits. If that means turning down bets then so be it. Most of them have pretty sophisticated monitoring systems now and the business they’re turning away is almost always unprofitable in the long term. I always ask, if it was your business, would you do it differently?

        As for racing as an industry, I despair, along with many others. People call for leadership but leadership of what – a ship crammed with every-man-for-himself? The biggest and costliest blunder in racing’s recent history was the tame surrender by the BHA of commercial rights to fixtures. I think Mr Bittar now realises this; whether he can do anything about it, I don’t know but that’s what any sane, consistent and long-term structure relies on. Would the Premier League ever give away fixture rights to clubs? Madness.

        Not only have they surrendered them, they have handed them to the equivalent of a cat and a dog to sort out – the Horsemen and the RCA. Crazy, crazy, crazy.

        I could write a bloody book on this and it would indeed be stranger than fiction!

        Good night for now

        Joe

      • I’ll finish my comments simply to address your “most of them have pretty sophisticated monitoring systems now and the business they’re turning away is almost always unprofitable in the long term” comment because therein lies the problem.

        I am not referring to sharp money going through an internet account or similar. I’m referring to a total stranger in a new town trying to place a reasonable sized bet on a horse at a widely available price in a shop. The betting shop managers are briefed “if it’s a stranger and you don’t know him lay no more than £50/£25 JUST IN CASE it’s sharp money”!

        The stranger could be anyone and very likely new to the game with fresh money/interest. Bookmakers, with their sophisticated monitoring, see shadows at every corner and are now instilling suspiciousness into staff rather than promoting welcoming new customers to their business and therefore the racing industry. It is because they have sophisticated monitoring systems that they believe every bet is a potential winner and therefore unwanted.

        Bookmakers have always been alert to unprofitable customers but against a backdrop of “guaranteed profits from gaming machines” they no longer NEED to take ANY risk. This is to racing’s detriment and until bookmakers are forced to re-evaluate refusing bets then the Levy and therefore racing cannot recover.

        All opinion of course.

        Good luck

  3. Have had licensed betting shops here in Australia for all the years (since 1988) that I have lived here. Plenty of pubs have TAB outlets and special sports bars for drinking and gambling on any number of sports _ including the ubiquitous slot machines and the cartoon races. Racing has developing
    problems here, too, as demographics change and sports betting, while small at present, begins to make inroads. Not helped by all the race fixing allegations and mud being slung around on the eve of the Melbourne Spring Carnival.
    Crowds are great for Melb Cup, Derby Day and a handful of big meetings. But for an off season metro midweeker you could shoot a cannon and not hit anything….

  4. Great article, thanks. I’m the author of a book called “Overcoming Gambling” and a Trustee of a group called GRASP (Gambling Reform and Society Perception). We are NOT anti gambling and we were NOT set up as a help forum though many of our members come to us for help and as an alternative to the industry funded Gamcare. Virtually every new member comes to us because of FOBTs and a casual glance on the Gamcare forum will similarly show the REAL damage they do despite the industry’s tired line of “no empirical evidence to link FOBTs with addiction”.All we are trying to do is illustrate people to the dangers of gambling so they can make a more informed choice.

    I’m not so nieve to say there were no addicts before FOBTs and better on horses didnt cause people problems but it is nothing like what we are seeing now.

    A few points on the 2010 Gambling Prevalence Survey. The industry and government conspired nicely to cherrypick the 450,000 (0.9% of the adult population figure) and use that. What never comes out are the additional 900,000 people who showed signs of becoming addicts and 2.3 million who could be at risk of becoming addicts. Imagine if they used the figure of 7 or 8% of the UK adult population could be gambling addicts and that we lead the world for gambling. addiction. Is it any surprise when you see the far more likely scale of the problem that the Prevalence Survey has now being stopped. Is it not relevant to ask what exactly has happened to all those at risk and showing signs of problem gambling since 2010? They have been bombarded with gambling adverts and betting shop inducements (free tournaments etc) to switch over to FOBTs whilst at the same time offered very little help or advice into problem gambling. Is in unreasonable to assume that if there was a 2013 or 2014 survey the numbers really would be up around the 2 million mark?

    The industry scaremongers with a figure of 8000 job losses if FOBTs were banned though I believe this doesnt take into account the horse racing industry. An interesting figure showed that if the £1 billion waged on FOBTs annually was stopped a further 20,000 jobs would be created in surrounding business (pubs, restaurants, cafes, shops etc) as gambling basically comes down to the use of “disposable” income though clearly when linked to spiralling debt problems and the rise of loansharks/payday loan companies problem gamblems go way beyond using disposable income.

    Anyway I’ve rambled on too long but thought I’d put these thoughts down

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