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Why banning FOBTs from shops will damage racing

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William Hill CEO Ralph Topping’s comments in yesterday’s Racing Post have caused quite a stir (when do Mr Topping’s comments not cause a stir?).

One debate taking place on Twitter as I write concerns, among other aspects, the potential benefits to racing of FOBTs being removed from shops completely. I assume that this is on the presumption that much of that FOBT turnover will be transferred to horse racing.

I wouldn’t argue for a minute that betting on horse racing is not an essential attraction for regular betting shop punters. But its market share has been slipping for years. In the 1980s, horse racing made up more than 80% of turnover; I suspect it’s now closer to half that figure. The belief that dulling the attraction of FOBTs will boost horse racing turnover to any noticeable degree simply does not stand up, in my opinion.

Why would serious players move from a product that returns 98% of stakes to one that returns 84%? And, that second figure is only achievable, realistically, if you take the time to learn about racing. Betting shops are grossing around £900 a week per machine (source William Hill half year results, June 2012). The costs to bring racing into shops is onerous. FOBT profits are subsidising that cost, in some cases very heavily. If FOBT business collapses, experienced industry figures predict we will lose a minimum of half our betting shops meaning racing will lose at least half its media rights money.

Some will cry ‘Scaremongers’, but when FOBTs really started taking off  with Roulette some years ago, I asked the MD of one of the major bookmakers in a private conversation, ‘What would happen if FOBTs were made illegal tomorrow?’

‘I’d close around 80% of my shops’ was the reply.

On the stats front, the Racing Post recently published an article on a survey done by a company called GamblingData. One of the areas covered was the cross-over or interplay, however you want to term it, between FOBT play and horse race betting.  43% of people who bet on FOBTs also bet on horse racing.  What the report does not indicate is the level at which that takes place.  A machine punter who also bets on horses might have one £5 bet a month. A horse player who also bets on machines might put just £5 a month into a machine – the figures are useless without further data.

The real bummer for supporters of the ‘ban FOBTs campaign’ is the stark fact that 57% of those playing FOBTs do not bet on horse racing.

Those who believe that smashing the FOBT market will re-direct most of the turnover to horse racing, or that it will encourage bookmakers to sell racing (a product with the tiniest of margins and in a number of cases, negative margins) well, the stats we have so far, plus anecdotal evidence, do not bear that out.

The proof of the pudding will only be found in the eating. It could turn out to be the most expensive dessert racing has ever sought.

GamblingData Survey article in RP

 

 

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7 replies »

  1. I am sure we sometimes wonder Joe if the big companies ‘get together’ to see how they can rid themselves of the few independent shops that have (somehow) survived these last few years! I don’t see how they could maintain their licences if the machines disappeared.

  2. I don’t know where GamblingData do their studies or even if they do participant observation at the grass roots i.e- the betting shops but I think their figures on FOBT users who also bet on Horse Racing are very generous at 43%. Speaking as a traveling punter, who often frequents betting shops and who also has a degree background in Sociological studies, I can quite categorically say the FOBT punter & the Horse Racing punter are really quite alien to one another. The crossover is minimal.
    I could go on and on about the socioeconomic background of both types of punter, their ethnicity etc etc, but in summary I would say that around 80-85% on the punters/users on FOBT machines in British betting shops today don’t bet on Horse Racing.

    • From my own experience, I believe your theory is near the mark Steve. Whether it’s as high as the figure you quote, I don’t know. But bookmakers would do well to formulate a meaningful new product strategy for retail in general. At the moment that is left pretty much to gaming companies and nothing is going to come from them that will make sufficient impact as to redress the FOBT imbalance.

  3. survey probably taken around National time…. once a year might tick the box but doesn’t count in real terms. Can never see the genie going back in the bottle to ban them… but would like the addictive/damaging capacity of them (namely stake sizes) reduced.

  4. I cannot remember the last time I went into a betting shop but my basic feeling is that the comment made by ‘Mully’ is not a million miles away from the truth.

  5. FOBT’s dont pay 97% to each punter. They FOBT has to make £800 a week minimum….that means some poor soul is going to loose whilst some other person will win – thus taking then roulette “random number generator” completely out of the equation. FOBT’s are not regulated properly and they should be banned…they are a social drain that pries on addictive behaviour. They don’t make billions from penny dabblers. bookmaker knows who there market are (problem -vunrable gamblers) and if horse racing has to suffer along with bookmakers and jobs – so be it, its the their own fault for having such a short-term immoral business model

  6. FOBT’s are the modern day ‘goose that laid the golden egg’. they will NEVER be banned, because todays bigwigs are lost in there own greed. Its just collateral damage that some poor souls life gets ruined along the way on a daily basis.

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