As the Triennial Review moves further toward concrete proposals on issues such as B2 staking limits, the UK’s gambling industry is looking forward to some long-awaited clarity.
Grant Humphrey, director of EY’s betting and gaming team, believes decisive action from the DCMS could unlock the next wave of M&A activity in the UK’s increasingly consolidated betting sector.
October saw the Department of Culture Media and Sport‘s overdue release of the “Triennial Review” into betting and gaming machines and social responsibility measures.
The released consultation appears to demonstrate the Government’s wish to strike the right balance between maintaining a healthy gambling industry, while also targeting the Fixed Odd Betting Terminals and omnipresent advertising which has stirred up controversy in recent times.
The consultation document does appear more well thought out than potentially expected on FOBT staking, recognising the subtle difference between slot and non-slot games, with potentially variable staking limits.
This would be a helpful distinction, with evidence included in the consultation document detailing the differing impact on player behaviours associated with each game type. Non-slots such as roulettes appear likely to maintain a higher permit- ted staking level as a result.
A further key element of the consultation is with regards to player tracking and a reduction in spin-speeds on FOBTs. Placing limits on the frequency of gambling could have a similar, if not
bigger impact, on reducing problem gambling, as opposed to a pure focus on stakes and prizes as is the case in much of the non-industry media.
Online gambling, by its very nature, also throws up a multitude of unique problems which aren’t faced by FOBTs, such as the ability to place high and frequent bets without visible scrutiny. Operators are, however, able to track individual player behaviour, and it is this focus on data that will be key for the online sector to demonstrate to the Gambling Commission.
Operators will be required to apply a comparable rigour to the use of data for responsible gaming purposes as it does when using the same data for marketing purposes. The online gaming industry will need to tackle this head on to avoid the backlash currently directed at the FOBTs.
The cost to the industry associated with reducing the FOBT stake has been estimated at between £35m (at a £50 maximum stake) and £639m (at a £2 maximum stake) according to the consultation document.
Reaching a conclusion on this staking level, and the associated long-term certainty, will enable the industry to regain focus. Any decisions on staking levels should not be overly punitive on the high-street outlets and should be evidence-based, a phrase used by many of the operators in their press releases after the release of the consultation paper.
Once this clarity is reached, it is likely to unlock the next wave of industry M&A activity which had been put on hold. M&A will be driven not only by the potential need for operators to offset the lost revenue, but also for the buyer and seller, or merging entities, to better negotiate and reach agreement on key deal terms.
Currently the lack of clarity means risk-adjusted pricing ranges are too diverse for deals to proceed. This activity may not be immediate, as uncertainty will remain, but there will also be the potential for a rise in Point of Consumption tax to offset lost Treasury revenue from FOBTs.
The Triennial Review has been a long time coming and it’s great that the industry is keen to engage in this topic – especially with the attention that FOBTs have received from the general public and media.
All sides will be keen to see greater clarity on a multitude of issues and to resolve these quickly to break the ongoing uncertainty for operators on the highstreet and online.