Despite continuing to record growth over the course of the last 18 months, the gambling industry is poised for some more significant challenges in 2018.
This is certainly the case this week, with the lucrative bookmaker sector braced for the long-awaited triennial review results into the controversial form of betting referred to commonly as FOBTs (fixed-odds betting terminals) to come into force soon. A true lifeblood of bookmakers nationwide, FOBTs have come under increasing scrutiny among politicians, regulators and government bodies alike.
The official review from the Department for Culture, Media and Sport (DCMS) covered a wide range of suggested reforms in this market, with the aforementioned groups are coming under increased pressure to adopt bold regulatory measures that slash the maximum betting threshold. However, despite plenty of chatter around the proposals, nothing has as of yet been formalised. Here's a breakdown of what has been happening so far.
What has Happened so far?
The influential Department for Culture, Media and Sport (DCMS) has been particularly scathing of FOBTs, labelling them disparagingly as the “crack cocaine of gambling”. It has also pledged repeatedly to clampdown on them, with a reduction in the maximum betting threshold set to have a huge impact on bookmakers' profits.
This was enough to send shock waves through the gambling sector by itself, but it's also important to note that the additional pressure from regulatory and government bodies looks set to trigger a significant reduction in the maximum betting threshold. In fact, it seems increasingly likely that the maximum individual stake will fall from £100 to just £2, creating a significant revenue shortfall that will have a detrimental impact on growth within the gambling sector.
Similarly, smaller and independent bookmaker chains may be forced out of business completely, while firms across the board have seen their values plunge ahead of the upcoming report. In fact, shares in bookmakers plunged when the news first broke, and this trend could well worsen once the final report has been released and consultation finished.
What's Next for FOBTs and the Gambling Industry as a Whole
With the current maximum betting threshold, FOBTs are capable of generating up to £300 per minute from gamblers. According to the most recent figures released from the UK Gambling Commission, this translated into a total FOBT spend of £1.7 billion between October 2014 and September 2015, which in turn accounted for a staggering 56% of betting shops’ profits during this period of time.
Simple mathematics dictate that, should the maximum bet threshold of £2 be implemented, profits could plummet considerably, while bookmakers would be forced to fill a huge chasm in terms of revenues. Beyond this, it's estimated that almost half of the 9,000 betting shops would become unprofitable in the worst-case scenario, facing the risk of closure by 2020 if they're unable to mitigate the impact of the new ruling.
For now, bookmakers must await the full detail of the final report, as the relevant authorities finish seeking consultation from the industry to cement their final decision. With bookmakers formulating their own response, it's almost certain that we will see some form of formal legal challenge in the event of the betting threshold being capped at just £2.
Regardless of the precise findings, the debate is likely to rumble on amid ongoing legal battles in
the near-term, even if the government implements a more balanced reduction that seeks to satisfy all parties involved.