FOBTs, fighting words and shifting targets

Monday was an odd day for the gambling sector in Britain, with a damning report into the heart of the industry barely causing a ripple in the markets but sending the war of words over FOBTs escalating to shrill new heights. The sabre rattling is nothing new, but the tone of the debate is a worrying sign.

The report in question was a 60pp document from an All Party Parliamentary Group (APPG) into the Fixed Odds Betting Terminal sector, which concluded that stakes should be lowered from £100 to £2. This came as no surprise after an earlier statement from the APPG stated this was its most likely conclusion, but its sober repetition in a parliamentary report still made for stark reading.

“We find that from the evidence presented to us, the government now has a prima facie case for significantly reducing the £100, which can be wagered on a Fixed Odds Betting Terminal,” the report said. “The Group sees a strong case for the stake being set at £2. This call is supported [by] many Members of Parliament from all political parties and in both Houses of Parliament.”

Profit warnings

The associate members of the report reads like a who’s who of the anti-FOBT world – including the Campaign for Fairer Gambling and the UK AWP giant Novomatic – and its conclusions should be taken with a large bucket of salt. But it nonetheless represents the views of 29 MPs from both parties and is unlikely to be entirely ignored by the government as it looks to make a final decision.

The net impact of a reduction to £2 would be devastating for the retail betting industry. Most models suggest at least a 40% reduction in revenue from FOBTs, which could turn the sector from very profitable into heavily loss-making. The knock-on impact would be to reduce available investment for some of the biggest names in the online gambling sector, while seeing a hike in mobile play as customers seek out a replacement for the games.

Talking to industry insiders, the sense is this nightmare scenario of a £2 stake limit is fanciful and it’s entirely possible the outcome will be no reduction in stakes at all, or a nominal drop to £50. The evidence, the industry says, is on its side and any punitive attack on staking limits would be an emotive rather than an intellectual one. But the new world of politics seems to be guided ever thus.

So could it happen? It’s not impossible. And in theory this could even be a net win for the online gambling industry as a whole. Remove the FOBTs, increase mobile slots and table games play and hand the advantage to the online-only firms sounds like a dream scenario for many. But the issues surrounding FOBTs are extremely similar to those around online casino, not least the rapidly growing slots sector.

There is a real risk of online slots becoming the new demonised product if FOBTs are chopped off at the knees. Staking limits are higher, revenues are higher at £1.8bn in the year to March 2016 and concerns have already been raised by the government over the promotion and management of the products. What has happened to FOBTs could easily happen to slots and there is a real need to think as one in this regard.

Time wasting

Looking at the make-up of the APPG report backers, the cries of “rigged reports” comes across as reasonable, albeit somewhat aggressive. Ladbrokes Coral was one of the most outspoken in its condemnation of the report. “The industry did not take part as it was nothing more than a FOBT kangaroo court,” a Ladbrokes Coral statement said.

The implication is Ladbrokes Coral sensed it was a stitch-up from the start, so refused to play along and give some legitimacy to the process by taking part. They’ve given evidence and presented their case at length to the DCMS and the Gambling Commission and this is, after all, where the real battle is being fought. But they didn’t want to waste time and energy here.

While the decision is understandable, and not without merit in terms of effectively delegitimising the report, it is a high-risk game to take on the critics with such bold aggression. It’s hard to argue it’s one that’s working well for the industry when it comes to horseracing, for example.

Anything other than an effective non-reduction in stakes can be spun as a loss of face for the gambling sector here. If they lose this war of words there are no shortage of new targets for its opponents to aim for in the future, not least the vulnerable looking online slots vertical.

These are hugely important times for the industry and its fate is not entirely in its own hands. The need for the industry to speak with one calm, clear voice has never been more keenly felt.