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Wednesday, 23 January, 2019

Done: it's a sector under siege because of the moral panic surrounding FOBTs

Betfred chief on the serious impact the gaming machine review could have

The government's ultimate approach to gaming machines will prove crucial for the betting and racing industry's
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This is a landmark year for me as 2017 marks my 50th year in business as an independent bookmaker.

Betfred will trade 1,682 betting shops on high streets across Britain later this year once the migration of the recently acquired Ladbrokes-Coral shops is completed; we also trade betting shops on 51 racecourses, and part of the wider group is responsible for pool betting operations on 58 racecourses.

I’ve come a very long way since opening my first betting shop, 50 years ago, with my brother Peter in Salford in 1967.

That journey has undoubtedly given me a unique insight into the high street betting sector which, according to a recent report, generated a gross gambling yield last year of £3.3 billion.

However, it is a sector that is under siege because of the moral panic surrounding fixed odds betting terminals (FOBTs), and in my view this represents, without doubt, the biggest single threat to the future of the high street betting shop in my 50 years as a bookmaker.

Betfred has recently submitted its response to the government’s Triennial Review of ‘Gaming Machine Stake and Prize Limits and Social Responsibility’, and the data that we provided shows that the existing regulatory framework already strikes the right balance, between ensuring that vulnerable people are not harmed or exploited by gambling on these machines, without unduly restricting the freedom of responsible adults to choose how and where they spend their leisure time and money.

In the past three years we’ve taken considerable steps, in common with other bookmakers, to improve player protection measures, and to mitigate the potential for harm to our customers when playing FOBTs in our shops. Yet the existing debate has failed completely to acknowledge the industry measures that have been taken, all of which have had a positive impact.

It also needs to be remembered that the rates of problem gambling remain very low. According to the recent Gambling Commission research published in February 2016, rates of problem gambling were 0.5 per cent. Not only is this rate low but it has also remained static and unchanged from the research carried out in 2014 and 2015. Throughout my time as an independent bookmaker it has always been my intention to operate in a way that does not harm or exploit customers who choose to use our shops.

The legal framework for betting in Britain, established by the government and which the Gambling Commission, as our regulator, is responsible for interpreting, enforcing and policing, anticipates that there will always be an element of problem gambling. It has been, and always will be, a hallmark of the way in which the gambling industry operates. That has been my experience over the past 50 years.

As an operator in the industry, therefore, Betfred is expected to have measures in place to properly identify, deal with, and then manage elements of problem gambling as and when they arise. And that is precisely what we have been doing and will continue to do, given that social responsibility is at the heart of my business.

Self-exclusion requirements, the recording of customer interactions, and the recently launched multi-operator self-exclusion scheme, are all examples of the measures that bookmakers now have in place to deal with problem gambling.

The intention behind the legislation is not to eradicate problem gambling – that would clearly be impractical - but to ensure it is managed in accordance with the licensing objectives and to provide the appropriate help and support to those who find it impossible to gamble responsibly.

I believe that is being done, particularly as a result of the measures we’ve introduced during the past three years. Indeed, as an industry, we are committing significant resources to harm minimisation, over and above our contribution to the Responsible Gambling Trust.

Betting shops therefore, more than ever, now represent highly-regulated, appropriately-supervised adult-only environments, which strike the right balance between the prevention of harm and freedom of choice.

Given the huge significance of the issues at stake here, the debate concerning the future of FOBTs in high street betting shops should be both balanced and evidence-based. And yet recent press coverage in the build up to the Triennial Review has regrettably been categorised by alarmist rhetoric and misleading sound bites.

Betfred, in contrast, intends to rely on data not drama, and I can only hope the government will not be unduly swayed by some of the often-repeated myths that abound regarding the playing of FOBTs, best illustrated perhaps by the myth that ‘it is possible for someone to gamble £18,000 an hour playing a FOBT in any betting shop in Britain’.

As the Gambling Commission have pointed out, such a statistic is ‘astronomically improbable’.

The truth is that the average stake per spin in a Betfred shop is £4.01, down from £4.73 in 2013/14, and the average time spent on the machine is ten minutes 21 seconds. On average the customer loses £7.70 per session, dramatically less than figures used by opponents who advocate a drastic change in the maximum stake.

Part of the reason behind this ill-informed reporting is the failure, on the part of campaigners, to make the fundamental distinction between money staked and money lost, which creates the perception that customers spend vastly more on FOBTs than they really do.

As a bookmaker I am acutely aware of the difference, but it is a feature of FOBT play that is often conveniently overlooked by opponents, whose aim is to influence the public, industry stakeholders and politicians alike, as the government considers whether further regulation is warranted.

In a balanced debate this crucial distinction between churn (the amount wagered) and drop (losses to players minus winnings) would be understood and made clear, but it appears to have consistently eluded much of the general media, which in turn has allowed campaigners to greatly exaggerate the amount spent by customers when playing FOBTs.

This misinformation and ignorance, which has characterised much of the debate so far, is in danger of influencing policy, and that was part of my motivation in wanting to write this open letter, in the hope of being able to set the record straight.

I also wanted to air my concerns regarding the motives of some of those campaign groups who are urging the government to significantly reduce stakes on FOBTs in betting shops; whether their standpoint can truly be said to be objective, and whether they have vested interests.

On December 8 2016 the Fixed Odds Betting Terminal All Party Parliamentary Group published its interim findings. The group said it could ‘see a strong case for the stake being set at £2’ and they went on to say such a call was ‘supported by a significant majority of the public’.

The group has agreed for organisations to apply for associate membership upon payment of a fee of £3,000. Among its associate members are BACTA (the main trade association for the amusement and gaming machine industry in the UK), the Hippodrome Casino, the Campaign for Fairer Gambling, and JD Wetherspoon.

The group has also registered a benefit in kind (valued at between £10,501 and £12,000) received from a company called Interel Consulting Ltd, a public affairs consultancy. I am quite sure that the associate members will all benefit handsomely in the event that stakes on FOBTs in betting shops were significantly reduced.

For the government to be able to justify a significant reduction in stakes on FOBTs it must be able to demonstrate that such a step would have a positive impact on levels of problem gambling, particularly among those customers who choose to play FOBTs in betting shops.

The data that we provided to the government as part of the company’s response to the Triennial Review demonstrates that problem gambling is already being managed in line with the licensing objectives and that no reduction in stakes or prizes is warranted.

However, if the government significantly reduced stakes on FOBTs, that would curtail the availability of the most popular games, and that in turn would inevitably drive players elsewhere. All of the evidence we have points to the fact there is a very high demand for this type of product. Consequently, if this demand is not met in high street betting shops it will have to be met in one of a number of ways; it will not simply disappear or be diverted into other products overnight.

There are only three possible outcomes: it could lead to an increase in the demand for online gambling provided by both regulated and unregulated operators; it could result in illegal gambling; attendances at casinos could increase.

As for online gambling, which according to the latest figures released by the Gambling Commission now accounts for 33 per cent of all gambling in Britain, although providers of online gambling facilities into the UK are obliged to hold a remote operating licence granted by the Gambling Commission, there remains a significantly greater potential for gambling-related harm, given the absence of player-centred control measures that are now to be found in high street betting shops.

Playing on a tablet, computer or phone at home, alone, without that level of oversight and scrutiny, and without the availability of support, help and information from suitably-trained staff, is a potential recipe for increased levels of problem gambling.

Moreover, the popular games to be found on FOBTs in shops will be available to players who migrate to online gambling but very often without the maximum stake and maximum prize levels that form part of the current regulatory regime in the shops.

Unlimited stakes and prizes on online casino-type games could potentially expose these players to greater levels of risk taking, greater losses and the potential for greater harm. The government needs to recognise that regulation cannot afford to be anachronistic in a market where customers can already place unlimited bets on their tablet, computer and mobile phone.

We anticipate that unregulated and illegal operators will quickly move into the high street market if the demand, that clearly exists, is not legitimately met by high street betting shops. And the clear and obvious dangers for players are all too readily apparent were this to happen.

Yet the focus of the present debate, and the thrust of the government’s Triennial Review, is concerned solely with the availability of FOBTs in betting shops. It fails completely to address the availability of FOBTs both online and in casinos, where arguably the potential for greater harm exists, especially with alcohol being available in casinos. In view of my concerns such an approach is indefensible.

It is now widely accepted that the profits from FOBTs make up at least 50 per cent of the profit for an average high street betting shop and generally that is our experience. Consequently, if stakes on these machines were significantly cut, or if their numbers were reduced, that would have a devastating impact on the viability of high street betting shops and would result in widespread closures across the country. That in turn would result in:

  • Significant redundancies; Betfred alone employs close to 10,000 people
  • Closed shop units impacting on the vitality and viability of high streets
  • Significantly reduced tax revenues (corporation tax, employers NIC and GPT/gaming duty). Currently we pay in taxes and levy 6.5 times more than our profit after tax
  • Reduced levels of business rates for local councils
  • Falling levels of rental income for high street landlords, many of whom will not be able to find alternative tenants
  • A lack of investment by bookmakers into those shops that remain open
  • Curtailed sponsorship and a reduction in the levy
  • Reduction in media rights payments to horseracing
  • A stagnant, uncompetitive and declining high street betting market

This is without doubt the biggest threat to the high street betting shop that I have faced during my 50 years in business as a bookmaker.

I have asked for some financial modelling to be done on our retail estate to assess the impact, were stakes on FOBTs to be reduced to just £2. At the time of the analysis, prior to the Triennial Review and before the Ladbrokes-Coral acquisition, we operated 1,360 shops and out of those shops, 660 would become loss-making overnight, resulting in me having to make a decision to close them.

That would result in at least 3,300 employees being made redundant, although further closures and additional redundancies would inevitably follow, given that we would have to realign in the market as we tried to continue to operate with a much smaller retail estate.

I also believe that small independents and medium-size operators would disappear completely from the high street.

But perhaps one of the most significant and concerning unintended consequence would be the impact on the future of British horseracing. I am proud to be able to say that under my stewardship, and following the acquisition of the Tote in 2011, Betfred is now horseracing’s biggest supporter.

Last year the company’s contribution to racing was £13.3 million. We have exceeded the £9m contribution that we guaranteed to the government in 2011 every year since the Tote acquisition.

In addition to this direct contribution to racing of £13.3m, last financial year we paid just under £10m in levy, plus over £43m to our picture providers TurfTV and SIS. Fewer shops will reduce the levy but will have a greater impact on media rights. Payments in respect of media rights have grown in recent years, from £30m in 2005 to over £170m last year. As all operators pay an amount per shop, this will have a dramatic effect on the total paid in media rights and the return to racing.

I believe that I am therefore uniquely placed to warn the government that it risks damaging, irretrievably, the British horseracing industry were it to press ahead and significantly reduce the stakes on FOBTs in betting shops.

That surely cannot be part of the government’s agenda as it seeks to review gaming machines and social responsibility measures.

The future success of our world-renowned and much-envied racing industry is wholly dependent upon the continued vibrancy of the high street betting market. Without its contributions, through sponsorship, media rights and the levy, racing would not be able to survive in its present form.

The demise of the high street betting sector would have a profound and far-reaching impact on the racing industry and thus on the fabric of Britain’s sporting culture and heritage.

The government should understand that the stakes have never been higher and this message, from an independent bookmaker celebrating 50 years in business, is one that the government needs to hear loud and clear. I can only hope that someone is listening.

Yours sincerely,
Fred Done

The government should understand that the stakes have never been higher
E.W. Terms
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