Paddy Power Betfair chief's call for £10 FOBT stake limit sparks war of words
Paddy Power Betfair have become the first major bookmaker to support a significant reduction in gaming machine stakes, calling for them to be reduced to £10 or less and sparking a war of words in the industry.
The company's chief executive Breon Corcoran wrote to Department for Digital, Culture, Media and Sport minister Tracey Crouch this week to say the subject had become "toxic" to the industry and that lack of decisive action would lead to continuing uncertainty for the sector.
The Association of British Bookmakers (ABB), of which Paddy Power Betfair is a member, said Corcoran's viewpoint did not match that of the majority of its members, while Greg Knight, managing director of independent bookmakers Jenningsbet, described it as being driven by "blatant commercial consideration".
The results of the government's long-awaited review of gaming machines – better known as FOBTs – are expected to be released next month.
Campaigners have called for the maximum stake on the machines, which have become the largest source of revenue for some operators' retail chains, to be reduced to £2 from £100 to tackle problem gambling.
It has been reported that the government is mulling options including £2 and a figure of around £20 and £30, while the status quo is unlikely to survive.
Retail bookmakers have argued that a major reduction in stakes would lead to the closure of many betting shops, thousands of job losses and also impact on racing's finances.
However, in the letter Corcoran, who it was announced in August will be stepping down as the firm's chief executive, said: "Whilst we are not aware of any evidence which links stake size to problem gambling, we are acutely aware of the increasing reputational damage to the gambling industry that has followed the lack of progress in this area.
"We believe this undermines the role of the sector as a provider of entertainment, employment, and tax revenue, in addition to being a much-needed supporter of sports such as horseracing.
"We now believe the issue has become so toxic that only a substantial reduction in FOBT stake limits to £10 or less will address societal concerns. I am confident we could operate our retail business successfully and profitability under such circumstances. Other well-run operators should be able to do the same."
Corcoran goes on to say he does not believe other measures such as reducing the number of machines allowed in shops or changing spin speeds would be effective.
He added: "Instead we believe they could worsen the situation by leading to a higher number of lower-quality gambling operators on our high streets."
A much smaller estate
It was recently reported that analysts at Barclays had estimated a reduction in stake to £2 would cost Ladbrokes Coral, who have around 3,660 betting shops in the UK, £449m in revenues and William Hill, who have around 2,375 shops, £284m.
However, the estimated cost to Paddy Power Betfair, who have a much smaller betting shop estate in the UK numbering in the 300s, was £55m.
Reacting to Corcoran's letter, the ABB said: "The Paddy Power Betfair position does not reflect the view of the majority of ABB members. Paddy Power Betfair comprise just four per cent of the UK retail estate.
"Independent analysis has suggested very significant shop closures and job losses if stakes are materially reduced and, as Paddy Power Betfair concede, this would do little to help problem gamblers."
Knight, whose Jenningsbet brand is the largest independent chain in Britain, employing 500 people nationwide, condemned Corcoran's move as a "cynical attempt" to drive competitors out of business, adding: "I am confident DCMS will see it as the blatant end-game to a long-term commercial strategy that it is."
He went on: "Corcoran is well aware that the industry could not survive a drastic cut to stakes and the independent sector in particular would be rendered obsolete.
"There are over 800 family-owned businesses like ours in the UK that compete against Paddy Power Betfair. They do not have the online revenues to support loss-making retail estates."
Knight claimed Paddy Power Betfair would "benefit enormously" if retail customers were forced to migrate online.
He added: "The most pertinent fact here is that anybody can play the same games found on FOBTs on the Paddy Power website or app and play at £3,000 per spin rather than the £100 limit imposed in betting shops."
Analyst Gavin Kelleher at Goodbody said the news would "be viewed as something that makes the chances of a severe stake reduction more of a possibility".
At close, shares in Ladbrokes Coral had fallen 1.4p to 122.8p, William Hill shares were down 0.3p at 250.3p and Paddy Power Betfair shares had fallen 5p to 7,300p.
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