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| MAPS BETTING AND GAMING JULY 1998 |
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The total value (gross stake) of the betting and gaming market in the UK was estimated to be around £24.8bn in 1997. Of this, £18bn was paid out in winnings, making net expenditure by the UK gambling public of just over £6.9bn.
In terms of market sectors, the largest in terms of expenditure (£2.8bn) is the National Lottery, followed by gaming machines and bookmakers. However, in terms of gross stake (the money spent before winnings), comfortably the most popular form of gambling is gaming machines (£8.3bn). Casinos, bingo, the football pools and other lotteries are relatively small parts of the market under both measures.
As with many other leisure industries, the level of activity in the betting and gaming sector depends, to a large extent, on that of economic activity generally. Therefore it is not surprising to find that the market has grown substantially since the early 1990s. However, it is important to note that certain sectors of the industry, particularly casinos, are also susceptible to changes in global economic conditions since they are heavily dependent on overseas gamblers. It is also clear that the introduction of the National Lottery has impacted significantly both on industry revenue and profitability.
As with other sectors of the economy where the only product that changes hands is money, commercial betting and gaming is susceptible to criminal involvement such as money laundering. Another concern is that it can be addictive to individuals. Reflecting these concerns, the government has, over time, developed strict rules and regulations to control commercial gambling.
The cornerstone of this is the 1968 Gaming Act, which enables gambling to be carried out legally by commercial operations for profits within a regulated system that does not unduly stimulate the demand for gambling. However, the introduction of the National Lottery in 1994, with its own form of regulatory criteria, radically altered the UK gaming market. Many in the industry argue that the National Lottery is able to spend millions of pounds promoting its activities, while other forms of gambling are tied to an outdated act of parliament. As a consequence of exhaustive lobbying, the previous Conservative government introduced a series of amendments aimed at deregulating the betting and gaming industry in the UK.
One of the most important changes to the legislation governing gaming machines was the introduction, in 1996, of Amusement with Prizes machines offering cash prizes. Previously, the industry had been limited to machines which paid out cash to a maximum of £4 and the rest (to a maximum of £8) in tokens. The introduction of the new, all-cash machines has proved very successful, with an estimated 10-15,000 new all-cash machines being built to meet demand. In addition, changes to regulations have allowed additional jackpot machines to be sited in casinos, bingo clubs and private members clubs.
The subject of advertising has been particularly contentious since the National Lottery’s multi-million pound launch. By 1998 virtually every sector of the gaming industry has had the rules on promotion relaxed to a certain extent. Betting shops, for example, are allowed to advertise their facilities and location, as well as being able to open their shop fronts to the street. Bingo clubs are now permitted to advertise both the prizes on offer and the location at which these games are being played. However, there is one sector of the industry where promotion is still not allowed – casinos. This sector is prohibited from even advertising in the Yellow Pages and at present the only way to find the location of a casino is by word of mouth.
Original research, commissioned by Market Assessment and carried out by (NOP Solutions) investigated betting and gaming habits in the UK, and found that 64 percent of respondents claim to gamble or bet in some way or other. By far the most popular betting and gaming activity was the National Lottery with 56 percent of respondents claiming they buy a ticket for the Saturday night draw and 29 percent for the Wednesday night draw. However, the survey also showed that 77 percent of respondents believed that the jackpot prize for the National Lottery is currently too high and should be made lower so that there can be more winners.
A surprisingly small proportion of respondents (only 3 percent) reported that they spent more than £10 a week on both draws of the lottery, although 11 percent reported that since they started playing the National Lottery the amount of money they spend on it has increased. The survey also found that 11 percent of respondents have tended to donate less money directly to charities since they started playing the National Lottery.
Despite its initial success, National Lottery Instants scratchcard penetration is only 16 percent, compared to 33 percent in the 1995 NOP survey. Another key finding between the two surveys was the fall in the number of respondents who do the football pools: in 1995, 26 percent of respondents played the football pools every week but by 1998 this had fallen to 12 percent. Other activities to record a fall in participation include bingo and betting shops.
The financial difficulties faced by many sectors since the introduction of the Lottery has resulted in a flurry of corporate activity over the past few years. Ladbroke Group, for example, purchased the Coral betting shop chain from Bass in December 1997, giving it control of more than 30 percent of the UK’s betting shops. The company outbid Nomura, the Japanese bank which bought the William Hill betting shop chain the same year. In the bingo sector, Bass, the brewing and leisure group, sold its 130-strong Gala chain of clubs to a management buy-in team backed by PPM Ventures, the venture capital arm of Prudential, the UK life and pensions company.
While other sectors of the industry have suffered as a result of the competition from the National Lottery, ironically the company which runs the operation - Camelot – has also run into difficulties. Controversy continues to surround the National Lottery Charities Board and its distribution of funds to the so-called Five Good Causes. Public concern has been raised concerning the type of projects the Board funds, including the Millennium Dome in Greenwich. Charities not funded by the Board have also complained that it has become much more difficult to raise funds since the introduction of the National Lottery.
Legal action has also resulted in one of the partners leaving the consortium that holds the seven year franchise for the Lottery. Separately, the government announced an overhaul of the regulation of the programme, creating a five-person National Lottery Commission to replace the Director-General.
The prospects for the betting and gaming industry are mixed. The lotteries sector will continue to benefit from the popularity of the National Lottery. Demand, however, may have already peaked by 1998 and the National Lottery’s operators will be forced to come up with new variations in order to maintain current levels of revenue.
The betting industry has already benefited from the introduction of a lottery-type game, 49s, while sectors such as bingo have been forced to introduce larger prizes. Although the current government has so far failed to continue the deregulation of the betting and gaming industry started by their predecessors, it seems likely that continued pressure from the industry will force it to act. Likely changes include the transferability of membership between casinos owned by the same company and the introduction of limited advertising for the industry.
The gaming machine sector is likely to be hit in the short term by the introduction of the new £2 coin in June 1998, and more importantly by the government’s announcement, in the March 1998 budget, of a 21 percent increase in the licence fee for gaming machines. However, thanks to the success of all-cash AWP machines, the industry’s long term future now seems assured.
The same cannot be said for the football pools. Despite winning concessions from the government in terms of advertising, prize money and betting duty, the sector remains in severe financial difficulty. To date, all the attempts the industry has made to regain market share have met with failure. If this continues, it is possible that the next few years will see the exit of football pools from the betting and gaming market.
The bingo industry has been a particular beneficiary of the attempts to deregulate the gambling market. An increase in prizes and advertising has largely stopped the slide started by the National Lottery. In addition, the industry has made further gains by introducing other facilities to its operations and this trend looks set to continue.
The National Lottery will continue to dominate the UK gaming market for some time to come. It seems likely that other sectors of the market will regain some of the market share lost, once interest in the Lottery has peaked. However, it is unlikely that any sector of the betting and gaming market will recover its pre-1994 market share levels.
One possible future threat to all sectors of the industry is Internet gambling. While at present this had very little impact on the UK market, it is possible that virtual casinos and bingo clubs could become a significant force. This presents problems both in the form of unregulated competition for the industry and as lost earnings for the government from duty and tax.
Text © 1998 MAPS
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