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Paddy Power breaks ranks on betting machines

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These are nervous times for Britain’s traditional bookmakers.

Next month, the Government is due to publish its triennial review of fixed-odds betting terminals (FOBTs), the electronic gaming machines found in every high street betting shop.

Long criticised by anti-gambling campaigners as the “crack cocaine of gambling”, the machines are highly likely to face increased regulation, via a reduction in the maximum amount that can be staked.
At present, £100 may be gambled in the machines every 20 seconds, although in reality that much is seldom gambled.
However, the review is expected to slash that maximum stake to £20.
Until now, the bookies have been united in opposing such a significant cut, which the business services group KPMG – in a report for the industry – has estimated could result in significant closures among the UK’s 9,000 high street betting shops.
Today, though, Paddy Power Betfair has broken ranks.
In a letter seen by the Financial Times, its chief executive Breon Corcoran has written to Tracey Crouch, the minister at the Department for Culture, Media and Sport (DCMS), calling for a maximum stake of “£10 or less”.

Image: Fixed-odds betting terminals have been called the
Even more controversially, he has suggested this cut could be implemented without leading to the closure of betting shops, one of the major reasons why the Government might be squeamish about ordering such a move. (The other, which is thought to have provoked Treasury opposition to those in the DCMS keen on cutting the maximum stake, is the loss of tax revenue it would led to).
Now there is an element of cynicism and opportunism in Paddy Power Betfair’s move.
It only has about 350 high street betting shops in the UK. Ladbrokes Coral has more than 3,500, William Hill has 2,375, and Betfred has more than 1,350.
Making a far bigger share of its revenues from online betting than high street betting, it is far less exposed to a cut in the maximum stake than its rivals.

Nonetheless, its decision to break ranks with the other bookies will be greeted with delight by anti-FOBT campaigners.

Image: The industry says it has acted to limit problem gambling
Ironically, this debate comes at a time when the number of FOBTs is falling, according to Gambling Commission research.
There is also evidence that the amount being staked per spin is falling – something to which both Ladbrokes and Betfred have attested during the last year – while overall levels of problem gambling are static.
Indeed, there is a growing body of evidence that the biggest area of problem gambling lies not in FOBTs, but with the scratch cards sold by the National Lottery.
There is little doubt that some kind of reduction in the maximum stake is going to happen. The status quo is not an option because Theresa May is known to have told officials at the DCMS that she wishes to see one.
The big question is on the size of the reduction and the extent to which the Treasury’s battle to protect revenues has had a bearing on the final decision.
The verdict from the DCMS will in turn influence the number of betting shops that close if profits from FOBTs fall.
Some 20,000 people work in high street betting shops at present.
Stockbroker Credit Suisse has estimated that a cut in the maximum stake to £2 – which, according to the FT, Paddy Power Betfair would not oppose – would wipe out 90% of the profits made by the high street estates of the bookmakers.
That looks something of an exaggeration when, according to the Gambling Commission, FOBTs accounted for 56% of high street betting shop profits between October 2014 and September 2015.
But there is no doubt a cut will result in betting shop closures and job losses.

Source: SKY News Feed