The ongoing wait for the UK government’s White Paper on gambling reform has been one of the longest running industry sagas of the past few years.
According to numerous media reports, it is finally due to be released at the end of this month and is likely to propose major regulatory reforms around:
- a potential £2 stake limit on online slots,
- affordability checks,
- new advertising and marketing restrictions, and
- the implementation of a single customer view, which would enable UK operators to view customers’ gambling activities across all their accounts.
If brought into law, these changes could have major impacts on UK gambling companies, but also on their U.S. activities.
Whether they are operators, suppliers or affiliates, many of them operate in both markets and the hit such regulations could cause to their revenues could be noteworthy.
Groups such as Bally’s Corporation, FanDuel, bet365 or 888 on the operator side, affiliates such as Gambling.com or Catena Media or suppliers such as Open Bet (part of Endeavor Holdings) or Genius Sports; all have activities in the UK and are active in the U.S., even if their market shares and scope vary considerably.
UK figures detail
Recent first quarter figures published illustrate how changing UK regulations could impact some of those companies’ U.S. plans.
Bally Corporation’s first quarter results published in early May revealed that group revenue was up 35% to $548.3m, but also showed that international digital revenues represented nearly 50% of that total at $253m/£188.5m (at currency rates at the time).
The UK makes up more than half those ex-US online revenues at £108m.
During the call, Bally CEO Lee Fenton sounded confident the UK gambling review would not result in dramatic reforms and with regard to affordability checks.
He said: “We don’t want to be requesting (authentication) documents from players at relatively modest levels of spend and we think the message is getting through. It’s also part of Tory MPs (Conservative members of parliament) pushing back against the ‘nanny state’, which is a key issue for them.”
888 meanwhile managed to reduce its purchase price for William Hill’s non-US activities from Caesars Entertainment by £250m because of the macroeconomic issues impacting the world economy and the UK’s looming regulatory overhaul.
On the affiliate side of the industry, Gambling.com CEO Charles Gillespie sounded somewhat blasé about discussing the topic during his company’s recent call with analysts.
Gillespie said the regulatory reforms had been “watered down, but we weren’t particularly concerned by it and hopefully they (the UK government) release something and people will stop asking questions about it. The latest noises suggest we can be relaxed about it.”
His comments would indicate that new regulations are ‘baked in’ by many stakeholders and from the tenor of those comments implies that impacts on revenues will be minimal, or at least manageable.
On the other side of the argument, Peter Jackson, CEO of FanDuel’s parent company Flutter Entertainment, was much more downbeat about prospects in the UK.
The group’s first quarter trading update published in early May revealed that UK & Ireland revenue was down 8% to £519m. Online revenue from the UK and Ireland was down 20% due to the ongoing introduction of safer gambling measures, lower hold and a return to more normal post-Covid working conditions had cost the group around £30m.
Jackson added that he hoped to “see some clarity on the outlook for regulatory change” once the government’s white paper came out.
No hard forecasts
There are no hard forecasts on the potential impact new regulations such as a £2 stake limit on online slots might have on UK operators, but when the government introduced a £2 stake limit on the fixed odds betting terminals (FOBTs) in April 20219, all the companies with major retail networks closed many of their high street outlets.
Six months after the introduction of the FOBT stake limit, around 1,100 shops had closed. William Hill closed 700 shops, for Ladbrokes Coral owner GVC (as it was then known), it was 900 closures and Ladbrokes Coral’s net gaming revenue from the machines dropped 36% subsequently, while Betfred closed between 400 and 500 of its shops.
In the UK these topics are tied to highly sensitive issues linked to responsible gambling, operators’ social responsibilities, gambling harm and its tragic impact on some vulnerable people. In the public domain the combined effect of these factors has led to a debate that has become dominated by claim and counterclaim from anti- and pro-gambling lobbies, leaving little room for dialogue. The market as it stands should act as a cautionary tale to U.S. stakeholders.
Far-reaching impact
There is no doubt more restrictive regulations will impact UK operators as a result of the reform proposals that are set to be published shortly, but their impact is seemingly underplayed by many in the industry.
My colleague Scott Longley wrote recently that reforms such as “a possible £2 stake limit on slots, affordability measures and advertising bans would have been viewed as an apocalyptic triple-whammy” not long ago.
“Now it’s an aside in a note which foregrounds regional gaming deliberations. The UK may not be central to Bally but the effects of whatever measures are (finally) introduced will be far-reaching.”
He was referring to Bally Corp in this case, but clearly the logic applies to all UK companies with U.S. operations.
