An unusually quiet news week for the betting sector has allowed strategic consultancy Regulus Partners to reach for its history books, detailing that under-siege incumbents can gain applicable learnings helping their operations overcome present regulatory complexities.
General Ludendorff was one of the greatest practitioners of the operational art of war in modern times. He also did more than anyone else to shorten the First World War and lose it for Germany in the way that it did. His great Michael (and subsequent) spring offensives took huge swathes of land, many prisoners and (briefly) terrified the Allies. And yet 100 days later, it was all over. There are three big mistakes that the completely operationally focussed Ludendorff made: he didn’t measure success in a manner that led to strategic results (for example disabling Allied logistics); he expected momentum to carry itself forward rather than run into over-extension, and; he failed to take into account the resources and capabilities of his enemies. Any of this sound familiar?
Sweden is the first market that springs to mind. Many licensed operators have been very keen to hit the ground running, take full use of sign-on bonuses and grab as much market share as possible. A good few public companies also suggested that ‘re-regulation’ was a growth opportunity. So far, revealed KPIs have focussed much more on positive active customer growth than the impact on revenue or the bottom line. Perhaps more concerningly for the sector, the Swedish government has told operators that “noticeable change” is required in the relatively self-regulated field of gambling advertising, or legislative action would follow – and this in a country used to aggressive gambling advertising. The operational motives of each of the licensees involved are pretty obvious and, on a standalone basis, pretty compelling.
However, Sweden is a jurisdiction where it has taken just six weeks for the threat of a legislative backlash to emerge. The three lessons in this instance are pretty similar to those that finished the German army as an offensive force in 1918. Generating as many actives as possible in the first few weeks of trading is likely to be negative for profitability, neutral (at best) for a brand and almost irrelevant for long-term prospects, especially if bonuses were the main lure. Similarly, the huge splurge of domestic licensed marketing and sign-on bonus activity creates false momentum: the bonuses are a structural one-off but attempting growth with the sledgehammer of marketing budgets rarely (if ever) yields sustainable results. Finally, and crucially, if all operators aggressively market then not only does this activity become largely dilutive, but also invites regulatory intervention. This threat was obvious and preventable: “noticeable change” needs to be of operators’ strategic understanding of their environment, not just the symptom of aggressive marketing.
The UK is also going to see two significant regulatory changes fairly soon. Late March sees the beginning of the end of the FOBT (in Birmingham, the home of the Commission), before a 1 April national ban. The summer sees the implementation of ‘whistle to whistle’ advertising. Many operators really feel like they have their ‘backs to the wall’ (as Haig said of the BEF at Ludendorff’s peak) and are likely to want to regain their fighting spirit. On many levels they should: innovation and confident operations management are vital to a functioning sector. However, many products and advertising options presented are likely to take operators very close to the wire. Whistle to whistle, for example, leaves lots of options around the edges as well as attempts to create contextual messaging within and around the events that are not ‘advertising’ per se. Similarly, there are already roulette alternatives that do not need B2 legislation which might be attractive in mitigating revenue losses but are likely to attract the public ire of a number of well-placed stakeholders.
The UK sector has almost set a trap for itself: if it innovates, it could be castigated; if it doesn’t, it effectively accepts decline. However, if operators understand what their strategic end game is and play towards it, these issues can probably be effectively harnessed. Product and advertising must not only be responsible, but they must also appear to be responsible. In a period of heightened scrutiny, the regulatory framework must be not only obeyed to the letter but also in spirit. Equally, the concerns of potential critics should be addressed and, where possible ameliorated, not ignored.
The problem is, on current form, senior commercial gambling executives in a number of jurisdictions would make even Ludendorff squirm in terms of their over-focus on operations, lack of strategic understanding and political missteps…
UK: In Parliament – APPG joins the queue to review
How many parliamentary reviews does it take to sort out Britain’s gambling laws? As of this week, the answer is four, with the All Party Parliamentary Group for Gambling-related Harm (formerly the FOBT APPG) announcing details of its latest inquiry.
The APPG, headed by the redoubtable Carolyn Harris (Lab, Swansea East) and backed by (amongst others) former Tory leader, Iain Duncan Smith (Cons, Chingford)and Scottish Nationalist firebrand Ronnie Cowan (SNP, Inverclyde) is to examine “the full impact of online gambling, the addictive and potentially harmful nature of some of the products on offer and their effect on the vulnerable, in particular, children.”
Gambling advertising, the use of credit cards, age verification, stake and prize limits, use of pre-commitment tools and the legal status of loot boxes are among the subjects of the APPG’s scrutiny. A call for evidence has been issued with a deadline for submissions of 14th March 2019.
Britain’s gambling companies thus face an APPG inquiry, Labour Party plans to overhaul the nation’s gambling laws and planned reviews of the Gambling Act 2005 by both the Church of England and the House of Lords. In addition, they must consider the Gambling Commission’s proposals for a new harm reduction strategy as well as several consultations or calls for evidence on mandating specific harm prevention measures (see below).
Having laboured painfully (and thanklessly) for almost three years over its last ‘triennial review’, the Government is understandably reluctant to undertake the one parliamentary assessment that really matters; but pressure is building.
Those who seek reform have a point. At the time of the last major review (carried out in 2000-2001 by the Gambling Review Body which authored the ‘Budd Report’), Britain’s remote industry was guessed to be worth roughly £100m a year and the smartphone was just a twinkle in the eye for Steve Jobs. In passing the Gambling Act in 2005, Parliament and the British Government decided to ignore two key recommendations of the Budd Report – with disastrous consequences. First, they dumped Budd’s proposal to restrict the country’s online market to domestically licensed firms; and second, they decided that a follow-up review process was not required.
The current mess is thus at least partly the result of negligence by the political and regulatory establishment. Of late, there have been signs that the minister charged with sorting out the mess, Mims Davies (Cons, Eastleigh) agrees. Ms Davies is reported to have observed on more than one occasion that her department is now responding to events rather than dictating them. We must hope that recognition is the first step to recovery.
The industry is, of course, culpable too. The need for reform has been painfully obvious for some years now; and yet the major market participants have largely chosen to ignore the signs. As a consequence the industry has forsaken the chance to help frame the debate around legislative reform, appears ill-prepared for what is to come and is increasingly likely to find itself written out of the review process.
It is not clear that anyone in the regulatory-political establishment or within the industry has a plan to find a coherent way forward. However, if thoroughness is any guide, then the best hope for a sane outcome may be the Labour Party. The party’s leader, Tom Watson (Lab, West Bromwich East) was the first to identify the need for regulatory modernisation and his team has shown great diligence over the last year-and-a-half in engaging with stakeholders. In a little under a fortnight’s time, we will get a glimpse of Labour’s vision for gambling in Great Britain when Watson makes his address at the Institute for Public Policy Research. It is unlikely to be to everyone’s taste – but the simple act of being in position to articulate a vision is to be applauded.
Elsewhere, the Government disclosed (in response to a PQ from the Conservative Lord Chadlington) further statistics on gambling-related harm – this time for hospital admissions in Great Britain where a“primary or secondary diagnosis of pathological/compulsive gambling” had been recorded. The number of ‘finished admission episodes’ increased from 65 in 2013/14 to 107 in 2017/18. The numbers may be small (and are likely to represent a degree of under-reporting) but it is through such statistics that the negative externalities of gambling are now being weighed.
Lord Chadlington’s fellow Tory, Lord Smith of Hindhead fired in a hat-trick of parliamentary questions on the level of fines levied against gambling operators since 2010, the level of complaints about gambling advertisements and Government views on the activities of online affiliates. Lord Smith has shown intermittent interest in the regulation of gambling for a number of years now and – as the chairman of the Conservative Party’s own lottery – has spoken in Parliament on the benefits of “the occasional flutter”. Lord Smith and Lord Chadlington do appear to be a part of a growing Tory remote gambling-sceptic movement that ought to be taken seriously indeed.
UK: Regulation – Commission consults…again
Regulatory consultation may just be the fastest growing area of Britain’s gambling industry. In a week when lines closed for submissions on the Gambling Commission’s proposed strategy for harm reduction, the regulator also issued a call for evidence on measures “to make Britain’s gambling industry the fairest and safest in the world”. It is not clear who currently holds that title although Norway and Iran seem like good contenders (for very different reasons – the judging criteria are somewhat obscure) but it’s nice to have ambition.
The specific areas for evidence gathering seem sensible enough – customer interaction; alternative dispute resolution; and the provision of blocking software (something that Gamesys and Kindred amongst others have pioneered in recent years by working with gamban and betfilter). However, it is a source of some bafflement to licensees that with each passing week, the overall harm reduction strategy appears to be overtaken by events – including the NHS Long Term Plan, revised age verification requirements and new Advertising Standards Association guidelines (also announced this week).
One criticism of the Commission’s overarching strategy is that it is short on both detail and time (it comes into effect at the end of March – a remarkably short window to review and consider responses and develop detailed implementation plans). The not unreasonable suspicion is that the strategy has been kept deliberately loose in order to accommodate a series of further consultations.
Already lined up for later this month are two further calls for evidence – in relation to gambling on credit cards and player protection measures on Category B gaming machines.
Cynics may recall the definition of the verb “to consult” provided by the 19th-century American writer, Ambrose Bierce: “to seek approval for a course of action already decided upon”. We must be thankful that there are so few cynics in and around Britain’s gambling industry.
Content provided by Regulus Partners