Regulus Partners, the strategic consultancy focused on international gambling and related industries, takes a look at some key developments for the gambling industry in its ‘Winning Post’ column.
UK: Politics – Watson’s reforms more elementary than barking mad
Britain’s gambling stakeholders were offered a vision of regulation under a Labour government this week as the party’s deputy leader, Tom Watson (Lab, West Bromwich East) published the outcome of his nine-month review of the industry.
It is a reflection of just how fast the regulatory-political debate has moved away from operators that the measures included in Labour’s gambling manifesto – which might have been deemed radical (or even rabid by some) a year ago – now represent rather more mainstream thinking. Indeed, the review was perhaps most notable for what it did not contain (such as a ban on gambling sponsorship of professional sports) – a case for this Watson of the dog in the night-time.
Under a Labour administration, gambling TV adverts will be banned during live sports broadcasts (with a sensible carve-out for horseracing); the prohibition of credit card betting will be extended online; banks will be required to allow customers to ban gambling transactions; a compulsory levy (at 1% of GGY, or c. £110m excluding TNL) will be imposed on licensees to pay for research, education and treatment (with the provision of resources under the NHS); and clinical guidelines will be developed for treating people with gambling problems.
Labour’s plans appear to go very much with the grain of current policy discourse. Many in industry (larger operators) openly support greater advertising restrictions; the Gambling Commission is reviewing credit card payments; the RGSB has flagged the need for a substantial increase in RET funding (indicating a target figure potentially as high as £76m a year – which Labour’s proposals would more than cover) and most operators prefer the certainty of a levy to the ambiguity of the current voluntary-compulsory arrangements; and challenger banks Monzo and Starling have already launched payment blocking options (with some bigger institutions likely to follow).
While specific operators may have particular concerns, the package of measures does not feel disproportionate to societal concerns – and any attempts to push back will require sensitivity and sophistication.
As Her Majesty’s party of Opposition, Labour’s job is to create mischief rather than govern the country and its views on gambling have no direct legislative effect (and of course are subject to change in office). However, it would be dangerous to view the party’s policies as a paper tiger. Given the chaotic state of politics in Britain, it is not inconceivable that Labour will be asked to form a Government at some point – and in the meantime Watson’s proposals will add pressure on DCMS to tighten the regulatory net (something that a growing number of Tory back-benchers appear to support also).
We should also bear in mind that Labour could have gone further (a lot further) – and may yet do so. Some of the policies announced this week (such as a £100m+ levy and bank account blocking) were first aired last year by Labour’s fringe Campaign for Gambling Reform. This forum was also one of the first to propose means-tested gambling (arguably a ‘logical conclusion’ of the Gambling Commission’s thinking on affordability checks) and a rise in the legal age for gambling from 18 to 21. As the gambling lawyer John Hagan observed this week at the KPMG egaming summit, “as bad as things seem, they can always get worse.”
For gambling companies in Great Britain, this is the greatest period of regulatory uncertainty since the Gambling Bill era – and certainly the greatest period of negative pressure in living memory. The regulatory establishment is running a wide range of dislocated reviews without any real sense of coordination or coherence, driven by an exclusively negative political and public health agenda. There are signs that the industry is starting to come together to address the severe challenges it faces. The question is whether this can be achieved with sufficient speed and substance to avert calamity.
US: sports betting operations – start as you mean to go on?
FanDuel (PPB) has taken a leaf out of its new parent’s book this week and generated huge publicity by paying out on a series of erroneously priced bets in New Jersey, after initially refusing to do so. Despite the informal intervention from the regulator, there is a suggestion that this was primarily a marketing decision and not a precedent. Protection against “fat fingers” is an important component of any sportsbetting regulation / T&Cs, since mistakes are inevitable, typically obvious and can be extremely costly if enforced. If this really is a one-off, then it would be good to let customers know clearly and soon – or risk a significant (and possibly even litigious) backlash on the next occasion. A wise man once said that one ought to treat one’s partner on a first date as you would treat them for the rest of your life, or expectations will not be managed and only disappointment and acrimony would ensue (the wise man in question is actually on our reading list!); in the rush to impress a new market, operators could be falling into just this trap…
Peru: online gambling regulation – more bullish than bearish?
Peru (pop. 32m, GDP US$190bn) is looking likely to be the next South American country to regulate online gambling, tabling legislation that would provide domestic licensing for all online betting and gaming along with a 10% tax rate. The government hopes that it will generate a US$200m market, or c. US$6 per person. This seems toward the higher end of likely short/medium-term outcomes to us, but still (just about) plausible: it would be half of Spain’s regulated market on a per capita adjusted basis, though Peru’s GDP per capita is less than 25% that of Spain’s. Another cautionary point is the experience of Colombia, which mixes some liberal elements (most products, 15% GGR tax, no VAT), with more restrictive practices (relatively tough licensing process and costs, no shared liquidity, no live casino) – this has generated ‘only’ 15 licensees (mostly domestic or Spanish), and a GGR run-rate of just c. US$30m, or c. US$0.60 per capita. Nevertheless, with increasing maturity and growing regulatory pressures in Northern European markets, well placed bets on emerging South American jurisditions could look very shrewd on a ten-year view.
Global: Formula 1 – no such thing as easy money?
Formula 1 has ended its longstanding anti-gambling policy by signing a five-year, US$100m, sponsorship and data rights deal with Interregional Sports Group (sponsorship and event marketing, broadcast production; with a roster of premium sports properties but – significantly – new to gambling). The deal to supply data to power in-play betting markets also includes the sale of worldwide betting partnership rights, to be activated through on-screen graphics, trackside signage and integration across digital and social platforms. Sportradar will have a role to play, through both product development and the provision of integrity services.
After nearly 40 years of distancing itself from gambling, this is clearly a significant move by Formula 1 under its (relatively) new ownership. While some F1 fans have expressed their displeasure at the decision, management has pointed out that it is far from alone among premium sports properties in going down this path. There is no question, however (perhaps given the previously arms-length relationship), that F1 is currently a (very) niche betting product, so innovation and patience will be required (as well as expectations management). There will also, of course, be challenges in execution given the variety of regulatory, political, and public stances on gambling across its target markets.
It has been said that F1 has never properly filled the sponsorship gap left by the Europe-wide tobacco advertising ban, and it may be that gambling sponsors can help to do that. However, the increasing focus in several jurisdictions on the relationship between sport, gambling and advertising (and impact on minors) may require F1’s current owners to ask Bernie where he left his “stave off threats to tobacco advertising” playbook…
Global: M&A watch – Perform Group; Boyd Gaming / Valley Forge Casino
Perform Group has announced it will be rebranded as DAZN Group (pronounced Da zone for those struggling with the lack of vowels) and restructured to establish two distinct divisions within the group: DAZN, responsible for consumer-facing business; and Perform Content, focussing on B2B activities, including Opta, Watch & Bet and RunningBall.
Boyd Gaming Corporation has announced that it has completed its acquisition of Valley Forge Casino Resort in King of Prussia, Pennsylvania, its first property in the state.