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FOBT NEWS ARCHIVE
While betting shops continue to see their business boom on the UK high street, it is not just the punters who are developing an unusual fondness for new brands of betting.
The bookmakers themselves are becoming steadily more dependent on Fixed Odds Betting Terminals (FOBTs), which are accounting for a growing percentage of their turnover every quarter.
In a series of impressive results released in the past month Ladbrokes and William Hill both laid out rosy financial pictures of their high street operations but in both cases the FOBT's were the heroes, with virtual online casinos running a close second.
FOBT's and virtual betting account for 16% of William Hill's net revenues and the terminals are expected to account for 20% by next year.
At Ladbrokes operating profit rose from �76.5m to �101.8m, with fixed odds machines the main drivers behind the jump in-group turnover from �2.56bn to �3.96bn. As Ladbrokes� commercial director Dominic Harrison explains, "Even we�ve been staggered by the arrival of this category of betting machine.
New products have blown the lid off the market before, but this is unprecedented.
Nevertheless, like every product it is subject to a life cycle."
So while the machines are obviously now very much in a growth phase of their life cycle, their future is less certain. Partly because of their explosive growth, FOBTs are facing close scrutiny by the UK's Gaming Board who are concerned that the machines are little more than mini-casinos encroaching onto every high street, and are seeking a High Court declaration on where these machines fit within existing laws.
An initial hearing is expected in October but it is widely believed that there will be no judgement until 2004.
But any ruling against FOBT's could leave the big high street bookmakers with a bigger cold turkey sensation. Ominously Richard Caborn of the Department of Culture, Media and Sport has said that regardless of the outcome of the gaming board's court hearing he would take measures to put limits on the proliferation of the FOBT's, an announcement that, Dominic Harrison argues, was "predicated on no real research whatsoever."
A great deal is at stake for the bookmakers- FOBT's are a logical extension of their long term plans to develop and create their own events on which punters can bet, in so doing broadening the traditional appeal of the bookmakers shop beyond horse and greyhound betting.
Ladbrokes 49ers numbers game was an important landmark game, as was virtual horseracing during the foot and mouth crisis.
They are keen to ensure that there is no confusion between what they are offering - a betting machine where the determination of outcome is made on a remote server located elsewhere- and the older style mechanical gaming machines (AWPs) where results are determined inside the box. Unfortunately for the bookmakers the appearance of roulette type screens on the machines has drawn direct comparisons with casino gaming. "It is only by custom and practice that roulette has become a game synonymous with the gaming industry, says Harrison, adding, " The gaming board only got involved once fixed odds roulette was launched- before that we had been running dog and horseracing variants without any concerns."
Across Ladbrokes UK properties there are 3500 machines in use; across the William Hill chain There are now 2,525 FOBTs, up from 1,745 last year, and unlike the Cheltenham Festival or this summer's soaring temperatures the FOBT's are low risk.
Like real roulette tables FOBT�s typically return 97.2% to the customer- far more than a typical gaming machine that holds onto around 18% of the punters money.
A fixed odds terminal in a busy London bookmakers shop can make �350 a day, but with such low levels of hold that means that more than �12,000 has to pass through the machine each day- a huge turnover boost to every shop.
According to Mintel, since 1997, the net spend by punters in British bookmakers has soared more than 33 per cent from �6.85bn to �9.1bn, much of it driven by FOBTs So any limitations for FOBTs would also signal the end of the line for an important source of revenues for the government According to David Zeffman of London law firm Olswang, " The question the government has to address is whether this is money that betting shop punters would otherwise be losing on horses or are people coming in off the street specifically to play the machines.
My assumption is that there would be people who fall into this later category, but it is arguable that they might simply spend that money at a high street amusement arcade anyway. Zeffman predicts, "There are likely to be limits, firstly on the number of machines, second on the maximum prize- at the moment there is no limit on the maximum prize."
Dominic Harrison disagrees that the FOBT�s are cannibalising the amusement arcade�s trade "our internal research shows no evidence that customers are coming in off the street specifically to play these machines."
But Harrison does agree that FOBT's provide the punter with a markedly better deal. " The terminals return 97.2% of the money that is put in them, You have little chance of winning on an on old mechanical gaming machine when another punter has just cleaned it out, but with FOBTs the likelihood of winning is exactly the same every time."
Tabloid newspaper comment suggesting the machines are the crack cocaine of the high street have not helped a balanced consideration of the issues.
"There's no difference between a red/black bet on a roulette machine and an even priced favourite at Sandown park. says Harrison.
"Unconstrained proliferation of FOBT�s is just not possible because the shops are of a restricted physical size- and AWPs are not coming out of shops to make way for them, but, he concedes, It�s proving difficult to plot out an investment strategy for FOBT�s with some of the uncertainties, Hilary Stewart Jones, a leading gaming industry lawyer at London firm Berwin Leighton Paisner, notes that the high court declaration will be about a lasting interpretation of the law and its definitions rather than an opportunity to haggle over jackpots or machine numbers, and Stewart Jones believes the future for FOBT's is to be treated as remote gambling terminals. "It�s simply the skin of the roulette table software that's got people excited, she says, but there is no question that these terminals are now going to be reconsidered in the context of the gaming bill and its broad redefinition of gaming machines of all kinds.
FOBT's will be dealt with in the context of remote gaming machines, just like the touch bet roulette terminals in casinos and a limit will be placed on numbers that way
rather than with an outright attack on the enshrined right of bookmakers to stage their own events for the purposes of making bets."
As such the FOBTs will be around and thriving until a gaming bill is formulated - an event for which everyone in the industry is still waiting.
Story courtesy of Andrew Gellatly
Back to FOBT News Archive
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