This year is expected to bring about a variety of dramatic changes to the UK gambling industry that would impact both players and gaming businesses. The online gambling sector in the UK is to be subjected to more rigid regulations as a part of the government’s crackdown which aims at setting new standards both land-based and online operators would be required to comply with.
One of the leading trends the UK is to observe in 2018 has to do with gambling advertisements and marketing campaigns. The Committee of Advertising Practices in the UK (CAP) proposed a new set of rules in relation to the advertising of gambling services and products this past January.
The aim of the amendments is to ensure a higher level of customer protection, amid a growing problem with gambling addiction. The tougher rules came in the wake of a research conducted by the UKGC that revealed as many as 2 million citizens have either already developed a pathological gambling problem or are at a higher risk of addiction.
Betting Companies to Comply with Stricter Advertising Rules
Operators licensed in the country are to obey a number of requirements that have to do with misleading or exploitative advertising that targets vulnerable groups of customers. Their failure to comply could lead to heavy fines for the violators.
Under the new rules, gambling operators are prohibited from broadcasting their ads during live sports events, which currently represent 95% of all commercials shown during the breaks of live football events on the air. Ads that prompt viewers to “Bet Now” or entail the so-called “Risk-Free” promotions are included in the category of promotional campaigns that target vulnerable viewers.
A spokesperson of CAP dubbed “Free Bet” advertisements misleading because they are easy to misinterpret since they do not state upfront these are in fact matched bets. This is to say deposits of a certain amount are required in order for the customer to receive the “free” credits. While this information is normally clearly stated in a given promotion’s terms and conditions, there is still room for misinterpretation on behalf of the viewer.
The same applies to the “Bet Now” type of advertising where the viewer is instilled with a sense of urgency. Betting companies are to be prohibited from using this phrasing in their advertising campaigns. The so-called “Money Back” deals are also under fire as the betting companies would be required to pay back customers’ losses in actual cash instead of offering them more free credits to stake.
Many betting operators licensed in the UK are known to offer “Risk-Free” bets. Advertising such offers is also subject to changes – they must not cause the customer to incur losses. Winnings accumulated with such offers are capped at a specific amount. In accordance with the new CAP rules, these profit restrictions are considered a significant promotional condition and are to be stated as clearly as possible upfront.
These changes in gambling advertising policies are expected to produce a positive effect. UK citizens will be able to enjoy a higher level of customer protection in 2018. The locally licensed gambling operators are given a deadline to change their advertisements until April 2, 2018, when the new set of rules will officially come into effect.
The changes were introduced in the wake of a difficult year for the local gambling industry which was marked by a number of scandals that had to do with negligence on behalf of betting companies, including advertising content that might appeal to children and insufficient staff training where handling problem gambling is concerned. The new advertising rules are expected to bring about more regulatory adjustments of this kind to the gambling industry in the country.
FOBT Operators Face a Dramatic Stake Reduction
The UK government is currently on the brink of deciding what to do with the notorious Fixed-Odds Betting Terminals (FOBTs). These machines sparked a good deal of controversy in 2017 and were dubbed extremely harmful by campaigners due to their high addiction potential. In their essence, these are machines offering digital casino games like roulette, for instance. The problem is they enable bettors to stake up to £100 every 20 seconds, which may cause people to incur significant losses in a very short timespan.
But gambling addiction is hardly the only harm associated with FOBTs. The high maximum stakes on these machines make them a convenient tool in the hands of money launderers. Even if the fraudsters do lose some of the money they stake on the machines, the remainder of their illicit earnings will appear like legitimate gambling profits.
The UK government is expected to come up with a decision on FOBTs any moment now and it is more than likely that the maximum stake on the machines would be significantly reduced from £100 to £2 per every 20 seconds. While it undoubtedly works to the benefit of vulnerable customers, this huge reduction, if enforced, will have a rather negative impact on the business of high-street betting firms like William Hill and Ladbrokes Coral.
The two companies operate thousands of FOBT machines across their landbased betting venues. It makes sense one such stake reduction will lead to a significant slump in revenue amounting to hundreds of millions in losses. In fact, the negative effects of the anticipated stake reduction are already taking place.
Following the news of the government’s intention to reduce the maximum bets to £2, the stock market value of some of the country’s largest gambling companies dropped by more than £660 million in January. This huge drop in stock market value is anything but surprising considering betting firms have generated more than half of their annual revenue for 2017 from the already notorious FOBTs, collecting as much as £1.8 billion.
2018 May Be a Big Year for Mergers
The substantial drop in revenue resulting from the FOBT stake reduction is likely to force some of the biggest gambling companies to merge in an attempt to offset the losses across their landbased venues through more profitable online gambling operations.
An example would be the merger of GVC Holdings and Ladbrokes Coral that was officially announced back in December 2017. The purchase of Ladbrokes Coral is to cost GVC Holdings up to £4 billion and is currently subject to investigation on behalf of the UK Competition and Markets Authority or CMA.
The investigation was deemed necessary due to concerns that a merger of such mammoth proportions is likely to lead to a competition reduction in the local market. However, Ladbrokes Coral’s Communications Director Donal McCabe dismissed these concerns as unsubstantiated.
The merger is likely to cost the Ladbrokes Coral Group 1,600 jobs, with the cuts impacting the company’s management and its support staff. The two companies are expected to officially seal their merger deal by the end of 2018’s first half.
William Hill, another giant on the UK gambling market started negotiating with the Stars Group (Amaya at the time) on a potential merger in the autumn of 2016. The two companies were planning to introduce a huge omni-channel platform that was worth the impressive amount of £5 million but eventually failed to reach an agreement. The Stars Group was in financial distress at the time and William Hill’s shareholders approached the idea of a merger with great discontent.
Now that the Stars Group is in a better shape financially, a renewal of the 2016 negotiations is not out of the question. Even more so if the UK government decides in favour of the FOBT stake reduction.
The Stars Group is hardly the only company to negotiate with William Hill on a possible merger. The year 2016 saw both 888 and Rank Group approaching the rival company with a takeover proposal to the amount of £3.2 billion. If everything had gone according to plan, the merger between the two companies would have created the biggest gambling group in the UK.
William Hill ended up rejecting both offers at the time. However considering the FOBT stake reduction looming over UK operators at the present moment, it would not be a far stretch to expect a renewal of the merger negotiations.
Despite the dramatic changes the online gambling sector in the UK will go through this year, it is not all doom and gloom as the iGaming industry in the country is expected to continue with its steady growth in 2018.
UKGC figures indicate that interactive gaming is currently the largest gambling sector in the country, with a gross gaming revenue of £4.5 billion generated for the period between April 2015 and March 2016 alone.
Things are looking up for the industry and it appears Virtual Reality gaming is expected to further contribute to the sector’s development, with an expected growth of 800% by the year 2021. As with all things in life, our only option is to wait and see what happens in the months to follow.