tag:blogger.com,1999:blog-91359801049876547262024-03-25T09:31:05.927+00:00Regulus BlogRegulus Partners is a strategic consultancy focused on International gambling and related industries. We work with large and small operators, start-ups, suppliers, regulators, governments and other stakeholders. We have unrivaled sector experience, a track record of delivery and a data-driven approach.Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-9135980104987654726.post-42257253743449134382016-07-21T16:48:00.001+01:002016-07-25T21:26:34.284+01:00Brexit: implications for the gambling industry<div class="separator" style="clear: both; text-align: center;">
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<span style="font-size: 18px;"><span style="color: firebrick;"><span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><strong>All Bets Off – Gambling’s Brexit Gamble</strong></span></span></span><br />
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<strong style="font-family: arial, 'helvetica neue', helvetica, sans-serif; font-size: 12px;">Dan Waugh</strong><span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">, </span></span><strong style="font-family: arial, 'helvetica neue', helvetica, sans-serif; font-size: 12px;">Partner at Regulus Partners</strong><span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;"> blogs on last week's discussion co-hosted with Olswang.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">There are few industries as familiar with the vagaries of life than gambling – which may be just as well given the uncertainty that faces the industry in the wake of Britain’s EU referendum.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">The binary uncertainty of ‘Leave/Remain’ has now been replaced with myriad unresolved questions concerning the effect of Brexit on the judicial, legislative and economic landscape for all of us.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">So for gambling – as for the rest of the UK – life must go on. What that life (on the other side of the Brexit looking-glass) will be like was the topic for discussion when Jenny Williams, former CEO of the Gambling Commission, chaired the Olswang/Regulus Brexit debate in London last week.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Those joining Williams on the expert panel – Dan Tench and Tamsin Blow from Olswang and Paul Leyland from Regulus – were quick to discount any lingering hope of the ‘Remainers’, that Article 50 would somehow not be triggered. The bookies may have called this one wrong but there will be no Stewards Inquiry.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Positively, this is one political secession that would be undertaken in a considered and well-ordered manner. The future may be uncertain but major disruptive upheaval is not on the cards. Indeed, once we are out it may be that much of life (and law) will feel much the same as before.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">In particular, if the UK joined the European Economic Area (EEA) “EU directives or not, key legislative requirements of UK gambling firms on matters such as money-laundering and data protection are highly unlikely to be changed”, said Tench. And even if the UK left the EU and did not join the EEA “Substantive EU law will remain on the statute books and there will be no hurry to redraft them.” Indeed, the practical need to have consistent reciprocal laws with our continental neighbours may mean that the influence of legislators in Brussels will continue to be felt within our shores for the foreseeable future.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Yet if our laws are likely to remain largely unchanged, the question of who interprets them is a little harder to judge. If the United Kingdom remains within the EEA, then the highest court would shift from the CJEU to the European Free Trade Agreement Court. Given the slimmed down nature of this court (just three judges, currently drawn from Iceland and Norway), the UK may expect to exert greater influence on it than it had been able to on the CJEU.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">And if the UK did not join the EEA on Brexit, the UK's own Supreme Court in London would be likely to have the final say – but even here the need for coherence of interpretation (with respect to our EU trading partners) will remain a consideration.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">In terms of the broad economic outlook, Paul Leyland advised firms to buckle up for a roller-coaster ride with the financial markets highly sensitive to the volatility that the Brexit negotiations and their aftermath seem likely to bring (something that share trading had exemplified in only the first few weeks post-referendum). </span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Inward investment would falter, with multi-national companies exercising caution on major capital projects. Early high profile property asset sales in the wake of ‘Leave’ would no doubt be followed by others.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Critically for gambling companies, securing lending (already a tough beat) is only likely to get tougher. How the consumer reacts to all of this is harder to discern – but with a weaker Pound and jobs under threat in certain quarters, risk appeared to be largely on the downside.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Against this background, Theresa May’s new Government will be highly sensitive to the needs of business; but not all businesses are created equal. Gambling’s political significance typically outweighs its economic importance – and that may make it vulnerable to tax increases (to fund spending) and regulatory intervention (in response to the politics of party fragmentation). The following day’s announcement that John Whittingdale (widely seen as a sympathetic observer of the gambling industry) would be replaced in the new PM’s Cabinet by the crime-busting Karen Bradley reinforces this analysis, as does the re-appointment of FOBT disliking Tracey Crouch.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">Gambling’s take on Brexit has undoubtedly been skewed by concerns over the fate of offshore territories such as Gibraltar, Isle of Man and Alderney - where so much of the value of Gambling Inc is now located. Gibraltar knows from experience how Spain can turn the screws (in terms of border crossings) when it chooses to – and Madrid has not been slow to draw the link between a UK free of the EU and a Gibraltar free of the UK.</span></span><br />
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<span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;"><span style="font-size: 12px;">It was true that UK would undoubtedly fight to defend the interests of Crown dependencies and other offshore jurisdictions – but that the matter was unlikely to be anywhere near the top of Brexit Minister David Davis’s priorities (nor for that matter Boris Johnson’s – although he has since met with Picardo to give reassuring words).</span></span><br />
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<span style="font-size: 12px;"><span style="font-family: "arial" , "helvetica neue" , "helvetica" , sans-serif;">All of which leaves remote operators in these territories with a dilemma – sit tight and hope that political pragmatism will protect their ability to operate within the EU from small islands; or relocate. Stay put and trust to fate or precipitate the scramble for Malta (with all the attendant issues of bandwidth, talent and resource)? Companies will have to make such calls on the shifting sands of HM Treasury policy, although for some the threat to the offshore exemption on input VAT may just help to make the options clearer.<br /><br />Rather closer to home, is the possibility that our impending break with the EU will result in the dissolution of the Act of Union and the rebirth of an independent Scotland. Given the current position on FOBTs of the Scottish Nationalists, this would clearly pose challenges for the betting shop sector – but any move towards regulatory localisation will present opportunities too.<br /><br />Every question answered on the future of gambling in the Brexit and post-Brexit eras appears destined to spawn many more. The journey to schism has started and requires careful and close scrutiny from here on in. </span></span></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-18251483978251342042016-05-02T15:15:00.000+01:002016-05-02T17:00:54.548+01:00Mayday – the National Living Wage will drive channel shift<div class="separator" style="clear: both; text-align: center;">
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<b style="color: #222222; font-family: arial, sans-serif; font-size: 13px;"><span lang="EN-GB"><i>“The production of too many useful things results in too many useless people” Karl Marx</i></span></b></h2>
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<b><span lang="EN-GB">Today is the International Labour Day holiday and in the UK, the new National Living Wage has been in force for a month. This has been presented by government as strengthening the value of workers; the gambling sector has largely presented it as a minor inconvenience. It is neither. The vast majority of workers will not be any better off, meaning that increased pay does not (in the short term) deliver increased spending power. Moreover, while the initial rate may be easy to swallow, NLW is a ratchet.</span></b></div>
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<b><span lang="EN-GB">NLW: locking in wage inflation</span></b></div>
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<span lang="EN-GB">The early years of the National Minimum Wage drove material cost increases for employers of the low paid (1999 – 2006 CAGR of 5.8%); however, this was from a low base (starting at £3.60), occurred during a (mostly) strong economic period, and grew disposable income (HDI) in the same period increased by 4.7% pa). However, despite Brown’s redistributionist rhetoric, the NMW largely stalled during the recessionary period 2008 – 2012 (CAGR 1.9%) and grew by only 2.5% pa during the coalition government. By contrast, the Welfare Budget has grown by 5.4% CAGR between 1999 and 2015 (ie, adding c. £8bn pa). </span><br />
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<span lang="EN-GB">However, between 2015 and 2020 the Welfare Budget is effectively capped other than for pensions, meaning that a significant and long-term low-pay fiscal stimulus has effectively been removed. Changes to in-work benefits also mean that the NLW is essentially HDI neutral in year one. Thereafter, it is likely to add c. £1.1bn pa to the spending power of the low paid – but this is dwarfed by the previous benefits increments. On the flip side, employers of the low paid have a fairly visible c. 6.7% annual wage inflation to contend with. </span></div>
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<b><span lang="EN-GB">‘Convenience’ retail gambling is the most impacted…</span></b></div>
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<span lang="EN-GB">Ladbrokes and William Hill have both quantified their NLW impact at c. £2m: a relatively small sum, the impact of which is easy to dismiss. However, these businesses employ c. 13,000 people in their UK retail estates each and have total retail salary bills of c. £200m. Average salaries for the two businesses combined (across channels, functions and countries) is £20,700 (NB, an FTE on NLW would earn £13,000 pa ex any employer or state benefits). </span></div>
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<span lang="EN-GB">From a retail context (and this applies reasonably well to AGCs and bingo halls also), if we suppose 80% of staff are ‘low paid’ (c. £15,000), c. 10% ‘low-medium paid’ (c. £30,000) and c. 10% ‘well paid’ (£60,000 or more), this would get us to the average salary; it would also reinforce the view that comparatively few workers are directly caught in the NLW net. However, 80% of workers are very close and a further 10% are in a directly comparable pay tables – only 10% of the workforce are not affected by the NLW at all. By 2020, the FTE salary on NLW will be over £17,000 – directly capturing over 80% of the retail workforce, on our assumptions. </span></div>
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<span lang="EN-GB">In other words, a large proportion of the retail workforce is already subject to indirect wage inflation, and this will become increasingly direct over the next four years. In these circumstances, annual wage increases in retail of less than 4% would probably be very optimistic; especially since front-line staff numbers have been cut to the bone in most sectors.</span></div>
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<span lang="EN-GB">The average cost of salaries as a proportion of revenue for William Hill, Ladbrokes and Mecca (retail only) is 23%; the average EBIT margin is 16.4%. All things being equal, therefore, the introduction of NLW is likely to reduce profits by c. 6% pa (1ppt of margin) over the next four years: this is not trivial. </span></div>
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<b><span lang="EN-GB"> …and these are the sectors most at risk from channel-shift</span></b></div>
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<span lang="EN-GB">The problem for retail sectors is that all things are not equal. Outside a few stand-out products, broad-based top-line growth is proving elusive, while we have demonstrated that the NLW cost impact far outweighs any spending benefits, even in the medium-term. Equally, the two other big cost items for retail – rents and content – are also likely to prove inflationary. NLW is therefore reducing business cost flexibility and increasing margin erosion at a time when revenue growth is tough, without any direct upside. </span></div>
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<span lang="EN-GB">Retail top-line growth is likely to become tougher still as anecdotal evidence continues to point to accelerating retail-to-mobile channel shift. To put this issue into stark relief, it would take a retail operator just six years to swing into loss on 0% topline and 4% cost growth if it started on a 15% EBIT margin: disruption and dislocation would likely occur much sooner. Eroding profits will also reduce supply and discourage investment: reducing retail’s competitiveness vs. remote and further accelerating channel shift.</span></div>
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<span lang="EN-GB">Equally, UK retail gambling is dominated by just seven major operators; these same operators control only c. 25% of the UK remote market: channel shift redistributes revenue away from the major retail incumbents, even when they are competent online. This makes talk of omni-channel urgent and defensive, not (on its own) a growth strategy. </span></div>
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<b><span lang="EN-GB">Can we afford the future?</span></b></div>
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<span lang="EN-GB">There is an irony to all this – in embracing the much less labour intensive world of remote gambling, both consumers and operators have been moving inexorably from a business of people to a business of things, and so (in line with the wider economy) being part of the process which is undermining its own future.</span><br />
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<span lang="EN-GB">Retail gambling has been very effective at ‘transactional services’, but over the last ten years or so many operators have undermined the ‘personal service’ through (largely) cost-driven investment in EPOS and electronic forms of gambling (including machines). Product knowledge and community contact has been significantly eroded. Increasingly, if the consumer wants simply to ‘transact’, the mobile is a far more efficient medium. </span></div>
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<span lang="EN-GB">The government is forcing employers to pay their staff more, the only way this can be turned into a positive is if more can be got out of staff. Retail gambling still holds enormous latent advantages over remote gambling (not just tapping into the cash economy): it is a dedicated venue; it can be a destination; it can be/reflect a community, and; it can deliver a personal touch. Leveraging these 'social' advantages is no longer about hope or chance, it is about survival. </span></div>
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<span lang="EN-GB">Please see our previous blogs on this subject:</span><br />
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<span lang="EN-GB"><a href="http://regulusp.blogspot.co.uk/2015/02/time-to-think-outside-box.html?m=1" style="color: #1155cc; text-align: start;" target="_blank">http://regulusp.blogspot.co.<wbr></wbr>uk/2015/02/time-to-think-<wbr></wbr>outside-box.html?m=1</a></span><br />
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<a href="http://regulusp.blogspot.co.uk/2015/04/omni-channel-castles-in-sky.html?m=1" style="color: #1155cc; text-align: start;" target="_blank">http://regulusp.blogspot.co.<wbr></wbr>uk/2015/04/omni-channel-<wbr></wbr>castles-in-sky.html?m=1</a></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-88300117504145998582016-04-14T09:43:00.001+01:002016-04-14T09:43:16.885+01:00The Budd (breakfast) Report<div class="separator" style="clear: both; text-align: justify;">
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<b><span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">This week, Olswang and Regulus Partners co-hosted Sir Alan Budd, one of
Britain’s foremost economists and the man who chaired the 2001 Gambling Review
Body (whose report gave rise to the Gambling Act 2005). Sir Alan recounted his
experiences from that time, explaining the processes, pitfalls and issues
arising from the eventual legislation – and in so doing offering valuable
lessons for any future review.</span></b></div>
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<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Here is our
summary of his hugely informative and insightful perspective.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Sir Alan Budd
started by making the often overlooked point that government policy was at that
time often generated by committees of people “of a certain class” without much
experience, knowledge or even interest in the subject of their considerations.
Luckily for gambling, Budd took a keen interest in the subject and could bring
an economist's training to bear. The appointment of the Gambling Review Body
was precipitated by three forces; a sense that gambling legislation was “in a
muddle” (with different acts for different parts of the industry); there was an
untested perception of greater permissiveness since the key legislation of the
1960s; and the nascent but clearly emerging issue of online gambling needed to
be dealt with. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">It was Budd's
view, which guided thinking, that good gambling legislation should be about both
enabling and protecting the consumer – and he referred to the need to find a
balance between the two as his ‘central dilemma’. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">The Gambling
Review Body was not interested in the profitability of gambling companies, high
employment or in moral judgements on the simple desirability of gambling. Yet
while the committee received around 200 operator submissions, undertook
numerous meetings with industry and conducted site visits, they received little
in the way of direct testimony from ‘the consumer’. Thus they considered the
behaviour of ‘Punters’ through the prisms of observed experience and research
(mainly the British Gambling Prevalence Survey, the Family Expenditure Survey
and their own ONS participation survey). Critically, however, the principle
that (proportionate) harm reduction trumped the freedom of the majority was
enshrined from the start. While the committee included taxation within its
terms of reference, it was not mandated (nor indeed equipped) to opine on
fiscal policy.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Budd
recommended that the legislation should be flexible and enforcement simplified.
The regulator (we owe to Budd the
creation of the Gambling Commission) would ensure that principles were
followed, the sector behaved responsibly and technological changes were adapted
to. This was largely followed, though with the significant caveat of machines
stakes and prizes, which was reserved by DCMS. Other advice not taken or fudged
was to ensure that remote operators were licensed in the UK (now fixed), that
the NHS should be mandated to address problem gambling and that ambient
gambling should be removed (first clubs were protected, now the Greene King
case is challenging the licensing principle of ‘primary purpose’). <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222;">The immediate
success of the ‘Budd Report’ was that the vast majority of its recommendations
were enshrined within the Gambling Act. The longer-term effects are more
difficult to ascertain but gambling legislation in 2016 is undoubtedly simpler
and more flexible as a result of the ‘Budd Report’; choice has been extended
significantly for adult gamblers; strong controls are in place to restrict
crime; problem gambling rates have remained relatively stable; and remote
gambling has flourished without giving rise to the scale of public health
issues feared at the time.</span><span style="color: #222222;"> </span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">No discussion
of this episode would have been complete without reference to the political
controversy that swirled around Budd’s proposals for resort casinos. The
dilution and final extinction of plans for destination gambling was, it seemed,
an example of how moral judgement (often disguised as paternalism) can trump
considered analysis. Sir Alan noted Professor Peter Collins’s assertion in ‘The
Great British Casino Shambles’ that this represented “typically British
political decision-making”. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">In the
round-table discussion which followed Sir Alan’s opening remarks, it was
recognised that the Gambling Commission today has considerable flexibility
under the framework provided by the Gambling Act, but that this framework is
much tighter on the supply and shape of land-based gambling than it is on the remote
sector. It was acknowledged that there has been a recent shift in industry
perceptions on and engagement with ‘Responsible Gambling’; and that in time
this may pave the way for less defensive modes of engagement on legislation and
regulation. Happily, the vexed subject of FOBTs only made a brief appearance,
with the standard arguments being rehearsed; though there was some recognition
that perhaps the Gambling Act had 'unintended consequences' of proliferating high
stakes gaming and putting casinos at a relative disadvantage. Given the
increasing evidence (supporting both sides) and increasing harm mitigation
initiatives, it was suggested that a Triennial Review would be helpful to
tackle these issues. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">More broadly,
a view emerged that under the Gambling Act, remote gambling was less heavily
regulated and faced fewer constraints than its land-based counter-parts (a bias
largely reinforced in the tax code) - despite Budd having recommended
casino-style regulation for ‘online gambling’. Moreover, it was suggested that some
of the current regulatory friction was being generated by land-based operators
rubbing up against the confines of restrictive (possibly anachronistic)
licensing regimes. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">While the
idea of a new gambling review was met with caution, the discussion posed an
important regulatory question - whether the Government is happy to preside over
a legislative regime that encourages and accelerates channel shift from
land-based to remote gambling. There are clear benefits to this shift, notably
the greater levels of data and technology-driven harm prevention measures that
can be deployed; but there are likely to be problems too.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;"><br /></span></div>
<br />
<div class="MsoNormal" style="background: white; margin-bottom: 6pt; text-align: justify;">
<span style="color: #222222; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB; mso-hansi-font-family: Calibri;">Perhaps most
significantly, our breakfast briefing with Sir Alan Budd served as a reminder
of a period when benefits to the consumer (both in terms of their enjoyment and
risk of harm) were placed explicitly at the heart of government thinking and
policy on gambling. <o:p></o:p></span></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-52406635904609273792016-01-29T16:58:00.002+00:002016-01-29T17:01:21.010+00:00Need financial support? Don’t Bank on it…<br />
<div style="text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6lwtobwLOscpDRXttXeY8F2ByIP8n6cV-vNCd6MdoLfoswTPEMgRuA2ZVQu2zIMEv_QdtU3PvDp1yy1T1pwhVOXcHNfbWdPnn-PgUZzl97KVMJ6pPBHSQHVZYoJcGk7U-TXPfL__oMXU/s1600/dreamstime_xs_56064058.jpg" imageanchor="1"><img border="0" height="318" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6lwtobwLOscpDRXttXeY8F2ByIP8n6cV-vNCd6MdoLfoswTPEMgRuA2ZVQu2zIMEv_QdtU3PvDp1yy1T1pwhVOXcHNfbWdPnn-PgUZzl97KVMJ6pPBHSQHVZYoJcGk7U-TXPfL__oMXU/s320/dreamstime_xs_56064058.jpg" width="320" /></a></div>
<div style="text-align: center;">
<br /></div>
<h2 style="text-align: center;">
<b><i>"I sincerely believe... that banking establishments are more dangerous than standing armies" - </i></b><b><i>Thomas Jefferson</i></b></h2>
<br />
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The Banking Crisis supposedly
ended six years ago. It probably doesn’t feel like that if you work in the
remote gambling sector, however. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div>
<div class="MsoNormal" style="text-align: justify;">
Back in the first heyday of
remote gambling IPOs (2004 – 2005), banks were happy to lend, albeit on
expensive terms and rapid rates of payback, and were more than happy to provide
commercial services and process payments. The banks’ appetite for ‘risky’
remote gambling companies changed markedly in the summer of 2006, when UIGEA
ended the party and put the banks in the spotlight, both for enforcement and
past ‘misdeeds’ for supporting businesses facing the USA. The global Banking
Crisis (2007-09) swiftly followed, highlighting some rather riskier banking
activities and putting any form of even slightly controversial banking activity
beyond the pale. These two events meant that the banks were firmly shut to many
(most) remote gambling operators and largely have been since, an economic
recovery and substantial remote growth notwithstanding.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
But before we bash bankers too
much, it is probably worth flagging that their Risk Committees had a point when
it came to remote gambling. There are (or were) seven things typically found in
remote gambling which give bankers pause – and it is the presence of all seven
that made remote gambling particularly toxic (rather like the Titanic, bankers
would probably have been more or less relaxed about the breech of any three of
these risk-assessment bulkheads, but any more would be fatal). <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
First, and probably most
importantly, the US government made its anti-remote gambling ire known to the
financial services industry: every global bank has perforce extensive US
interests - which are probably bigger than most countries’ gambling markets; it
is not an unreasonable commercial decision that most banks fled from
potentially upsetting the US government, whatever their own views were.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Second, back in 2006 the vast
majority of remote gambling was regulated on a point of supply basis. Given
that even many gambling executives use the shorthand of ‘unregulated’ for this
activity (or even pointedly don’t put some revenue in a ‘Sustainable’ category
when reporting), it is unsurprising that many banks regard ‘point of supply’
revenue as risky.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Third, and as a result of the
second point, most remote gambling companies have their Headquarters in
‘exotic’ jurisdictions, typically associated with ‘tax optimisation’. With
tongue firmly away from cheek, many bankers frown on these sort of structures,
especially if…<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
… Fourth, most gambling companies
are rather small by international corporate standards (eg, not one gambling
company is in the FTSE 100, pending the Betfair – Paddy Power ‘mega merger’), meaning
that the ‘return on risk’ on most remote gambling business simply doesn’t stack
up for banks.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Fifth, the ‘entrepreneurial’
nature of many remote gambling companies meant that things like social
responsibility and corporate governance were not early priorities. This not
only plays badly in a corporate box-ticking environment, but also (far more
importantly) increases the risks of negative regulatory change: especially
where some mainstream press has an ‘anti-gambling’ stance. All of this
naturally reduces a bank’s already low appetite for the sector still further.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Sixth, back in the .com world
where most operators took money from most jurisdictions, providing a lot of
trading access (or at least details) to a regulated entity with a fiduciary
duty to block or report ‘dubious’ transactions was probably considered poor
risk management from the gambling companies themselves: relying on ‘sector
specialist’ financial services was much safer and more reliable. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Finally, many remote gambling
companies are relatively young and, given the cash generative nature of such
(more successful) businesses, have not hitherto needed much ‘vanilla’ financial
services support. This has meant that there is no long-standing relationship or
network of relationships within the financial services community to leverage:
it is much easier to turn down a new business than turn off an established one.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Many of these ‘legacy’ issues are
now being solved however. The US has been firmly shut for nearly a decade -
levels of compliance have been comfortingly high and the US has even positively
modified its regulatory stance (albeit in certain highly specific areas). Many
remote gambling companies now generate most or all of their revenue from
regulated markets, while UK Point of Consumption licensing has made many
companies more visible and more accountable. Remote gambling is now big
business, driven by a combination of organic growth and M&A: in the UK (the
most liberal domestically regulated market), remote gambling is now the single
largest commercial sector by official Gross Gambling Revenue stats, as well as
one of the fastest growing. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Further, many companies have made
the transition to well governed, socially responsible entities, through a
combination of increasing scale, increasing regulatory scrutiny, and changes in
management and/or ownership. Lastly, many remote gambling companies are now (at
least) ‘medium sized’, well established businesses with a strong track record
of sustainable (and audited) revenues and growth. </div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Unfortunately, none of these
positives have yet been accepted by mainstream financial services businesses,
with appetite to deal with remote gambling companies (especially small and/or
new ones) very low. This is important. In fact it is a lot more important than
the remote gambling sector realises – I would point to five key reasons
(Finance Director readers could probably add many more!).<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The most obvious impact of having
high volume ‘vanilla’ providers of financial services closed off as an option
is that the cost of doing business increases - for commercial banking,
processing or financing. This puts new and/or remote only businesses at a
competitive disadvantage in terms of day-to-day activities (eg, payment
processing as a cost represents c. 25% of typical remote profits).<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Another impact of limited supplies
of debt is that it materially impacts flexibility to grow. If substantially all
of a company’s increased costs need to be organically funded by revenue or
through equity investors, then growth is made both slow and expensive; reducing
competition and innovation while favouring the larger incumbents.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The supply chain is probably the
area where significantly reduced financial services options have the biggest
and most problematic long-term impact. Platforms and content need R&D and
infrastructure spend to grow. If this can only come from organic resources then
the focus will be on short-term wins and tried-and-tested ideas. It will also
keep small developers small unless they hit lucky with one very high return
product or service or find a very generous equity backer. This not only
polarises the supply chain into very few haves and very many have nots
(materially reducing operator choice), it also stifles innovation. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
A potential regulatory risk issue
for the sector is that forcing operators to use more exotic forms of financial
services also puts them (perhaps unwittingly) into the ‘grey market’ supply
chain. In a very narrow sense, this perpetuates the problem by providing life
to the support structures of the industry that often cause greatest concern. In
a wider sense, operators already plugged in to ‘regulatory flexible’ payment
solutions or financing may become tempted to broaden their revenue base to
riskier markets. This could be especially compelling when combined with the
need to generate high margin revenue to support costs, given the paucity of
attractive financing options.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
Finally, by helping to keep large
parts of the remote gambling sector small and ‘colourful’, the lack of mainstream
financial services engagement helps to perpetuate the stigma that causes the
sector so many problems, from inviting negative press and adverse political
risk to making talent difficult to attract.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
A further tangential risk worth
flagging is that traditional land-based businesses are becoming increasingly
remote (indeed need to); many of these companies also have material amounts of ‘vanilla’
debt. If the large banks maintain their anti-remote gambling position then
increasingly ‘omni-channel’ businesses could see themselves growing their financing
risk to dangerous levels; especially if land-based profits decline.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The lack of effective access to
large-scale financial services therefore touches nearly every key aspect of the
remote gambling industry. Moreover, as the industry matures, this lack of
access is likely to be felt ever more acutely, causing deeper problems to
perpetuate.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
I would suggest that high-level
stakeholder engagement, including regulators and equity holders, is key to
resolving this impasse before the issue distorts the sector further and
potentially also causes value destructive levels of risk. The sector should also
be prepared to engage on more creative means of securing attractive financial
services for the ‘regulated age’, without simply turning to expensive and high
risk ‘.com’ solutions. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
At the beginning of a year it is
usually tempting to focus on which channel will see most growth, or M&A
gossip, or some other form of crystal-ball gazing. But as the remote industry
matures, it should spend less time pondering the ‘next big thing’ might be and
more time focussing on resolving the very real issues that are retarding its
ability to be taken as not only the most dynamic gambling sub-sector but also
the most sustainable. As the remote sector challenges land-based sectors in
terms of scale in many jurisdictions, the fate of the entire gambling industry
might rest on making this transition successfully. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br />
<div style="text-align: center;">
<b>This article appears in the January/February edition of iGaming Business</b></div>
</div>
</div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-3446879961795923342016-01-15T13:05:00.000+00:002016-01-15T13:07:32.374+00:00DFS, ducks and the gun lobby.<div class="MsoNormal">
<i><b>By Michael Ellen, Partner</b></i><br />
<i><span style="font-size: large;"><br /></span></i>
<i><span style="font-size: large;">“Not so much the issue of whether DFS is legal under
existing relevant law, but rather whether DFS should be legal.”</span></i><o:p></o:p></div>
<br />
<div class="MsoNormal">
It doesn’t waddle or quack but DFS looks very like a
substitute for a sports betting duck to the untutored eye. The title quote
comes from a White Paper on DFS (and onwards into eGambling regulation)
published this week by the Massachusetts Gaming Commission, and reads like the
blast of applied common sense the world has been awaiting on this particular
duck-shoot.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraph" style="margin-left: 0cm;">
Given its enormous and popular
following, the current hiatus of, variously, recognition, passive acceptance
and prohibition plus sanction across the federation does no credit to the U.S.
legislature. </div>
<div class="MsoListParagraph" style="margin-left: 0cm;">
<br /></div>
<div class="MsoListParagraph" style="margin-left: 0cm;">
There is rumour of a Federal investigation into the activity,
which if true almost certainly means an indictment is threatening one or both
the major DFS players (to be resolved, probably late this year). Current
proceedings in California seem very likely to find that the activity falls
within existing regulations on pool betting. The rumoured UIGEA carve-out for
DFS (allegedly excluding DFS from the “unlawful activity” that UIGEA was aiming
to choke off federally) bears no examination at all – its not there; the
reference to Fantasy Sports, the annual version, serves only to exclude it (and
not the Daily version) from UIGEA; and neither of them from other previous blocking
legislation.<o:p></o:p></div>
<div class="MsoListParagraph" style="margin-left: 0cm;">
<br /></div>
<div class="MsoListParagraph" style="margin-left: 0cm;">
If prohibition is
threatening, outside Massachusetts, we should recognise that it has never been
effective in stopping the average American citizen from sports betting. Prohibition
and a regulatory vacuum apparently serve the long-term interests only of vested
commercial operations. Conversely licensing and regulating, as already provided
to DFS activity in Nevada, provides assurance on probity and fairness; and it
raises taxes, a consideration that may to sway California and New Jersey into
legitimising sports betting this year, subject to resolution of another
pre-existing regulation (the continuing relevance of the 1992 federal
legislation known as PASPA, which outlawed the further development of sports
betting, is likely to be formally resolved by New Jersey this year).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
One interesting side-effect of legitimising and regulating
both verticals would (or will) be the sea change it generates in social
responsibility and at-risk player protection, not just in sports betting but
radiating across the whole sector in USA. It is an existing identified cancer
within an otherwise generally healthy body of activity. It will seem, in ten years’
time, to have been the madness of the previous generation not to have faced
this issue more directly – very like smoking – but as President Obama is
finding out now on gun control, US federal priorities are not always logical;
and election year will certainly divert political energy.<o:p></o:p></div>
<br />
<div class="MsoNormal">
<br /></div>
Dan Waughhttp://www.blogger.com/profile/09374178707808839560noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-28468005881326422062015-12-18T10:45:00.001+00:002016-01-15T13:07:53.907+00:00In testing times we’d be daft to duck the question<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNHuIkg_dAXMsfLkBin5wJ-wfOrEiBgpH98DyTYucdTUrCFVHoO7dqS2M2Tast5YQpuMmEaI5gO4u7eSrwfM7JjCH0kvuAllmCJMCg7qtdEnLVZUh0TJGCRvGIEKCv0U4bf9d_GaqDGblY/s1600/dreamstime_s_35669793.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNHuIkg_dAXMsfLkBin5wJ-wfOrEiBgpH98DyTYucdTUrCFVHoO7dqS2M2Tast5YQpuMmEaI5gO4u7eSrwfM7JjCH0kvuAllmCJMCg7qtdEnLVZUh0TJGCRvGIEKCv0U4bf9d_GaqDGblY/s320/dreamstime_s_35669793.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">"Guilty Mallard?"</td></tr>
</tbody></table>
<br />
By Dan Waugh, Partner<br />
<br />
<div align="center" class="MsoNormal" style="text-align: center;">
<i><span style="color: #002060;"><span style="font-size: large;">“If it looks like a duck, sounds like a
duck and walks like a duck it’s unlikely to be a horse.”</span><o:p></o:p></span></i></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<i><span style="color: #002060;"><br /></span></i></div>
<div class="MsoNormal">
One of the problems with regulating gambling in a relatively
permissive society like Great Britain is that the target simply refuses to
stand still. Changes in technology and consumer behaviour propel gambling
companies forward in search of ways to grow the market and to capture greater
share – sometimes rubbing up against the confines of regulation.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If the regulatory cords are tied too precisely, they may
become outmoded and so create loopholes; too loose and they give rise to
inconsistency of interpretation and possible exploitation. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This is the sort of problem that the Gambling Commission has
been grappling with in trying to ensure that licensing regimes are used for the
purposes intended (and more specifically to guard against the proliferation of
machine gaming in ‘ambient’ premises). Attempts to set some measurable
parameters around the principle of ‘primary purpose’ (the idea that a betting
shop licence should be used primarily to offer betting, a bingo licence for
bingo and a casino licence for table games) have been met with predictable
entrepreneurship (often manifested in tokenism) from the industry. This in turn
has led the Commission to seek to implement the well-worn ‘duck test’.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The ’duck test’ which focuses on outcomes rather than
compliance tends to trump the industry’s best-laid arguments. The recent
travails of DraftKings and FanDuel in the USA illustrate the point. The daily
fantasy sports sector may be correct in asserting that their activities are
exempted from the proscriptions of UIGEA and the Bradley Act; but if the
regulator decrees that the carve-out is being exploited to offer sports betting
by proxy, there will be only one winner. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Back here in Britain, local authorities may soon be asked to
consider whether a bingo club is really a bingo club, not on the basis of technical
specifications (bingo positions vs slots, floor space allocation, revenue
splits) but on whether it meets their expectations of what a bingo club should
be.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is a common sense approach to licensing that the
Commission hopes will put paid to pubs masquerading as bingo clubs, arcades
aping casinos and betting shops bereft of sports. In some respects it may be
seen in the same vein as the current regulatory emphasis on impact and
effectiveness rather than simply compliance – a renewed recognition that the
spirit is every bit as important as the letter of the law. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There is of course the risk is that the proposed new
approach leads to inconsistency of interpretation between local authorities;
but the Commission will be only too aware of its task in meeting this
challenge.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Perhaps the more important concern is that in applying the ‘duck
test’ to licensing, we are once again addressing symptoms rather than getting
to the heart of the matter.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Britain’s terrestrial gambling operators are – generally
speaking – a fairly well-behaved and conservative bunch. The widespread
inventiveness in licensing that we have seen since the Gambling Act has often resulted
from challenges to the traditional business model (such as the smoking bans of
2006 and 2007 or the casino duty increase of 2007) rather than base avarice. Sometimes covetousness creeps in where
there are obvious regulatory imbalances (e.g. FOBTs being permitted in betting
shops and not arcades; bingo clubs having better slots entitlements than pubs)
but deep down this has been about the need to adapt to a changing world.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As I have argued in previous articles (notably <a href="http://regulusp.blogspot.co.uk/2015/02/time-to-think-outside-box.html" target="_blank"><span style="background: white; color: #1155cc; font-family: "arial" , sans-serif; font-size: 10.0pt; line-height: 107%;">http://regulusp.blogspot.co.uk/2015/02/time-to-think-outside-box.html</span></a>),
the prognosis for licensed gambling venues in Great Britain is worrying and
this is largely because they are still defined by parameters set in the 1960s
and the needs of a dwindling band of customers. Our arcades, betting shops and
bingo clubs are looking increasingly anachronistic while the much vaunted rise
of the casino has somehow failed to materialize. Gambling activity seems to be
shifting inexorably to remote channels – a trend that may not be unambiguously
positive.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Against this backdrop, it is unsurprising that operators
have become more enterprising in how they interpret regulations. Done in the
right way, it can even serve to force positive change. Several years ago, I was
involved in the process to supplement machine numbers in bingo clubs through
multi-licensing – a response to a restriction in the Act that limited clubs to
just four jackpot machines per premises (at a time when some clubs were receiving
up to 1,000 visits a day). With no evidence of harm arising from the machines
expansion in bingo clubs, successive governments have relaxed restrictions and
so largely obviated the need for multi-licensing.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: left;">
Nevertheless, the rise to prominence of machine gaming in
venues where it is intended to be a secondary activity is a justifiable source
of concern for the Gambling Commission as is the land-based industry’s growing
dependence on those machines. Application of the ‘duck test’ is a sensible response
to current challenges (notably Greene King’s attempts to deploy bingo licensing
in community pubs) but it is unlikely to end the game of cat and mouse over
licence definitions, precisely because it does not address the root cause of
incipient obsolescence. It asks the question of whether the licensing regimes
are being adhered to rather than whether the licensing regimes are themselves
appropriate. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This is existential stuff for the industry but will never be
a priority for government; so the onus is on companies to address it. Put
simply, if our ambitions fail the Commission’s ‘duck test’, perhaps it is time
for us to consider whether we wish to be ducks at all – particularly those of
the sitting kind.<o:p></o:p></div>
<br />
<div class="MsoNormal">
<br /></div>
Dan Waughhttp://www.blogger.com/profile/09374178707808839560noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-57998903914519023572015-10-19T23:08:00.000+01:002016-01-15T13:08:11.221+00:00Gambling in the UK: the perversity of eschewing diversity<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitkhWJcyOIAlEwhCC2BnFq_4d6JsqQ6odEJQojIggdwyx05oWxn63uoQyJFKueD_r3lThZgQUQq_IlffZo_xQXpDVh1xkzJln5HvsdoSbTbnA9p5vjk-R0BZlWHGagxTPgobGkR7FjDgyj/s1600/dreamstime_xl_22836320.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitkhWJcyOIAlEwhCC2BnFq_4d6JsqQ6odEJQojIggdwyx05oWxn63uoQyJFKueD_r3lThZgQUQq_IlffZo_xQXpDVh1xkzJln5HvsdoSbTbnA9p5vjk-R0BZlWHGagxTPgobGkR7FjDgyj/s320/dreamstime_xl_22836320.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Time to get another basket? <br />
A decade on from the Act, gambling is still the only show in town for most of Britain's major operators.</td></tr>
</tbody></table>
<i><br /></i><i>By Dan Waugh, Partner<br /></i>
<i>As Genting prepares to
open Britain’s first truly integrated destination casino at the NEC in Solihull
this week, Dan Waugh asks why our gambling industry has been so slow to embrace
mainstream leisure.</i><br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A few years back, the American Gaming Association published ‘Beyond
the Casino Floor’, a report which claimed that the economic value of commercial
casinos in the United States was between three and four times greater than its
$35bn of annual gross gaming revenue.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is unlikely that the British gambling industry will be
following the AGA’s example any time soon for the principal reason that
gambling in Great Britain – unlike in an increasing number of US states and other
markets - underpins nothing so very much more than....well.... gambling (and its traditional
adjuncts, horse-racing and dog-racing). Whereas in the US, around a third of
casino expenditures relate to non-gaming activity (more than 70% on the Las
Vegas Strip), in Britain it is closer to 5% (in licensed gambling venues).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The unwillingness or inability of gambling companies to
diversify revenue beyond gambling is perplexing to many overseas observers. For
all the hyperbole of the Gambling Bill era, betting and gaming remain niche
leisure pursuits - many of us do it but not very often; very few of us engage
in it frequently. As a result, consumer
expenditure on gambling is relatively small beer at the macro level.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Restricting commercial activities to gambling thus confines
the opportunities for growth. Given that most gambling businesses have fairly
high fixed-costs, the opportunity to generate marginal revenues from existing
areas of consumer spending should be highly attractive – but for a variety of
reasons this has not proved to be the case.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The image of Britain as a nation of gamblers owes much to
the National Lottery, which skews participation rates towards the
three-quarters commonly quoted. The key sectors of land-based gambling –
betting shops, bingo clubs, arcades and casinos – enjoy relatively low levels
of patronage compared with leisure at large. This is despite the relatively high
dispersal of licensed venues (there are around 10,000 overseen by the Gambling
Commission) which makes gambling significantly more convenient than in many
jurisdictions.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the major global markets, the expansion of non-gambling
amenities within venues has driven increased visitation and encouraged trial
(if you want to be mass market then it pays to lead with mainstream activities
rather than those which are niche or taboo – just ask Ann Summers).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The reason for the industry’s obsession with gambling may
lie in the high gross margins and large VIP expenditures that are characteristic
of certain sectors. If one can make millions through the relatively simple
process of spinning a wheel or plugging in a slot machine, why bother with the
grind of activities which require more labour, more effort, different skills
and may yield lower margins? </div>
<div class="MsoNormal">
A decade ago, a gaming executive I knew defended
the unspeakably bad food in his bingo halls by explaining to me that he would
rather see his customers spend their time and money on high margin bingo games
than on dining. He seemed to have completely missed the point that his
customers were spending their money in the local chip shops instead (and then
bringing the food into the clubs to eat). Things have moved on since then – but
not by as much as we might have hoped.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So does gambling’s reliance on gambling actually matter? The
industry appears not to care too greatly, the regulator has a range of other
issues to deal with and the Government is not particularly interested; and why
should they? Yet what if the question of diversification involved more than
simply the opportunity cost of foregone revenues? <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
First, there is the fact that gambling is a politically
volatile business, subject to unhelpful regulatory interventions and
opportunistic tax raids. On three occasions in the last eight years, three
different sectors of the gambling industry have seen their business models
unexpectedly challenged by Budget Day changes to gambling duties - casinos in
2007 and 2009; bingo clubs in 2009; and betting shops in 2014 (this excludes the
extension of remote gaming duty in 2014 to offshore operators which was well
flagged in advance). <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Such changes are not unique to Great Britain (think UIGEA, the
current government crackdown in Macau, the backlash in Italy, the banishment to
Siberia of the Russian casino industry, the imposition of retrospective remote
gambling taxes in Spain, the outlawing of slots parlours in Poland – the list
goes on) and the lesson seems obvious - a business that is built entirely on
gambling revenues is one that is vulnerable to that which issues from the politician’s
soapbox or the bureaucrat’s pen.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Gambling – a sector that often suffers from an unhelpful
status in mythology and morality – is weak in part because it has so few
champions. A small percentage of customers care passionately about their right
to have a flutter, but taken as a whole the Great British public’s attitude to
gambling is one of mild disapproval. Output is not significant within the context
of national economics; employment is reasonably large (c.0.3% of Britain’s workforce)
but highly dispersed, modestly paid and in decline; and while some communities
truly value gambling (bingo clubs in some towns; arcades in seaside resorts, betting’s
support for race courses), opposition tends to be more active and more vocal
(e.g. the 93 local authorities who supported the London Borough of Newham’s
Sustainable Communities Act gambit or the councils who have adopted no casino
policies in spite of the fact that the law does not permit them to license
casinos anyway).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Linked to this issue of political volatility is the question
of gambling-related harm. There is a comforting story that we tell ourselves
within the gambling industry that we are working towards a world where all
gamblers spend within their means, allowing operators to benefit from
affordable (and so sustainable) consumer expenditure and long-term customer
relationships. Gambling businesses, we tell ourselves no more want problem
gamblers than pubs wants alcoholics. It’s a neat line but what if it isn’t true?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Several studies (notably the Australian Productivity
Commission and in this country the work of Professor Jim Orford) have suggested
that gambling companies are highly sensitive to the expenditures of problem
gamblers. We don’t know this to be the case but we do know that certain sectors
(casinos, betting shops and remote) derive large portions of their incomes from
a small proportion of highly frequent customers (n.b. frequency is a key flag
for possible harm).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This is what the writer and former Wall Street trader,
Nassim Nicholas Taleb calls ‘Extremistan’ – a place where the mean is
meaningless and the behaviour of the few markedly skews the overall picture. Pubs
on the other hand largely inhabit ‘Mediocristan’, where consumption values from
one customer to the next are less divergent.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If Orford is correct then this suggests an unhelpful paradox
where ‘responsible gambling’ may be put squarely at odds with commercial objectives.
If (and this remains to be proven) certain types of gambling are sensitive to
the expenditure of problem gamblers, it makes it that much harder for companies
to take meaningful action because to do so is to work against near-term
financial self-interest. Sacrifices that hurt tend to be harder to make.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In this situation, revenue diversification would seem to
have two things going for it. First, companies are going to find it easier to
do ‘the right thing’ if they are less dependent on ‘the wrong thing’; and
second, by offering customers a wider range of amenities, there may be positive
incentives for them to take breaks from gambling (as opposed to the negative
incentives of limit-setting). It shifts our interpretation of responsible
gambling from a series of mitigations to inherent characteristics. This logic
was embedded in the Budd view of gambling reform that somehow got lost along
the way.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
All this is fine in theory but how on earth does gambling
make that journey from Extremistan towards Mediocristan (noting that dependence
on high-value customers is not the same as reliance on problem gambling and the
distribution of revenues will always be more skewed than in other parts of the leisure
market)? By dint of the current licensing regimes, casinos and bingo clubs have
the greatest opportunity for revenue diversification. Indeed, Simon Thomas at
the Hippodrome has been demonstrably successful in taking the casino mainstream
despite the obvious limitations of the 1968 Act regime; and now Genting is
raising the bar again (under the more generous 2005 Act) at the NEC.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Yet there is nothing to stop arcades and betting shop
operators from seeking to exploit new revenue opportunities. Their business
models may need to change in order to do so; but this is perhaps overdue anyway
given the erosion of the traditional customer base and the need to appeal to
younger customers in both formats. For all sectors, there are models of
diversification from overseas that might be adopted or adapted (see <a href="http://regulusp.blogspot.com/2015/02/time-to-think-outside-box.html">http://regulusp.blogspot.com/2015/02/time-to-think-outside-box.html</a>);
and though this may require changes to regulation, reform is more likely to be
achieved if its consequences are in keeping with social policy objectives.<o:p></o:p></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
The dynamic of land-based gambling in Great Britain appears
today to be a long-term shift towards obsolescence with the threat of near-term
regulatory shocks. Both require strategic action, including a willingness to do
things differently. Kicking gambling’s dependence on gambling may just be an
important part of that process.<o:p></o:p></div>
Dan Waughhttp://www.blogger.com/profile/09374178707808839560noreply@blogger.com3tag:blogger.com,1999:blog-9135980104987654726.post-12713727486608115712015-09-18T16:23:00.001+01:002016-01-06T10:09:54.828+00:00Labour’s lurch raises the stakes for gambling<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjd9uJWU_C0rflJuy_tlybKWuc0lsR0JJbLonFVnlHSr3HMDuDvNgUVzK9-MgOT_EflrsPe1AXamoXMexDJxybmHn3kzWop44iPSwCy9lvwcTdprcrSDc2KCLnTQrwQml0X-WRfcdAJIS4g/s1600/dreamstime_xl_17618979.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjd9uJWU_C0rflJuy_tlybKWuc0lsR0JJbLonFVnlHSr3HMDuDvNgUVzK9-MgOT_EflrsPe1AXamoXMexDJxybmHn3kzWop44iPSwCy9lvwcTdprcrSDc2KCLnTQrwQml0X-WRfcdAJIS4g/s320/dreamstime_xl_17618979.jpg" width="320" /></a></div>
<b><br /></b>
<b><br /></b>
<b>By Dan Waugh, partner at Regulus Partners</b><br />
<br />
<div class="MsoNormal">
One should always be careful what one wishes for.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
On May 8<sup>th</sup> this year, the bookmaking industry
breathed a collective sigh of relief as David Cameron’s Conservatives were
returned to government by the British electorate. The spectre of an allegedly anti-FOBT Labour administration had been vanquished but few at the time suspected that Ed
Miliband’s defeat would usher in an altogether more alarming era with his party lurching even further to the left. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The future of Opposition politics remains shrouded in uncertainty
but the rise of Jeremy Corbyn provides a disconcerting political backdrop to
gambling in Great Britain at a time when deal-making has raised the stakes on
regulatory risk.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The gambling industry – and the bookmakers in particular –
appear to have few friends (if any) on the new Labour front-bench, announced
this week.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A quick scan of parliamentary records shows that only one
member of the shadow cabinet (on one occasion) voted in favour of positive
regulatory change on gambling between 2010 and 2015. Of course, this pattern
was entirely consistent with the party line on these votes – but it is worth
noting that Corbyn has never voted in favour of deregulation, even when Labour
was in government.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
More telling perhaps is the number of shadow ministers – 13
out of 26 - who have used their positions as MPs over the course of the last
five years to express concern on matters gambling (via Parliamentary Questions
and contributions to debates in the Commons); and nine of these related
specifically to betting shops (across the intertwined issues of FOBTs,
clustering and single-staffing).<o:p></o:p></div>
<div class="MsoNormal">
Quite aside from the numbers game, this list includes some
fairly vocal MPs.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Just last year, the now Shadow Secretary of State for
International Development, Diane Abbott warned about the “betting shop scourge”
in her constituency borough of Hackney; while the Leader of the House of
Commons, Chris Bryant has in the past confessed to being “puritanical about
gambling”. Of more immediate concern for the betting industry is the fact that
the deputy leader of the Labour Party, Tom Watson counts the Campaign for
Fairer Gambling’s Derek Webb amongst his supporters (Webb donated £5,500 to
Watson’s office in October 2014). Watson did however vote in favour of
increases to stakes and prizes on casino B1 slot machines back in 2013,
suggesting that his animus is directed at the FOBTs rather than gambling in
general.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Of interest to the gambling industry at large will be
Luciana Berger’s focus on the issue of gambling addiction. The shadow minister
for mental health is believed to be interested in shifting the onus of problem
gambling from charitable organisations to the National Health Service – and that way
may lie tighter regulation and tax hypothecation.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Outside of Parliament, Sadiq Khan’s run for Mayor of London
is likely to keep gambling regulation – and FOBTs in particular – in the headlines.
Khan has already made use of the FOBT issue to win his party’s nomination (with
Tessa Jowell unable to shake her ‘pro-gambling’ tag a decade on from the Act) and
is likely to continue to do so. This is against a backdrop of incipient devolution
of gambling regulation, where the granting of limited FOBT licensing powers in
Scotland may well prove to be the thin end of the regulatory wedge (see http://regulusp.blogspot.co.uk/2015/05/patriot-games-scottish-nationalism-and.html) .<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Industry will take comfort in the fact that Labour remains
the party of Opposition and that Corbyn is perceived to be ‘unelectable’ as Prime
Minister. It is a view that ignores the facts that the improbable happens in
politics more often than is acknowledged (and that ‘Corbynism’ appears to be in
the vein of of a wider global political movement) and that policy formation
tends not to be the exclusive preserve of the majority party.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Corbyn’s own record in Parliament suggests that he does not
perceive gambling to be an issue of national importance but that does not mean
that he and his team are not prepared to exploit it as a means to embarrass
both the Government and the rump of ‘Blairites’ on the back-benches. The issue of FOBTs in particular is one where Labour should be able to make common cause with the SNP in order to put pressure on Cameron's slender majority.<o:p></o:p></div>
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<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br /></div>
<div class="MsoNormal">
We simply don’t know whether Jeremy Corbyn’s leadership of
the Labour Party proves to be a seminal moment in British politics or simply a
colourful interlude. We can only deal with the facts as they stand; and in the
changed political environment, the barometer of regulatory risk in gambling may
just have swung again. <o:p></o:p></div>
Dan Waughhttp://www.blogger.com/profile/09374178707808839560noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-90393107803144676942015-09-07T13:40:00.000+01:002015-09-07T13:48:17.600+01:00Achtung Paddyfair! <span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyZ6UL7FEPXpLzg2Z1b5ojXqp1cSdro7cDWK_OjNTm6VMeKkkjuR56E-ar1zDSlaYbayBVbpOFtfl9R3w9ja-TC7TYP86DgmTlwwy3NTnjYkD2ZDwmBW_k0FVHruUYcBfeLbvsHoqrxgo/s1600/dreamstime_xs_5895939.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyZ6UL7FEPXpLzg2Z1b5ojXqp1cSdro7cDWK_OjNTm6VMeKkkjuR56E-ar1zDSlaYbayBVbpOFtfl9R3w9ja-TC7TYP86DgmTlwwy3NTnjYkD2ZDwmBW_k0FVHruUYcBfeLbvsHoqrxgo/s320/dreamstime_xs_5895939.jpg" width="320" /></a></div>
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<span style="font-size: 11pt; line-height: 107%;"><b><span style="font-family: inherit;">By Paul Leyland, Founding Partner</span></b></span><br />
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<br />
<h2>
<i>“Actions speak louder than words. In the days to come the Goddess of Victory will bestow her laurels only on those who are prepared to act with daring.” <a href="http://www.azquotes.com/author/5984-Heinz_Guderian">Heinz Guderian</a></i></h2>
<br />
<div class="MsoNormal">
It is axiomatic that most armies prepare to fight the last
war, just with more resources. Those armies tend to lose. For nearly a decade,
scale and operational efficiency (alongside regulatory risk) has tended to
decide the winners and losers in remote gambling: the game has got bigger, but (outside
the regulatory landscape) it hasn’t really changed. However, it may be about
to…<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The potential merger announced between Betfair and Paddy
Power initially surprised everyone. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, it only takes a few seconds of
reflection to see this as one of the most ‘obvious’ and compelling deals
available in gambling. The positives were already well rehearsed within minutes
of the announcement, and at least partly reflected in the share price reactions:
highly complementary product and brands (sophistication through to
entertainment); complementary culture (bright, tough, hard-working and
data-driven); stronger technology and trading capabilities; significant revenue
and cost synergy potential. If there is a defensive element to the deal it is
that double-digit growth is becoming increasingly hard to come by in maturing
markets: but that is what M&A is for.<o:p></o:p></div>
<div class="MsoNormal">
Over and above the (very important) points listed above,
there are three further reasons why I believe this deal is so compelling.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
First, the genuine ubiquity of product and customer reach.
Pretty much all sports betting customers sit somewhere on an axis of
price-sensitive sophistication to offer / fun-driven entertainment. Betfair
owns one end of the spectrum, Paddy Power is the strongest player seeking to
dominate the other (with increasing competition from Sky Bet). It was always
going to be difficult to turn Betfair into a mass-market brand without diluting
it: that was a strategic growth problem for Betfair that has been brilliantly
solved. Equally, Paddy Power’s opportunities for genuine differentiation were
always going to be constrained by sitting on the same ubiquitous technology
stack as everybody else: that problem may too be solved. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Moreover, since most
customers move about within the price-entertainment spectrum according to
product etc, the opportunities for cross-sell and highly sophisticated
insights-driven marketing are huge. So the combination of Paddy Power and
Betfair dominates the sports product and brand spectrum while also increasing
flexibility to adapt. For a sector with a relatively rigid structure that
struggles with containing CPA and struggles even more with retaining customers,
this new flexibility from a major competitor could be a huge headache.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Second, the merger creates the scale to really innovate.
Pre-synergies, combined revenue will be c. £1bn, EBITDA c. £320m and a
technology spend of over £100m. Moreover, this scale is combined with a culture
of low regulatory risk, strong work ethic and data-driven brain-power. That is
a recipe for productivity-driven growth, rather than the sector default
strategy of buying market share with marketing money or bolt-ons. In other
words, the combination has the scale and skills not just to be a leader of the
pack, but to redefine the pack; as Apple did to Nokia/Microsoft/RIM or Google
did to Yahoo! The competitive problem with this is while the leader is focussed
on growing the segment (as industry leaders should but so rarely do in
gambling), it takes market share directly as well as relatively, almost
effortlessly. The requirements to turn
this potential into reality should not be under-estimated. However, nor should
the ramifications for the sector if the combination gets it right.</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
Third, timing, they say, is everything. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We have seen the
Ladbrokes – Coral merger maths work because Coral is on its way up about as
fast as Ladbrokes is on its way down. The danger here is that this is the sort
of ‘convergence criteria’ that might have put Britain in the Euro where it not
for wiser heads. Similarly, the run-rate EBITDA of both Betfair and Paddy Power
is now very similar (c. £160m), while so is the market-cap. A year ago, before Betfair
CEO Breon Corcoran’s textbook operational turnaround, market valuations were
very different; three years ago profitability was even more starkly different.
Only six months ago, the impact of POCT was still relatively uncertain. Now,
and really only now, the stars have aligned to allow this deal to happen in
such a compelling way. It is a sign of superlative leadership to strike with
full force as soon as the opportunity presents itself.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
Veterans of Paddy Power will remember with amusement that a
certain senior industry exec once said of his company’s move into Ireland:
“Watch out Paddy Power, we’ve parked a tank on your lawn”. That company has since
ignominiously retreated from the republic faster than a Char B on the Meuse.
Similarly, Betfair’s coffin-wielding reports of the demise of the bookmaker was
very much exaggerated: this now really is a case of if you can’t beat them… In
contrast to previous empty sabre rattling, I think the Paddy Power – Betfair
combination really will be a game changer for the sector.<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-76115446400834879872015-08-22T07:13:00.002+01:002015-08-22T07:13:34.915+01:00'Millennials’ gamble on Alternatives – an inflection point in the market?<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKhgPoI3GG7I6lyqskqqQPdAYV7Vau3h-BJpElsZNWl8nJnWUQk8he3Eo8peU3v6TkUu2bybscqn5ST7WJiLktbU6rc0MHAbu60LFvmrxgH9zKczq5c0wfDUOARCDtHnOIjjfnno_aCxM/s1600/dreamstime_xs_38824200.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKhgPoI3GG7I6lyqskqqQPdAYV7Vau3h-BJpElsZNWl8nJnWUQk8he3Eo8peU3v6TkUu2bybscqn5ST7WJiLktbU6rc0MHAbu60LFvmrxgH9zKczq5c0wfDUOARCDtHnOIjjfnno_aCxM/s400/dreamstime_xs_38824200.jpg" width="400" /></a></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>By Michael Ellen, Partner, Regulus Partners</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The footfall in the big <st1:country-region w:st="on">US</st1:country-region>
casinos is now driven more by food and beverage, pool parties and star DJs than
by table games and slots; this is the prospect being addressed across the <st1:country-region w:st="on">United States</st1:country-region> generally and it’s already true in
<st1:city w:st="on">Las Vegas</st1:city>. MGM’s
proposed 5,000 seat theatre development at the <st1:place w:st="on">Monte Carlo</st1:place>
casino, for example, recognises in dollars and concrete the influence of
“Millennials” (broadly those born in the 1980s onward) on their future revenue
prospects.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The same generational disengagement (with the previous
generation’s staple entertainment products) is visible in the <st1:place w:st="on">UK</st1:place> where<span style="background: white; color: #666666;"> </span><span style="background: white;">bingo clubs and
arcades have been under pressure for some time. According to the latest
Gambling Commission data, revenue from these sectors has shrunk by 4% and 19%
respectively since 2009</span>. Put in the negative, the land-based industry has
clear evidence of the prospective market decline of traditional casino
products, which appeal adequately to the post-war baby-boomers’ generations;
but not so much to the succeeding ones. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<st1:place w:st="on">Nevada</st1:place>’s
Senate Bill 9 (SB9) gives clear evidence of the alignment of suppliers, politicians
and regulators in searching out an alternative gambling vertical that will draw
in the younger generations that are driving this change (even the Nevada Gaming
Commission refers to “Millennials”), sustaining casino revenues within an evolving
regulatory best practice.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It is interesting to note <st1:place w:st="on">Nevada</st1:place>’s regulatory onus on market
development. In other jurisdictions the regulator’s main mission objective is
somewhat different: to capture black market activity within the regulated
sector (as in <st1:country-region w:st="on">Netherlands</st1:country-region>,
for instance); or to link permissible gambling activity to social
responsibility (as in <st1:country-region w:st="on">UK</st1:country-region>,
for instance). However what drives the weather, in gambling industry terms, is
the reality of player demand. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Millennials across the globe already play eSports in
unbelievably large numbers, bet on eSports in increasingly material volumes, as
well as play and bet on Fantasy. These markets exist either within, alongside
or outside the gambling sector and its regulatory parameters, with the position
by jurisdiction often different (and sometimes vague). <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In summary, businesses and products will always appear to
fill customer needs. The challenge for the regulated gambling industry is to
supply product that meets evolving customer needs while observing regulatory
boundaries; the challenge for the regulator is to ascertain whether the product
is gambling and then to ensure that it is not abusive. This evolutionary
process works best when the industry and regulator share a constructive
dialogue, common purpose and mutual understanding, as evidenced by what is
currently going on in <st1:state w:st="on">Nevada</st1:state>.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the case of <st1:place w:st="on">Nevada</st1:place>’s
SB9 the industry has joined together, involving the regulator to build a
gambling product that will attempt to capture one millennial market. The alternative
vertical in question is skill-based gaming. ‘Hybrid’ slots – on which a player
can risk the (win) outcome of a standard random slot game on a second-round
skill-based game - will appear soon on the floor of <st1:state w:st="on">Nevada</st1:state> casinos if the Governor’s weather-vane
is indeed pointing in the right direction.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Moreover, the development of Hybrid slots is not limited to <st1:state w:st="on">Nevada</st1:state>. It is likely
that a series of gaming states in <st1:country-region w:st="on">USA</st1:country-region>
and <st1:country-region w:st="on">Canada</st1:country-region> will follow
closely behind the current urgent development effort being put in behind closed
doors in <st1:place w:st="on">Nevada</st1:place>.
Leading European regulators are also monitoring the subject closely. The
challenges in this case, affecting all of them but not necessarily similarly,
will be in the revision of their technical standards and in ensuring that
players, and operators, are correctly informed on their chances of success – theoretical
RTP does not combine easily with a skill element.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
eSports betting is another Alternative vertical changing the
face of the gambling world. Pinnacle Sports has already recorded it as a bigger
market than golf, enjoying geometric rates of annual growth. Betting on (unregulated)
stock car races was once thought to be really exciting because it was rather
naively believed to be genuinely random. eSports betting will need to
differentiate its product from this position somehow and clearly demonstrate
its probity if it is to enter the regulated gambling mainstream. This vertical has huge cross-border markets,
including major grey markets; a dearth of trade associations; no systemic
protection of the vulnerable; and no coordinated public assurance of software
integrity; not to mention AML compliance.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Fantasy provides some similar characteristics and challenges
– such as significant public interest, cross-border markets some of which are also
‘dark grey’ and others of which are likely to become so. Whilst the UIGEA
carve-out of the original Fantasy activity – basically prolonged statistical
extrapolations for real individual performances in fantasy team – might have
made sense, it is much harder to justify the daily variety (DFS) which may well
be re-categorised soon as a form of betting in some US states. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
Millennial gambling activities, so far, are more inclined to
the remote sector than to land-based. Legitimate revenue growth, or even
footfall retention, may require some significant changes in approach by the
major land-based operators and their suppliers. There may be some empty deck
chairs on the beach this summer, as the industry gauges its ability to catch the
strength and direction of millennial market demand whilst maintaining high
standards of compliance.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i>This article was first published in the September issue of EGR</i></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-70656516725805825822015-08-07T18:09:00.001+01:002015-08-07T18:09:26.070+01:00Getting Smarter?<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9EfcTGSmYAF4RwFNMbvMPN3m370qgq8IA5WsILfPsxZiabEZp1fseK1JINIH4aBghlcsptm-5vGKthN0ftKzOlIayxvzvV_R3h82x6t30e5HhXVP21EYaai0BXs1a8OvF-d4rCTPKimA/s1600/dreamstime_xs_29548666.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9EfcTGSmYAF4RwFNMbvMPN3m370qgq8IA5WsILfPsxZiabEZp1fseK1JINIH4aBghlcsptm-5vGKthN0ftKzOlIayxvzvV_R3h82x6t30e5HhXVP21EYaai0BXs1a8OvF-d4rCTPKimA/s320/dreamstime_xs_29548666.jpg" width="320" /></a></div>
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">By Scott Longley, Partner, Regulus Partners</span><br />
<span style="font-family: inherit;"><br /></span>
<h2 style="text-align: center;">
<span style="line-height: 107%;"><span style="font-family: inherit; font-size: small;"><i>“<a href="http://www.brainyquote.com/quotes/quotes/t/timberners409503.html?src=t_technology" target="_blank" title="view quote"><span style="text-decoration: none;">The Web as I envisaged it, we have not seen it yet.
The future is still so much bigger than the past.</span></a>” <span style="text-decoration: none;"><a href="http://www.brainyquote.com/quotes/authors/t/tim_bernerslee.html" target="_blank" title="view author">Tim Berners-Lee</a></span></i></span></span></h2>
<span style="line-height: 107%;"><span style="font-family: inherit;"><br /></span></span>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">The latest
figures for smartphone usage in the UK from communications regulator Ofcom
feature a smattering of numbers and figures that are sure to find their way
into presentations at upcoming gambling conferences and presentations,
supporting remote positioning and an ‘omni-channel’ future.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">A headline finding
proclaiming the UK was now a “smartphone society” is likely a signal moment.
The Communications Market 2015 report found that 33% of people say their phone
is their most important device for accessing the internet compared with 30%
that prefer their laptop. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">When
another 19% that opt for tablets is taken into account, it is clear that a
sea-change has taken place. The combined smartphone and tablet percentage has
risen from 23% in 2013 to 52% in 2015 while the laptop and desktop share has
fallen from 74% to 44% over the same period. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">At the same
time, UK 4G subscriptions have leapt from 2.7 million
to 23.6 million. Ofcom found that, as of May 2015, 55% of these 4G users shop
online with their phone; 55% bank online; 57% watch TV and video clips; 49% use
their phone to send videos and photos via services like Snapchat; and 63% use
instant messaging services such as WhatsApp. Ie, transacting and being
entertained through a mobile device is now a mainstream activity that the
majority of adults engage in. The participation figures are also sufficiently
large to suggest that socio-economic divides are being (or have been) eroded.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">According to the report: “Developments in technology, and improvements in
availability and affordability have made it easier for people to go online
whenever they wish. These enhancements also have the potential to make the
online experience more enjoyable for consumers, as internet connection speeds
improve, particularly while on the move as the 4G network becomes more
widespread.”<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">This channel
switch has already been hailed by many in the gambling industry who have even
gone so far as to predict the ‘death of the desktop’. Now that the scale of
change has taken on apparently structural proportions, the clamour to proclaim
the new gambling world order will likely increase in proportion to the
statistics. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">But the
rise of the smartphone comes with its own pressures, not least for those
operators that are struggling to keep up with the pace when it comes to digital
innovation. This isn’t just about former land-based operators which are in
danger of being left behind by technological leaps and changing consumer
behaviour; some original online pioneers have also been caught out by the swift
rise to prominence of the mobile gambler.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">The figures
from Ofcom show how channel shift is likely to pick up pace. The figures for 4G
take-up in the UK in the past five quarters give an indication of just how fast
subscription levels for that service are growing. (See chart 1)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBGfzjG6a5LqfMty21ZCpNBhpw3SsmEtoLK7GU77lRgUyTcwebMPkWLtxXijbiP7gNwfjVOSQ2SZ3N0mAbd0LNJ0W8RY2vhQ-yIxvE17h4Rp7CsuDHXePbtoI8sqRNJ_ttzHEDBBeD4y0/s1600/graph.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBGfzjG6a5LqfMty21ZCpNBhpw3SsmEtoLK7GU77lRgUyTcwebMPkWLtxXijbiP7gNwfjVOSQ2SZ3N0mAbd0LNJ0W8RY2vhQ-yIxvE17h4Rp7CsuDHXePbtoI8sqRNJ_ttzHEDBBeD4y0/s320/graph.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small; text-align: start;">Source: Ofcom Communications Market Report 2015</span></td></tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">This degree
of change appears structural and is likely to pile more pressure on operators
scared of missing out to ‘do something’, whether that is to embark upon
ambitious innovation programmes, or alternatively seek to cut costs, or to rely
even more heavily on aggressive marketing and their supply chains.</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">The
pressure will be all the more intense because of what the smartphone offers in
terms of the relationship with the consumer. Having an app installed on a
customer’s main communication device gives an operator an ‘always on’ ubiquity
which is far more intimate and constant than the gambling experience enjoyed
via a laptop or desktop, let alone taking the trouble to go to a licensed venue.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">At the same
time, the possibilities being opened up on the data front are giving an
enhanced picture of each individual customer, and in particular their
preferences, opening up the opportunity to offer a more personalised gaming
experience. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">The more
forward-thinking operators are exploring what this channel shift means and
where the device and data developments are pointing. Others will be playing
catch up, not least with the consumer themselves.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">But each
should be wary of believing this channel shift to be an unalloyed positive. Buried
within the report are some other statistics which should give pause. The first
is that the average number of apps that smartphone users have downloaded onto
their phones is 17. Space for even a couple of gambling apps here is at a
premium, so getting onto this privileged list will be an expensive process;
dislodging an incumbent will be even trickier. In both cases it will demand ever
higher levels of marketing and advertising spend to persuade consumers that
your app is deserving of selection. It will also put an increasing premium on product
innovation, data-mining and CRM activity if market share is to be maintained.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: inherit;">One further
stat from the Ofcom report also offers a clear warning of what ubiquity can
mean: based on a scale of one to 10, the report found that 48% of smartphone
users gave a score of seven or above to describe how hooked they were on their
mobile phones. In the 16-24 age group that rose to 61%. The report notes that this
appears to be part of a continuing trend of increased dependency on the device,
up from 41% in 2012, and 37% in 2011. As much as that is enticing to the
operations side, it should also act as social responsibility flag. </span><span style="font-family: Garamond, serif; font-size: 14pt;"><o:p></o:p></span></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-14826805373332959862015-07-16T14:38:00.000+01:002015-07-16T17:39:09.387+01:00UK Point of Consumption Tax referral: the Heart of Justice?<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgles_rH5beCbtUCYABeg9PWx2ewzrPKSsc3EeBll98SxexPLNM0Jf718SImEV42MoMoENTBvON3SsDW1wkPwEPnW5BEpHK9UeVWsbDn99huHSdkfSMglV3ECpFiDAangyIKL2l2HwnAo8/s1600/dreamstime_xs_19682308.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="274" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgles_rH5beCbtUCYABeg9PWx2ewzrPKSsc3EeBll98SxexPLNM0Jf718SImEV42MoMoENTBvON3SsDW1wkPwEPnW5BEpHK9UeVWsbDn99huHSdkfSMglV3ECpFiDAangyIKL2l2HwnAo8/s320/dreamstime_xs_19682308.jpg" width="320" /></a></div>
<br />
<b>By Paul Leyland, Founding Partner, Regulus Partners</b><br />
<br />
<br />
<h2 style="text-align: center;">
<i>“Knowledge without Justice ought
to be called cunning rather than wisdom.” Plato</i></h2>
<div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The British High Court has ruled
that UK Point of Consumption Tax law was sufficiently controversial with regard
to EU law that it needed to be referred to the Court of Justice of the European
Union (CJEU) for an ultimate decision as to its legality.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
According to Olswang, the law
firm representing the Gibraltar Betting and Gaming Association (GBGA), there
were three key points that the Judge had issue with:<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; margin-bottom: 12pt; margin-left: 47.25pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="color: #222222; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-language: EN-GB;">1.<span style="font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">Whether a restriction on the
provision of services from Gibraltar to the United Kingdom engages the right to
free movement protected by Article 56 TFEU. Mr Justice Charles held that this
was an issue of constitutional importance.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-bottom: 12pt; margin-left: 47.25pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="color: #222222; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-language: EN-GB;">2.<span style="font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">Whether the taxes payable under the
new tax regime constitute restrictions on the right to the free movement of
services for the purposes of Article 56 TFEU. HMRC had argued that in order for
a tax measure to be a restriction for the purposes of Article 56 TFEU it is
necessary for it to be discriminatory. Mr Justice Charles held that in this
regard HMRC had relied on a principle of law which has no clear precedent in
European law.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-left: 47.25pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="color: #222222; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-language: EN-GB;">3.<span style="font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">Whether the aims relied on by the UK
Government to justify the new tax regime are legitimate. The reasons given by
the UK Government for the new tax regime included addressing a perceived
competitive advantage for overseas operators and increasing UK tax revenue.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; margin-left: 47.25pt; text-indent: -18pt;">
<span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
Each of these was cogently argued
on behalf of the plaintiff and each clearly makes logical sense. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
The CJEU must now find the time
to consider then decide whether this part of the 2014 Finance Act is
indeed lawful, needs minor tweaks or sends UK government back to the drawing
board. In the latter case the proceeds of the current tax will need to be
refunded. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
This process is likely to take
several months for the CJEU to find the time and several more months to consider
evidence and deliberate. In the meantime operators must continue to pay the
tax. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
So far so good for the off-shore
remote gambling industry?<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
I’m not so sure. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Mr Justice Charles, has in my
(thoroughly lay) opinion (safely) stuck to points of law and ‘kicked the
problem upstairs’ from a constitutional / policy perspective. This is not the
same as a judgement that the tax is unlawful and the decision should not be
taken as that. Moreover, the track record of the CJEU in gambling and in other
fields is that it is quite happy to consider law within the context of wider
policy (especially where free trade ‘needs’ to be qualified, with gambling a
fairly uncontroversial case in point): indeed as the highest court in the EU it
has to. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Looking through the lens of wider
policy, is it likely that a vital organ of the EU state is going to find in
favour of tax havens and offshore commercial businesses over the tax raising
powers of its larger Member States? I think not (certainly not without plenty
of get-out clauses in the judgement for which the court is famous). Equally,
even if the CJEU does rule in favour of GBGA, is it likely that EU and Member
State governments will meekly acquiesce to such a decision and accept the new
world order? Of course not… Instead they will be forced back to the drawing
board to achieve their ends through different means (possibly with added
anti-sector sentiment and belligerence). From a UK-specific perspective, the EU
treaty negotiations provide a further mechanism for the EU to ‘help’ UK with a
relatively marginal concession in the scheme of things.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
So here is the conundrum…<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
In my view, the best thing the
offshore gambling industry can now hope for is that the CJEU finds for HMRC.
Otherwise, Member States, including the UK, will have to think up new gambling
laws from first principles in order to ensure an ‘adequate’ level of tax and
regulatory oversight (according to their own criteria). Opening up that can of
worms is not likely to end with the benign, gently regulated and low-tax regime
that the UK currently enjoys. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
This is a fight the more
aggressive elements of the offshore industry may regret ‘winning’… <o:p></o:p></div>
</div>
<div>
<i><br /></i></div>
<div class="MsoNormal" style="text-align: center;">
<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-38686524247906133932015-07-13T14:04:00.000+01:002015-07-13T15:03:39.445+01:00Scratching the three year itch...<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAXEbW-MD3UbFSHYc72pvhVNrkiMP5Jes9v8kpGctBqrHHxHloFPzR4q7MbVF-ju8kC08ZO86-ehPCiBr0h-CkCCsFe78rFxcjUS9gvH-S2yVlKtYe7eHe-NyB8kR2G1O4jIEI-o9XN7E/s1600/dreamstime_xs_28728955.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAXEbW-MD3UbFSHYc72pvhVNrkiMP5Jes9v8kpGctBqrHHxHloFPzR4q7MbVF-ju8kC08ZO86-ehPCiBr0h-CkCCsFe78rFxcjUS9gvH-S2yVlKtYe7eHe-NyB8kR2G1O4jIEI-o9XN7E/s320/dreamstime_xs_28728955.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;"><span style="color: #272a2d; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; text-align: start;">© </span><a href="http://www.dreamstime.com/janvdb95_info#res8021698" style="color: #246eac; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Janvdb95</a><span style="color: #272a2d; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; text-align: start;"> | </span><a href="http://www.dreamstime.com/#res8021698" style="color: #246eac; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Dreamstime.com</a><span style="color: #272a2d; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; text-align: start;"> - </span><a href="http://www.dreamstime.com/royalty-free-stock-photo-forever-marilyn-chicago-image28728955#res8021698" style="color: #246eac; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Forever Marilyn In Chicago Photo</a></span></td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: left;">
<b>By Dan Waugh, Partner, Regulus Partners</b></div>
<div class="MsoNormal" style="text-align: left;">
<b><br /></b></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<i><br /></i></div>
<h2 style="text-align: center;">
<i>“Everything should be made as simple as possible, but not simpler.”
Albert Einstein</i></h2>
<div>
<i><br /></i></div>
<div>
<div class="MsoNormal">
It is a feature of gambling regulation that, while the
issues are often complex, public discourse on the subject struggles to rise
above the simplistic. Debates tend to be polarised and ‘good stories’ told by
both the pro-gambling and anti-gambling lobbies rarely admit inconvenient facts
– especially where the matter of gambling-related harm is concerned. Despite
the best endeavours of the regulator, evidence tends to be chosen selectively
and often manipulated to accord with predetermined theories.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
That last year’s Responsible Gambling Trust research into B2
machines gave succour to both the Association of British Bookmakers and the
Campaign for Fairer Gambling provides the perfect illustration. The verdict
that addressing stake size in isolation was unlikely to fully resolve issues of
problem gambling should not have been a surprise to anyone connected with
the industry. Previous studies and basic common sense had told us this some
time ago. We perhaps should not have been surprised either that both sides
would seek vindication in this finding.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the Gambling Commission’s 2009 ‘Qualitative Survey of
Machine Gamblers’, Professor Mark Griffiths set out three dimensions
influencing customer behaviour on machines – situational (characteristics of
the environment), personal (characteristics of the player) and structural
(characteristics of the machine). His study suggested that all three were important
in understanding play and problematic play.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So if we can accept that the issue of machines and behaviour
is complex and multi-faceted, perhaps now is time to recognise that within our
only formal and (at least in theory) regularised review of regulations – the
Triennial Review (which is scheduled to return next year).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
An expanded review of what types of slot machine are made
available in Britain and how (rather than one that limits itself to questions
on stakes and prizes), underpinned by a rolling programme of research has much
to recommend it. It would contextualise policy discussions on machine
regulation by considering factors such as sociability, environment, marketing,
access and supervision alongside structural characteristics; it would help the
Gambling Commission to deal with new issues (such as current hot topics of
skill-based hybrid slots and the proliferation of digital content in-venue) as
they emerge; it would put other issues (such as the casino industry’s
long-running and so far frustrated efforts to gain an increase in machines)
into a formal decision-making process; and it would create a more stable
environment for industry investment and innovation. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Anchoring the process with a sustained programme of
independent, collaborative and sequential research seems infinitely preferable
to the knee-jerk rounds of partisan ‘evidence-gathering’ that has been the
hallmark of previous reviews (the fact that the 2013 review resulted in more
than 9,000 identical submissions from the betting sector is telling). The Government
and Commission are heading in the right direction by insisting that all future
submissions should be grounded in evidence – but doubt will persist as to the
integrity of studies undertaken by interested parties. An ongoing programme of
independent research seems desirable.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It may all sound like hard (and possibly expensive) work but
who’s to say it wouldn’t be more efficient and less painful than the current
pattern of lobbying and counter-lobbying that characterises the slots debate
today? If a portion of the time, effort and lobbyist fees that are currently
expended on debating these questions (creating much noise but little in the way
of signal) was diverted towards a review such as this, everyone might benefit.
The government and regulator would have a better mechanism for dealing with
gambling headaches, industry would be able to focus on moving forward rather
than defending the status quo and concern groups could shift from a mode of
agitation to one of constructive engagement.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Whether it’s too late already to achieve an expansion of the
2016 review remains to be seen; but if we are to gravitate away from our
unhelpful obsession with stakes and prizes, we need to start planning today.<o:p></o:p></div>
</div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-55619302830907443702015-06-26T09:42:00.002+01:002015-06-26T09:42:15.301+01:00R&D in the gambling sector: Retrenchment and Deals?<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;"><span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; text-align: start;">© </span><a href="http://www.dreamstime.com/slangford3035_info#res8021698" style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; outline: 0px; text-align: start;">Slangford3035</a><span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; text-align: start;"> | </span><a href="http://www.dreamstime.com/#res8021698" style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Dreamstime.com</a><span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; text-align: start;"> - </span><a href="http://www.dreamstime.com/stock-image-albert-einstein-physicist-image37402011#res8021698" style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Albert Einstein, Physicist Photo</a></span></td></tr>
</tbody></table>
<div style="text-align: left;">
<b>By Paul Leyland, Founding Partner, Regulus Partners</b></div>
<div style="text-align: left;">
<b><br /></b></div>
<div style="text-align: left;">
<b><br /></b></div>
<h2 style="text-align: center;">
<i>“If I knew what it was that we
were doing, it would not be called research..<a href="http://thinkexist.com/quotation/you_may_have_to_fight_a_battle_more_than_once_to/11470.html"><span style="color: windowtext; text-decoration: none; text-underline: none;">.</span></a>”
Albert Einstein</i></h2>
<div class="MsoNormal" style="text-align: justify;">
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
The gambling industry is becoming
an increasingly complex and expensive one in which to operate. In land-based
sectors, software and service-culture is replacing hardware and transactions.
In remote, the pace of regulatory and technological change has never been
faster. Customers are expecting more, while suppliers are being squeezed in an
effort to share the burden and maximise returns. Across sectors and
jurisdictions, all operators keep a wary eye on politicians, the regulator and
the tax man. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
There is an obvious (and
sometimes effective) response to these trends: consolidation. Bwin joined with
Party; Scientific Games bought WMS and Bally; GTECH acquired IGT; Amaya and
Intertain have been highly acquisitive; and, now Ladbrokes is looking to merge
with Coral. Between them these deals
represent c. US$22bn (£14bn) of assets (potentially) changing hands.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
With the Canadian-listed businesses
the exception, a (the?) key reason for these deals is the capacity to deliver operating
synergies. The list is common to all M&A: consolidating to one set of head
office costs; combining central functions; stream-lining operations; increasing
buying-power; cutting waste. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
All of these things are good for
the bottom-line and, if well executed (a big if), can also be good for the
company and its customers. But cost synergies are a one-off and they often cost
money to achieve (deal costs, finance costs, redundancies, contract
renegotiations etc). They buy larger pre-exceptional profit, which markets
like, and they buy time to adapt to changing situations, if used wisely
(another big if).<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
I would flag two issues which concerns
me about this direction of travel.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
First, no-one likes to be a
synergy. Deals cause huge disruption to businesses: from management time, to
operating structures, to changing loyalties and motivations, to grass-roots
morale. This disruption is often poorly understood by markets (it is hard to
model in a spreadsheet) and often de-prioritized from a human perspective by
senior management, which suddenly have a lot more ‘tangible’ issues to deal
with. Given these pressures, M&A requires extremely high calibre management
with a thoroughly thought through and well communicated plan, along with a
competent and loyal core team.
Otherwise, all the cost cutting and reorganisation will simply undermine
long-term productivity and growth, leaving the whole worse off than the
historical parts. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Second, cutting costs does not
grow markets. Competition can grow markets. Innovation can grow markets. The
two tend to be linked. Increasingly, customers have a wide choice of “brands”,
but with a highly homogenised offer underneath (land-based and remote).
Equally, operators have a very narrow range of large suppliers to choose from
in each major product set. This is good for the short-term profits of the
sector, but it is not good for growth. And in an environment where underlying
costs are only going one way (tax, technology, regulation, upskilling), what is
not good for growth is not good for long-term profitability.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
To be a healthy sector,
supporting growth and favourable regulation, the gambling sector needs to
innovate. To do that successfully it must do six things that it has been
historically poor at:<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
</div>
<ul>
<li><span style="text-indent: -18pt;">Be
prepared to spend money without the certainty of a return (or it isn’t real
R&D)</span></li>
<li><span style="font-size: 7pt; font-stretch: normal; text-align: justify; text-indent: -18pt;"> </span><span style="text-align: justify; text-indent: -18pt;">Be
prepared to try things that may disrupt the status quo (even in a controlled
way)</span></li>
<li><span style="text-align: justify; text-indent: -18pt;">Create
proper test conditions and plan to learn (science, not hope and politics)</span></li>
<li><span style="text-align: justify; text-indent: -18pt;">Accept
that the cumulative impact of small change can be just as powerful (if not more
so) than searching for a silver bullet.</span></li>
<li><span style="text-align: justify; text-indent: -18pt;">Do
not be afraid of failure: in the longer run failure is a lot more instructive
to strategy than success (luck runs out far faster than relevant experience)</span></li>
<li><span style="text-align: justify; text-indent: -18pt;">Ensure
the regulator and wider public is as behind the growth potential as possible
(communicating, demonstrably acting responsibly)</span></li>
</ul>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
<o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
<br /></div>
<br />
<div class="MsoNormal" style="text-align: justify;">
All of these things are hard to
do in a tough trading environment and within an ‘operator’ culture. However,
such an environment simply makes growth and productivity more important. It is
also much harder to do when the teams being relied upon are in constant fear of
‘big change’: equity markets might be motivated by synergies, people are not…<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-65316559890558978392015-05-26T10:30:00.002+01:002015-05-26T10:30:53.788+01:00Patriot Games - Scottish Nationalism and the future of gambling in Great Britain <table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiP2A4MRkzZrbgwd1LEdXOp_2AIiiqcA0yNAG1I6G8pl6qbhsoGHPYCXL8SreVSN3aLDF2IudNwYE7W4kcYVWpQ4pLPo-KVTC7kUV0sbLkamDpxA4zxSRVox1dTd0qemqB7hCPPDjEIZ4Y/s1600/dreamstime_xs_32625883.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="382" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiP2A4MRkzZrbgwd1LEdXOp_2AIiiqcA0yNAG1I6G8pl6qbhsoGHPYCXL8SreVSN3aLDF2IudNwYE7W4kcYVWpQ4pLPo-KVTC7kUV0sbLkamDpxA4zxSRVox1dTd0qemqB7hCPPDjEIZ4Y/s400/dreamstime_xs_32625883.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: inherit; font-size: xx-small;"><span style="line-height: 20px; text-align: start;">© </span><a href="http://www.dreamstime.com/jamieroach_info#res8021698" style="line-height: 20px; outline: 0px; text-align: start;">Jamieroach</a><span style="line-height: 20px; text-align: start;"> | </span><a href="http://www.dreamstime.com/#res8021698" style="line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Dreamstime.com</a><span style="line-height: 20px; text-align: start;"> - </span><a href="http://www.dreamstime.com/stock-photos-highland-games-caber-heavy-man-toss-image32625883#res8021698" style="line-height: 20px; outline: 0px; text-align: start; text-decoration: none;">Highland Games Caber Heavy Man Toss Photo</a></span></td></tr>
</tbody></table>
<b>By Dan Waugh, Partner, Regulus Partners</b><br />
<br />
<h2 style="text-align: left;">
At first appearances, it might seem that the gambling
industry hit the jackpot in the General Election...</h2>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The electorate returned to
power the only major political party which had not pledged to get tough on
gambling (or more specifically, FOBTs); the Prime Minister appointed as
Secretary of State for Culture, Media and Sport an MP with genuine interest in
(and empathy for) the sector; and the Labour Party’s post-mortem recriminations
have hinted at a return to the Blairite brand of politics that provided such a
benign environment for gambling in the first half of the last decade.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
As my colleague, Paul Leyland has argued in his
post-election article (‘<a href="http://regulusp.blogspot.co.uk/2015/05/general-election-2015-sounding-all-clear.html" target="_blank">General Election 2015: Sounding the All Clear?</a>’), an<span style="background: white; color: #222222; mso-bidi-font-family: Arial;">y relief felt
by the bookmakers or belief that a bullet has been dodged </span>may well be
premature; but it has also distracted attention from what is a far more
significant development for the whole industry – the potential devolution of
Britain’s gambling laws.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If the Smith Commission opened the door on the question of
localised regulation by recommending that Scotland be given specific powers to
control machines in new betting shops, the SNP’s election landslide may well
have knocked it off its hinges. Indeed, Nicola Sturgeon’s party has already
called for devolved authority on all gambling (not simply FOBTs) – something
that would appear to be one of the simpler concessions for David Cameron to
grant.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The suggestion that FOBTs alone should be a matter for devolved
regulation was a choice piece of political fudge - carving out one isolated
aspect of the industry’s activities never made a great deal of sense in the
real world. If Holyrood is to control 50% of gambling in a betting shop, why
not the other 50%? If there are to be Scottish laws governing roulette machines
in betting shops, why not Scottish laws for roulette wheels in casinos?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Whether the SNP recognised these shortcomings or whether its
desire for wider powers is simply another instance of doubling down on
devolutionary concessions, specific gambling laws for Scotland are now a
distinct possibility.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If it comes to pass, the stakes for gambling companies may
be much higher than simply the welfare of their northern-most businesses. For
two reasons, the development of a Scottish system of regulation may prove to
have far-reaching consequences for British gambling at large.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The first and most obvious of these is that localised
control of gambling may be extended to other authorities – to the Welsh
Assembly, the Greater London Authority or to George Osborne’s putative
‘northern powerhouse’ – as part of a more general trend to decentralisation.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The second is that change in Scotland (for the good or ill
of the industry) might trigger successive reappraisals of gambling laws across
the rest of the United Kingdom. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The domino effect has been an observable characteristic in
the development of the global gambling market in recent decades. Perhaps the
most obvious example has been the expansion of gambling in the United States of
America. In 1968, New Hampshire broke ranks with the rest of the Union in
launching a state lottery to support public spending. In the years that
followed, state after state followed suit until only Hawaii and Utah were left
with gambling prohibition intact. Similarly, Nevada enjoyed a nationwide
monopoly on casino gambling for almost half a century before New Jersey
licensed casinos on Atlantic City’s Boardwalk. Today, no fewer than 23 (and rising)
states feature commercial casinos while 28 host tribal gaming casinos (39
states have some form of casino gaming). A number of companies are banking on
this pattern being repeated in remote gambling in the decade ahead.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
To take an example closer to home, the gambling laws of
Spain have undergone radical transformation over the course of the last few
years - most notably the opening up of sports betting and remote gambling
markets and the creation of a regulatory (and importantly fiscal) framework for
resort casinos. The fact that gambling in Spain is largely a matter for the 17
regional autonomous communities has been central to this process. Had it been a
matter for the federal government, it is unlikely that these modernising
proposals would have progressed as far or as fast. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The domino effect works in gambling because regulatory
reform is quite simply easier to achieve at a local level than at a national or
federal level. There are three reasons why this is so. The first is that the
expansion of gambling in one state will often be accompanied by tax leakage in
neighbouring states as citizens are forced to cross borders in order to gamble.
In such instances, the logical response is to protect revenue by correcting the
regulatory imbalance.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The second reason relates to political risk. Normalisation
of gambling, based on visibility, familiarity and proximity is the most
effective means of addressing societal fears of gambling-related harm (chiefly
problem gambling and crime). Put simply, the best way to defuse the political
risks of gambling liberalisation is to see it expand (profitably, cleanly and
responsibly) in a neighbouring state.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The third reason is that while gambling tends to be a fairly
trivial economic activity at a national level, it can be significant at a local
level where there is greater awareness of the jobs and taxes (if also devolved)
it brings. Of course this can cut both ways and it’s worth reflecting on the
fact that the current FOBT controversy became a national issue in large part due
to agitation by local councillors and constituency MPs.<o:p></o:p></div>
<div class="MsoNormal">
There are of course a number of reasons to be wary of a decentralised
gambling market. There is a danger that fragmented regulation would lead to a dilution
of regulatory expertise and effort and that this in turn would involve risks
for the consumer. Companies are also likely to be concerned that localised
regulation would give rise to greater operational complexity and higher
licensing and compliance costs. Some would undoubtedly prefer the preservation
of the status quo - no matter how unsatisfactory – than run the risk that
change might be negative.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
Yet life is about the risks we take. As unlikely as it
seems, changes to gambling laws in the land of John Knox and Gordon Brown might
just crack open the door for a more vibrant and enterprising gambling market
for Britain as a whole.<o:p></o:p></div>
Dan Waughhttp://www.blogger.com/profile/09374178707808839560noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-82746475698917696602015-05-11T12:46:00.001+01:002015-05-11T13:12:16.056+01:00General Election 2015: Sounding the All Clear?<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjz8sCYQaiTr2havjSadZnw7fI3TPut0-JWNcL21ePtPoPQHUHgLU2iJLAFQcQDDUri25JQvVZMsY8oKpo7ON-RkBcIndfZq_idTMGBkI8pDQnx4NR3YNVEkcJULZhNuzg1qLZNBvUPWug/s1600/dreamstime_xs_38857595.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjz8sCYQaiTr2havjSadZnw7fI3TPut0-JWNcL21ePtPoPQHUHgLU2iJLAFQcQDDUri25JQvVZMsY8oKpo7ON-RkBcIndfZq_idTMGBkI8pDQnx4NR3YNVEkcJULZhNuzg1qLZNBvUPWug/s400/dreamstime_xs_38857595.jpg" width="400" /></a></div>
<br />
<b>By Paul Leyland, Founding Partner, Regulus Partners</b><br />
<b><br /></b>
<br />
<h2 style="text-align: center;">
<i>"You may have to fight a battle more than once to win it" - Margaret Thatcher</i></h2>
<div>
<i><br /></i></div>
<div>
<i><br /></i></div>
<div>
<i><br /></i></div>
<div class="MsoNormal" style="text-align: justify;">
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
The UK gambling industry is
probably feeling very relieved right now, perhaps even jubilant. Not only have
voters returned a surprise Conservative majority, but John Whittingdale has
just been announced as Secretary of State for Culture, Media and Sport.</div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
The Conservatives were the only
major party not to have a manifesto commitment to increase the regulation of
FOBTs. They are also the only major party that was not committed to raising
taxes to combat the deficit (albeit no party mentioned gambling taxes
explicitly). Finally, Whittingdale has proved himself to be pragmatic and sensible
as head of the Culture Select Committee, even presiding over the (stillborn)
recommendation to increase the number FOBTs permitted per betting shop in order
to alleviate clustering (back in 2012).<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
As outcomes go, this is probably
better than anyone in the industry dared hope for. But is it right to sound the
‘All Clear’ on the sector?<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
I would advise considerable
caution for five reasons.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The first reason is that the
Conservatives have only the slenderest of Commons majorities (12), meaning that
this will be a parliament driven by consensus, lobby tactics and quid pro quo.
The views of the smaller parties cannot therefore be ignored, especially if
they coalesce and/or find resonance with elements of the Conservative party. It
should be remembered that Labour, SNP, Liberal Democrat and UKIP manifestos all
contained references to toughening FOBT regulation. It should also remembered
that the highly influential but non-ministerial Boris Johnson came down in
favour of tougher FOBT regulation prior to the election. </div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
(for more detail on party policy
relating to gambling in the run-up to the election, see the Regulus - Olswang
Election Briefing piece here: <a href="https://goo.gl/B5bFe8">https://goo.gl/B5bFe8</a>)</div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
Second, the SNP is determined to
wield its newfound influence in Westminster. Given his overall majority Cameron
may well be tempted to be hawkish and push the English agenda, though a slender
majority may tempt a more consensual approach (eg, Smith-plus in return for
support on Europe). The SNP are on record that Smith did not go far enough in
limiting FOBT numbers via licensing only for new shops: they could get more
powers, and if they do the Local Authorities of England and Wales (not least
Boris’s London) are highly likely to demand the same.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Third, pressure from external sources
is likely to redouble rather than diminish, given that the Conservative
manifesto effectively implied that enough had been done. This pressure has
proved highly effective in the past (<i>vide</i>
the number of manifesto commitments on a relatively narrow issue; as well as
ministerial action last year) and it would be dangerous in the extreme to write
it off now.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Fourth, Osbourne has made several
spending commitments that look unfunded (most notably £8bn extra for the NHS)
and is on the hook for material cuts elsewhere. He has limited room for
manoeuvre in increasing the major taxes given the Conservative Party’s
electoral stance. He is also facing an increased anti-austerity voice from the
opposition. In such an environment, any tax rises which are not felt by the
wider public or business as a whole are highly attractive. Gambling is an
obvious area for raiding on this basis.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Finally, with attention fixed on
FOBTs, the Racing Right, and potentially tax, it is easy to forget that there
are large swathes of land-based gaming, remote gambling and lottery which are
currently ‘below the radar screen’. History has shown that it does not take
much to put other sectors in the firing-line and it would be dangerous to be
blind-sided by complacency.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Despite these notes of caution I
am not necessarily gloomy. The industry has had a very lucky break in being
presented with a pragmatic government in terms of gambling policy, that it
willing to listen to its side of the argument as well as the anti-lobby. This
is good fortune: not a vindication of past errors. </div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
For anything like the
regulatory status-quo to remain, the government will have to be confident in
defending it, or it will be thrown under the bus for political leverage. The
industry must therefore redouble its efforts in being (not just appearing)
open, transparent, compassionate and responsible. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<br />
<div class="MsoNormal" style="text-align: justify;">
The old industry has been given a
stay of execution while it reforms; only by maintaining the pace of reform can
it get out of the danger-zone.<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-75999401859510733852015-04-30T11:40:00.000+01:002015-04-30T11:42:13.004+01:00Omni-channel: castles in the sky?<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjoEnaEhunp6ll8TVVR43BMb4Xe3nWNJNtU25KxyAGrUbrjPqptAtN_61g1Fl48i0EXgNE1xzzcTMPCEOcUNIYyDyBLfcD10KKT_oE9WkW12blzZeIfS1I-QGj9ldZbVRktuSZDJ9UIzNs/s1600/dreamstime_xs_33153724.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjoEnaEhunp6ll8TVVR43BMb4Xe3nWNJNtU25KxyAGrUbrjPqptAtN_61g1Fl48i0EXgNE1xzzcTMPCEOcUNIYyDyBLfcD10KKT_oE9WkW12blzZeIfS1I-QGj9ldZbVRktuSZDJ9UIzNs/s1600/dreamstime_xs_33153724.jpg" height="266" width="400" /></a></div>
<br />
<b>By Paul Leyland, Founding Partner, Regulus Partners</b><br />
<br />
<h2 style="text-align: center;">
<span style="font-size: x-large;"><span style="font-family: Arial, Helvetica, sans-serif;"><i>“Neither Admiral Roland nor I
claim to be omniscient or infallible – but we do claim to be omni-channel”</i> - Where Eagles Dare</span> </span></h2>
<h2 style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">(if it reflected modern gambling company boardrooms)</span></h2>
<div class="MsoNormal" style="text-align: justify;">
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
UK land-based gambling operators have
historically struggled to convert their brand and retail footprint into
material remote businesses. William Hill, the UK land-based group with the most
successful remote business, rather proved the point by reversing online
stagnation through a Joint Venture with Playtech and a wholesale detachment
from UK retail operations. None of the other UK land-based businesses with
significant market share in any licensing class makes the top six of UK remote
operators by market share.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Fishing for an edge over
multi-national remote operators, ‘multi-channel’ has been deployed as a
buzzword / aspiration / article of faith for many land-based businesses for
some time (the author remembers naively enthusing its imminent potential over a
decade ago). Given the almost total failure of multi-channel strategies to
convert into meaningful market share, it is perhaps unsurprising that the very
term disappeared quietly and un-mourned from the catechism at some point late
last year.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Omni-channel is now the the
latest buzzword. It is expounded almost everywhere with the fervency of new
hope; as if ‘omni-channel’ is somehow so radically different from ‘multi-channel’;
that multi-channel was so last year and previous failures can be brushed aside;
that the potential for land-based to deliver significant remote market share as
part of a coordinated customer offer is now (really) shortly upon us.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
I can understand why gambling wishes
to deploy the lexicon (even the practices) of the wider retail market:
omni-channel is not a gambling buzzword just as multi-channel was not. However,
words to not change operations, much less make sales. My concern is not with
the word, but with three underling problems its current use disguises:<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]-->1.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->Many
customers are already ‘omni-channel’ due to industry-wide supply changes<o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]-->2.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->The
solution involves technology but it is not a technology solution<o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]-->3.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->Channel
shift means the requirement is defensive rather than a growth opportunity<o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;">
<br /></div>
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Operators are increasingly talking
of giving their customers “an omni-channel experience”. It is certainly the
case that the remote offer of most land-based businesses is more-or-less
disconnected from the land-based in all but brand. However, does this matter to
the customer? The customer can already bet ‘in venue, online and on the move’ and
can choose from a wide range of operators in each category. Some customers may
add remote gambling to their land-based activities because of in-venue
promotion, but the vast majority who want to are likely to be doing it already.
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
For example, 54% of William
Hill’s UK remote customers use shops while 34% of shop customers use online:
this is without much ‘active’ omni-channel activity from the supply side.
Certainly, there are a few benefits around the edges that a land-based business
can (and should) provide over remote only (eg, integrated loyalty and CRM;
cash-in/out; wallet) but these pale in comparison with being able to match the
quality of other remote offers, which new remote customers soon discover and
come to expect. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
This quality has been historically
lacking from land-based businesses’ remote offer, which is a key reason for
multi-channel failure: the reason does not go away with a new name. The first
pillar of omni-channel success must therefore be a remote product that can
compete with the best in class in all products offered. The alternative is
brand damage, operational failure, and, over time, loss of market share (see
below).<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
All the major land-based
businesses already have remote businesses. They tend to be on different
platforms with limited product and CRM over-lap. This creates headaches for an
omni-channel strategy and it is telling that the major technology providers are
investing in omni-channel technology to overcome these hurdles. Technology is,
of course, a key enabler for successful supply-led omni-channel (vs. already
existing demand-led omni-channel) and suppliers will undoubtedly benefit from
the push for omni-channel. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
But, why should a customer be
drawn to “brand A” online just because it has a land-based presence? And not
just to visit the site and register (the brand works there, as evidenced by
lower CPAs), but to successfully deposit (first point of failure), gamble and
keep gambling (regular point of failure).<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
In the retail universe, where
stock is tangible, the quality of the product is a key reason. However, in the
gambling world much of the product is intangible and has been largely
commoditised (with some important distinctions). In the remote world this is
overcome with offers and lower margins; the land-based environment on the other
hand answers the commoditisation problem by being determined to protect product
margin and keep investment to an acceptable minimum. These tensions of strategy rip apart any
attempt at a common offer or user experience. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Another key reason for
theoretical land-based edge is the ‘personal touch’ with the customer. With a
few exceptions, the systematic quality of contact and service in most
land-based gambling is beyond poor. That is not to denigrate staff: many do an
amazing job of fostering loyalty through dedication and force of personality;
but they tend to do it in isolation from employers, without consistency and
with very few levers to cross-sell and/or up-sell. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The second pillar of successful
omni-channel is therefore to improve levels of product and service across the
board. Many remote-only customers would be shocked at the lack of value and
investment in land-based; many land-based-only customers would be surprised (some
dangerously pleasantly) at the offer (churn) driven remote model. These can be
reconciled but it requires a real focus on customer service alongside
understanding (and delivering) what the customer actually wants rather than
what the industry think they want. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
In my view customer service is far
more important than technology for delivering successful omni-channel
strategies and this is not something the sector has historically excelled at.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Successful omni-channel therefore
requires significant investment in both the remote and land-based businesses;
not just in technology but also in remote capabilities, retail infrastructure
and people. Getting all of this right takes most land-based businesses far outside
their areas of expertise and comfort. However, it is eminently achievable with
a lot of hard work and focus on successful execution (not just buzzwords). <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Nevertheless, there is a sting in
the tail. Getting all of this right has historically promised growth. It now
promises survival. As the statistics quoted on William Hill demonstrate, many
customers are already omni-channel and each new cohort swings the dial further
to remote. <o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
According to our own figures,
land-based gambling has barely grown in the last five years (2% CAGR, with many
areas in decline), while remote has achieved a CAGR of 17%: channel-shift is
occurring. Moreover, demographics, the ubiquity of mobile, the focus of
marketing and investment, regulatory pressure, and the lack of meaningful
R&D in the land-based sector means this trend is likely to accelerate. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
What does this mean for
land-based operators? In a nutshell guaranteed loss of market share in the
“omni-industry”.<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Historically this has been
relative in a (relatively) stable landbased environment. However, in an
environment where remote spend occurs <i>instead
of</i> land-based spend, then a ‘typical’ landbased market share of c. 25% (of
a given licensing class) gets converted into a ‘typical’ remote share of sub
10%: even the highly successful William Hill has a much higher LBO market share
(30%) than remote (14%); for less successful multi-channel businesses, the
conversion rate is much worse. </div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Moreover, this is structural: even in a fully
taxed and regulated regime, the remote channel can deliver more operators to a
given customer than even the most competitive and diverse local landbased
environment can ever hope too; further, land-based tools for building market
share (rollout; M&A) do not work to anywhere the same extent in remote due to
the lack of tangible space to control. To state the obvious, lower market share
in a value transfer environment means lower revenue in absolute terms. And
lower revenue in a high fixed-cost environment means rapidly declining profits.
<o:p></o:p></div>
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<br /></div>
<br />
<div class="MsoNormal" style="text-align: justify;">
Being omni-channel is not about
promising growth. Nor is it about technology fixes. It is about re-engineering
entire businesses to avoid medium-term extinction.<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-65518872622146966322015-04-02T08:48:00.004+01:002016-05-11T09:36:55.360+01:00One day a prince will come….<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijEBLlhbpeHbFru0NA80mpLnK8Fmw1TJJfq_YR7A2Nhl2Rd9StnMdvP0uSQqSDhvLC8idmEBZsXKMf61U-Ly4gTwMAL5s40uZwmirKmhn2P-oGeS4xLySidIwzES6hJlNulcX9cVwXWrQ/s1600/dreamstime_xs_43027533.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijEBLlhbpeHbFru0NA80mpLnK8Fmw1TJJfq_YR7A2Nhl2Rd9StnMdvP0uSQqSDhvLC8idmEBZsXKMf61U-Ly4gTwMAL5s40uZwmirKmhn2P-oGeS4xLySidIwzES6hJlNulcX9cVwXWrQ/s1600/dreamstime_xs_43027533.jpg" width="320" /></a></div>
<br />
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<br />
<br />
<h2>
<b><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-large;">An Innocent Man: Gordon Brown and the ‘killing’ of the
super casino</span></b></h2>
<b><span style="font-family: "arial" , "helvetica" , sans-serif;">By Dan Waugh, Partner, Regulus Partners</span></b><br />
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<b><span style="color: #002060; font-family: "arial" , "helvetica" , sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The great British super-casino whodunit is replete with
enough twists, turns and intrigue to stand comparison with Agatha Christie’s
best yarns. Not simply a tale of mistaken identity, it may also prove to be a
case of a death faked; the perversion of the course of justice rather than
homicide. <o:p></o:p></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The ‘crime’ in this instance was the killing of the British
super-casino (or ‘regional casino’ as it is known to legislation). The culprit,
according to popular lore is that great pantomime villain, Gordon Brown, the
conviction politician who brought his Presbyterian sense of morality to the
question of how and where people in Britain should be permitted to gamble. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">At first glance, the facts fit. Under Blair our Britannia
was cool – perhaps not Vegas cool but closer in spirit to the Rat Pack than to
the Gang of Four. Blair gave Sir Alan Budd the freedom to review Britain’s
gambling laws through the eyes of an economist rather than a moralist – and he
decided as many other governments have done (including those to the left and to
the right in Beijing and Singapore) that destination casinos or integrated
resorts were good. Brown’s premiership was a correction to all that. It was
back to basics (again) - a time for Labour to sober up after the party turned sour
in Iraq and Afghanistan.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">At the start of 2007 with Blair as PM, the Gambling Act
(despite a tumultuous passage) had been in place for a year-and-a-half and we
were on course for our first super-casino. By the end of the year, with Brown
in Number 10, hopes for ‘Brit Vegas’ had been consigned to the dustbin. The
‘Son of the Manse’, cheered on by gambling’s bogeyman (and editor of the Daily
Mail) Paul Dacre had prevailed by stopping Blair’s folly in its tracks.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Only it wasn’t quite like that…<o:p></o:p></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">According to voting records, Gordon Brown’s sole
parliamentary involvement with the regional casino was an affirmative vote in
March 2007, when the House of Commons endorsed the Casino Advisory Panel’s
decision to award the licence to Manchester (along with the allocation to other
local authorities of the eight ‘large’ and eight ‘small’ casino licences). I
don’t know (and don’t particularly care) whether Brown’s conscience was
troubled in voting for the measure. His vote was consistent with his priorities
at the time (as boss of the Treasury) to attract investment to the UK.<o:p></o:p></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The truth is that plans for integrated resorts and
destination gaming were killed in the Lords and not in the Commons. In a
monumental act of folly, Blackpool’s unsuccessful bid team persuaded a
sufficient number of misty-eyed peers to form a united front with the
anti-gambling lobby in order to defeat the statutory instrument.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Brown’s role in all of this was to persuade his culture
secretary, Tessa Jowell to decouple the regional casino from the other 16
licences. His government probably could have pushed it through but Brown’s own
interests had shifted with the move to Number 10. Rather than killing the
super-casino, Brown’s role was to turn off the life-support machine.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Only it’s not quite like that either…<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The intriguing fact behind all of this is that the regional
casino isn’t dead after all. Look – it’s sitting right there in primary legislation
– on the face of the Gambling Act. All that is required is the political will
to resubmit the enabling legislation; and this is something that may not be as
difficult as is commonly supposed.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">If the decision to award the regional casino to Manchester
was returned to Parliament, it is difficult to believe that Blackpool City
Council would be sufficiently exercised to protest this time; while the
backdrop of the FOBT controversy might even help to emphasise the virtues of
destination gambling over the convenience market. Whoever wins the General Election in May will need to address the Budget deficit - and this will require
investment ideas as well as simple tax-raising. Meanwhile, the opening of
Genting’s Resorts World at the NEC will have helped to reframe thinking about
how gambling can be harnessed to more productive economic ends.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">What is really needed is not so much political will but
industry ambition – for someone to paint a picture of what the regional casino
(probably but not necessarily in Manchester) might look like – what amenities
it would incorporate, how many jobs it would create, how much investment it
would attract, how much it would generate in taxes, how it would support
tourism and (importantly) explain convincingly how inevitable concerns about social responsibility can and will be effectively addressed.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">This sense of ambition has not hitherto come from within the
domestic industry, while many of the global titans of casino (such as MGM, Wynn,
Las Vegas Sands and Crown) have bad memories of Britain as a place to do
business. They may also be too besotted with the prospect of integrated resorts
in Japan to bother about a return to our small island. And yet…..<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">And yet, Europe remains a major gambling market that the big
operators have yet to crack. Investments in Britain by Genting, Crown and
Caesars were effectively market entry plays and remain fairly marginal in terms
of their global businesses. Meanwhile, Sands may now ‘own’ the customer in most
of the major gambling markets in the world – Las Vegas, Macau, Singapore – but
not in Europe.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">There was a time when some very bright minds (in government,
in academe, in industry) considered that destination casinos would work in
Britain and <i>work</i> <i>for</i> Britain. It may not be in vogue to say so today but that is no
reason to disregard their considered work on the subject.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The super casino is not dead; it is simply sleeping. It
pricked its finger on a spinning wheel and now waits for Prince Charming (Prince
Steve, Prince Sheldon, Prince Jim, perhaps even a homespun Prince….) to bring it back to life.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Meanwhile, as he prepares to retire from life in the
Commons, we should pause to exonerate Gordon Brown for the crime of killing our
super casino and perhaps remember him instead as the man whose betting tax changes (GPT) responded to sound economic arguments and paved the way for a rebirth of that sector….</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal">
<br /></div>
</div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-51619332414915192372015-03-20T13:29:00.002+00:002015-03-20T13:40:47.587+00:00Declaration of the Rights of Racing<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8Tb0f3WqL3n7BWagSWiWmJF_xpEHhJ5UW9dxmdolA3CG9id3yit0qndcQgHnDatBMfecnZpsBerDvEABMhYb8nx5FyNaCtthYh58t6hg3EGpMQvAfTHpMvo6Q-RFK80TGcwcpf9bYsyU/s1600/dreamstime_xs_11370448.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8Tb0f3WqL3n7BWagSWiWmJF_xpEHhJ5UW9dxmdolA3CG9id3yit0qndcQgHnDatBMfecnZpsBerDvEABMhYb8nx5FyNaCtthYh58t6hg3EGpMQvAfTHpMvo6Q-RFK80TGcwcpf9bYsyU/s1600/dreamstime_xs_11370448.jpg" height="320" width="205" /></a></div>
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><b>By Paul Leyland, Founding Partner, Regulus Partners</b></span><br />
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span>
<br />
<h2>
<span style="font-size: large;"><i><span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; line-height: 107%; mso-ansi-language: EN-GB; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">“</span><span style="background: white; font-family: Helvetica, sans-serif; line-height: 107%;">There are only two forces that unite men - fear and interest.</span><span style="font-family: Helvetica, sans-serif; line-height: 107%;">”
Napoleon Bonaparte </span></i></span></h2>
<br />
<br />
<div class="MsoNormal">
During Wednesday’s Budget, the Chancellor of the Exchequer announced that a
Horserace Betting Right will replace the current Levy. After more than a decade
of vacillation, the government has conducted three quick-fire consultations and
(rather rapidly) made its decision. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Matthew Hancock, MP for West Suffolk
(Newmarket), former Chief of Staff to George Osborne, and a business minister,
has been a leading champion of the Right (no pun intended). Clive Efford MP,
Shadow Minister for Sport, has also given his backing to the change. The details
remain unclear, but the course seems set for a Right whichever combination of
parties wins power (or at least office) in May.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So far the response has been one of muted delight from
racing and a mixture of incredulity, rage and fear from the bookmaking
community. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
First off, it is worth saying that I think the bookmakers
deserved to lose this fight. As discussed elsewhere (<a href="http://regulusp.blogspot.co.uk/2014/09/the-horse-racing-betting-levy-what-is.html"><span style="font-family: "Arial",sans-serif; font-size: 10.0pt; line-height: 107%;">http://regulusp.blogspot.co.uk/2014/09/the-horse-racing-betting-levy-what-is.html</span></a>),
racing is a sport designed (in the most part) for betting on (especially
off-course), and as such betting should pay more to racing than to other
sports, which are nowhere near so inter-dependent and symbiotically entwined
(excepting dogs). The betting industry should also see this as an investment
that will deliver a return: sustaining and influencing what remains a key
product (c. 45% retail; c. 33% remote) rather than dressing up its neglect as (self-fulfilling)
‘inevitable decline’.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Despite this very real symbiosis, the last decade has been
dominated by disengagement on product and belligerence on economics. With the
growth of remote and now channel shift (retail to remote), we estimate that c. 33% of horseracing gross win is occurring over
remote devices and this mix is growing. Bet365 pays the Levy despite now being
offshore; Betfair pays the Levy on commission, which is much better than
nothing; the big UK retail bookmakers have agreed a Levy top-up which I don’t
believe comes close to covering their lost remote Levy (in total across the
four); the rest – in a rapidly growing sector - quite glibly freeload
(shrugging at ‘anachronism’ without engaging in alternatives). Moreover,
racing’s economic comeback of Picture Rights is so geared to landbased betting that
it merely accentuates the remote funding time-bomb. Something had to be done;
and as the bookmakers were not collectively willing to play nicely (as well as
gaining bad press on other issues), that something is overwhelmingly in
racing’s favour. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
However, the fact that the bookmakers deserve to lose the fight
(or at least round one), does not make this situation positive. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A Horserace Betting Right is potentially a very bad thing in
my view because it is so one-sided. The government consultations spoke of
symbiosis, inter-dependence and balance. A Right does not conceptually reflect
this: the government is arming one side of the fight and disarming the other. <o:p></o:p></div>
<div class="MsoNormal">
This is dangerous and to demonstrate why, let’s consider a
possible scenario playing out over the next few years (this is not a
prediction, just an illustration):<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Racing, understanding the difficult economics of
the bookmakers, attempts to get an agreement on a material but not significant
rise on current the Levy: somewhere in the region of the £100m of recent yore
which has featured in consultations.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Some bookmakers, seeing the need for an
accommodation, agree in principle but a large proportion of (remote-led)
bookmakers, which have never paid, much less understood, the Levy, refuse to
play.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->A critical mass of bookmakers seek to challenge
the Right legally; straining relations with racing, DCMS and Parliament, at a
very sensitive time for gambling regulation generally.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Separately, retail bookmakers attempt to
minimise downside risk by playing as hard as possible on Picture Rights,
further straining commercial relations with racing.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->A series of fudges are worked out while the
legal position is settled (in my view the likelihood of a successful challenge
is extremely low but the bookmakers could play for time / hope).<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Racing wins its Right, but it now feels it has been
given the run-around for several years; fraught commercial and legal battles
have given more power to hawkish elements.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Separately, bookmakers are under pressure from
machine and remote regulation; they need to ensure sports / racing revenue mix
remains high from a business continuity and risk perspective almost whatever
the short-term P&L cost.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->-<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Bookmakers are on the back foot legally,
politically and commercially; the Impact Study gave a(economically
unsustainable) value range for the Right of 30-50% - Racing thinks in these
circumstances why not? It’s payback time after all…<o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<br /></div>
<div class="MsoNormal">
And in such circumstances, there is very little the
bookmakers could do but pay up – racing has the Right, not an independent body;
a Tribunal may settle disputes but it cannot set the rate. Sure, in five years’
time racing may regret pillaging bookmaking to near extinction and return to
moderation - but by then it may be too late for a beaten industry - and who
gets bonused on taking a five-year view anyway?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This is a doomsday scenario and it probably won’t happen as
the bookmakers will see sense and racing will show restraint. But looking at
the last ten years should we be relying on a model which requires sense from
bookmakers and restraint from racing?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The only way to ensure racing does not have the power to Terrorise
betting, even if it chooses to be moderate, is to enshrine balance constitutionally.
Not with a Right, which essentially allows one group to decide what is ‘best’
for all; but with a genuinely two-way transfer of value in which both sides
have an equal say in a properly governed and independent process. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
Bookmakers should not repeat the mistakes of the past by
going on the offensive (and therefore appearing offensive to many
stakeholders); they should use the hiatus of the election to reach out to
racing and form a working long-term agreement which encompasses all betting
revenue on GB racing, pays a fair share toward putting on the betting product,
and stakes a reasonable claim to governing its investment. It may now need to
be called a Right, but even one-sided rights tend to lead to sensible constitutions
in the end (though usually only after a lot of bloodshed). I only hope that
after such an emphatic victory in round
one, racing is still prepared to listen, before a really damaging fight begins
in earnest which risks poisoning everything. Over the next few months and years
one maxim should be at the forefront of the thinking of both sides: the only
sustainable solution to betting and racing working together effectively is one
built on interest, not fear.<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-6395417239938950742015-03-16T18:01:00.001+00:002015-03-16T18:01:51.782+00:00Taken to the cleaners?<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjW-rOklkgSIvuGZzc5ltOAhvx5FvltJ2v10gAuoiSVYjlWJBDqjo5rOXcdabxIfahkh7K7iMKYf9RexJoKSvr5PTCHX6ZffHJn4v8icR2thdR42pnXMT15JncNeU5LL-J7o8tQOeI-qEI/s1600/dreamstime_xs_13578830.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjW-rOklkgSIvuGZzc5ltOAhvx5FvltJ2v10gAuoiSVYjlWJBDqjo5rOXcdabxIfahkh7K7iMKYf9RexJoKSvr5PTCHX6ZffHJn4v8icR2thdR42pnXMT15JncNeU5LL-J7o8tQOeI-qEI/s1600/dreamstime_xs_13578830.jpg" height="267" width="400" /></a></div>
<div class="MsoNormal">
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><b>By Michael Ellen, Partner, Regulus Partners</b></span></div>
<div class="MsoNormal">
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><br /></span></div>
<h3>
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><span style="font-size: large;">Why the industry and regulators need to seek common cause to pursue shared objectives</span></span></h3>
<div>
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><span style="color: #181818; font-family: Georgia, 'Times New Roman', serif; line-height: 18px;"><i><span style="font-size: large;">"He who seeks to regulate everything by law is more likely to arouse vices than to reform them." Baruch Spinoza (a very influential 17C dutch philosopher)</span></i></span></span></div>
<div class="MsoNormal">
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;"><span style="color: #181818; font-family: Georgia, 'Times New Roman', serif; line-height: 18px;"><br /></span></span></div>
<div class="MsoNormal">
<span style="background: white; color: #222222; font-family: "Arial",sans-serif;">Balancing acts are tricky - ask any regulator. Leave too much
to market forces and sooner or later those forces will bite you on the bum;
over-legislate and you may find yourself the proud owner
of watertight regulations that operators seek to bend or avoid at every
opportunity.</span><o:p></o:p></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "Arial",sans-serif;">Generally, the public interest is best served by laws which
provide proportionate protection against harm without stifling
legitimate commerce.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "Arial",sans-serif;">So it goes with gambling - an industry which (in Britain) has,
by and large, benefited from well-balanced regulation – so far.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "Arial",sans-serif;">However, the forthcoming application of
the EU's Fourth Directive on Anti-Money Laundering (“4 AMLD")
has prompted fears in the remote sector that the balance between
protection and commerce may be moving out of kilter. If correct then the
consequences for <st1:country-region w:st="on"><st1:place w:st="on">Britain</st1:place></st1:country-region>'s
regulated market could be damaging.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white;">
<br /></div>
<div class="MsoNormal" style="background: white;">
<span style="color: #222222; font-family: "Arial",sans-serif;">This is not a question of the narrow parochial
interests of gambling. Even the most blinkered industry executive
would refrain from suggesting that the well-being of the industry should
be placed above the state's need for protection against the toxic and destabilising
effects of money-laundering. Instead, it's a question of whether the
solution (i.e. its regulation) is proportionate to the problem. If
not, the regulations may cause the migration of customers from
regulated, responsible (and now tax-paying) businesses to
unlicensed operators - and in doing so undermine the very objectives that the
legislation is designed to achieve.<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">At the moment, the
Danish Gambling Authority (DGA), which regulates one of the most liberal
demand-side regimes in Europe, claims that 90% of play by Danish residents is
on domestically licensed sites. Meanwhile, the Dutch government has set as a
licensing objective for its new remote regulator a target of regulating 75% of Dutch
resident player activity. By comparison, the French regulator (ARJEL) probably
captures less than 50% of French players’ remote gambling spend, despite
attempts to enforce. Italy and Spain lie somewhere in the middle, again shaped
by their regulatory approach.<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">UK, Denmark, and now
the Netherlands are aligned with the commercial ethos of attracting players, promulgating
the merits of regulation and regulated sites and in this way effectively
working to discourage players from straying toward low-to-no regulation
offshore sites when seeking a flutter online.<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">It remains to be
seen whether this approach wins out in Europe more broadly. The fact that
legislation has generally moved in the opposite direction (with bureaucracy
trumping pragmatism) for such a long time suggests not (though there is an encouraging
liberalisation pipeline from both Italy and Spain). Accurate
analysis of the state of the industry is needed to support policy if we are to
move into an informed and constructive era of political involvement in gambling:
facts speak far louder than opinion and the industry has for too long been much
longer on the latter than the former. <o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">However, too
often the key vested interest (and the strongest voice) in the room in any National
or EU debate on remote gambling has been the protection of state monopolies –
which has emerged as a key obstruction in the development of co-ordinated EC
remote gambling standards.<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">Under its new
Latvian presidency, Brussels has given priority in its legislative program to 4
AMLD, which represents seven years of Brussels’ thinking on money laundering.
It builds on 3 AMLD, which is incorporated in the UK Money Laundering
Regulations 2007. <o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">Seven years has
not been enough time to agree what should fall inside the central definition of
remote gambling, so that sports betting – ironically seen by many informed
onlookers as being at the top end of money-laundering risk within the sector (because
of the possibilities around exchanges and off-market transactions) – may fall
outside the general ambit of 4 AMLD as it is implemented in each Member State.<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">The Directive, as
presently drafted (and now close to final approval), tightens the requirements
around the remote casino operator’s ability to accept player deposits. It
requires due diligence to be undertaken on the ownership credentials for every
transaction (a term itself subject to interpretation, potentially causing a
patch-work of requirements across states) over €2,000. This introduces very unwelcome
interruption to play for many (crucial) higher-value players (potentially a
fillip to black-market operators), unless the state regulator chooses to make,
and subsequently justify, a risk-based exception for the relevant product. The underlying
logic given for the change is that because the player is not present at a
remote casino, its business falls into the highest risk category for money
laundering.<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">Logical enough,
you may say; the problem is that it is not supported by either practical
experience or academic research. Over the last decade, the International
Monetary Fund’s jurisdiction reviews of each of the major offshore centres for
e-gambling operations have identified a consistent theme of low volume
reporting of suspicious transactions, relative to other e-commerce activity. <o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: Arial, sans-serif;">The work of Professor
Michael Levi of Cardiff University (one of our most respected experts on
organised crime) explains why this is so. Quite simply, regulated online
gambling does not present an attractive environment for money laundering due to
three key factors:<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 36.0pt; margin-right: 0cm; margin-top: 3.75pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, sans-serif;">1.<span style="font-family: 'Times New Roman'; font-stretch: normal;">
</span></span><!--[endif]--><span style="font-family: Arial, sans-serif;">depositors are properly identified<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 36.0pt; margin-right: 0cm; margin-top: 3.75pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, sans-serif;">2.<span style="font-family: 'Times New Roman'; font-stretch: normal;">
</span></span><!--[endif]--><span style="font-family: Arial, sans-serif;">all transactions are recorded digitally and are subject to
scrutiny, exception analysis and then retention<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 36.0pt; margin-right: 0cm; margin-top: 3.75pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, sans-serif;">3.<span style="font-family: 'Times New Roman'; font-stretch: normal;">
</span></span><!--[endif]--><span style="font-family: Arial, sans-serif;">money is returned to the same (identified) card/ account source as
the deposit originated from i.e. the known, named, identity-verified player<o:p></o:p></span></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: "Arial",sans-serif;">Money laundering activity
does occur in remote gambling; but the <i>regulated
sector </i>is a very difficult place to do it successfully. Regulators already
know this, yet the imminent implementation of 4 AMLD in Europe will cause major
disruption to the industry, and according to informed commentators, “<i>gambling and payment firms will need to
lobby governments on a nation-by-nation basis when countries start to implement
it</i>”. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif;">The onus is on
the industry and regulator alike to ensure that the implementation of policy is
based upon facts rather than myth and supposition. The regulators are unlikely
to boast of their success in controlling money laundering while the ability of
operators to inform the debate is hampered by political and media prejudice
against the industry<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif;">The application
of disproportionately restrictive pressures on regulated operators seems likely
to improve market conditions for illegal operation, where money laundering is
much more likely to prevail. By the same token it buries the regulator in work
that would not otherwise rank so highly on a risk-adjusted scale.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div style="margin-bottom: 7.5pt; margin-left: 0cm; margin-right: 0cm; margin-top: 3.75pt;">
<span style="font-family: "Arial",sans-serif;">And so the industry and
regulators face yet more fragmented jurisdictional requirements on which to
build their compliance systems, around a threat which on current evidence seems
low; the clear evidence presented on the effects of the difference between
‘good’ and ‘bad’ regulation seemingly lost in translation.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif;">So that is the
problem – what is the solution?<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif;">Enlightened
operators and enlightened governments have a shared interest in the development
of healthy regulated remote gambling markets (and the successful suppression of
unregulated companies). In order to achieve this (and to ward off the threats
from ill-considered European legislation), companies need to do more to find
common cause with those who regulate them - an antagonistic relationship serves
the purposes of neither party. They also need to deploy facts to demonstrate
the efficacy of their position.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<span style="font-family: "Arial",sans-serif;">An obvious
initial step for both parties would be the commissioning of independent
research into the extent of money-laundering within remote gambling and how
this splits between regulated and unregulated sites. Only by first
understanding the problem can we hope to apply effective remedies. Without such
research, the interests of the operator and regulator will remain prey to the
unintended consequences of Brussels bureaucracy.<o:p></o:p></span></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-47526533650844014972015-02-27T09:27:00.000+00:002015-02-27T13:18:31.873+00:00GC Assurance Statements: assuring better gambling businesses<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhI2OLbgWOGrN-PrL6Whc7IqSEjYWs5B_yZBfx1dNYzSmTI25kJykbWMhpi4Df-BAuoLAtBsDSOOOz_ggs7OwJElO9R2-uH8SkoaPQD2yJ5qmXh4W112tvnUxAIHcvGI-90x1Gx4qFc1_k/s1600/dreamstime_xs_43878324.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhI2OLbgWOGrN-PrL6Whc7IqSEjYWs5B_yZBfx1dNYzSmTI25kJykbWMhpi4Df-BAuoLAtBsDSOOOz_ggs7OwJElO9R2-uH8SkoaPQD2yJ5qmXh4W112tvnUxAIHcvGI-90x1Gx4qFc1_k/s1600/dreamstime_xs_43878324.jpg" height="314" width="320" /></a></div>
<br />
<b>By Paul Leyland, Founding Partner, Regulus Partners</b><br />
<b><br /></b>
<b><br /></b>
<h3>
“<i>The government are
very keen on amassing statistics. They collect them, add them, raise them to
the nth power, take the cube root and prepare wonderful diagrams. But you must
never forget that every one of these figures comes in the first instance from
the local village watchman, who just puts down what he damn pleases. </i>“<br />“<i>It is easy to dodge
our responsibilities, but we cannot dodge the consequences of dodging our
responsibilities</i>.<i>” </i>Josiah Stamp</h3>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The Gambling Commission is currently consulting on a new
Annual Assurance Statement, which would require the larger operators (over £25m
UK revenue, which the Commission estimates to be c. 40 operators with c. 90%
combined UK market share) to inform the Commission as to how they are
understanding, measuring and mitigating the key risks captured in the
Commission’s licensing objectives, notably:<o:p></o:p></div>
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<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]-->Keeping gambling crime free<o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]-->Protecting the vulnerable<o:p></o:p></div>
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The consultation documents can be found here:<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal">
<span style="background: white; color: #1155cc; font-family: "Arial",sans-serif; font-size: 9.5pt; line-height: 107%;"><a href="http://www.gamblingcommission.gov.uk/Publications-consultations/Consultations/Open-consultations/Supplementary-consultation-on-the-introduction-of-an-annual-assurance-statement.aspx" target="_blank">http://www.gamblingcommission.gov.uk/Publications-consultations/Consultations/Open-consultations/Supplementary-consultation-on-the-introduction-of-an-annual-assurance-statement.aspx</a></span><o:p></o:p></div>
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<span style="background: white; color: #1155cc; font-family: "Arial",sans-serif; font-size: 9.5pt; line-height: 107%;"><br /></span></div>
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I believe that this process is an important addition to the
UK licensing regime for three reasons:<o:p></o:p></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l2 level1 lfo2; text-indent: -18.0pt;">
</div>
<ul>
<li><span style="text-indent: -18pt;">It puts operators’ social responsibility
practises under clear and systematic scrutiny</span></li>
<li><span style="font-size: 7pt; font-stretch: normal; text-indent: -18pt;"> </span><span style="text-indent: -18pt;">It </span><i style="text-indent: -18pt;">should</i><span style="text-indent: -18pt;">
encourage operators to further increase the internal and external priority of
social responsibility measures</span></li>
<li><span style="text-indent: -18pt;">It </span><i style="text-indent: -18pt;">may</i><span style="text-indent: -18pt;">
start to resolve some the natural tensions between social responsibility best
practice and (short term) profit maximisation</span></li>
</ul>
<div class="MsoListParagraphCxSpLast" style="mso-list: l2 level1 lfo2; text-indent: -18.0pt;">
<o:p></o:p></div>
<div class="MsoNormal">
It will be tempting for some operators to see this as an
unnecessary regulatory burden, or, worse, an attempt to gather (partial)
information in order to justify increased regulation. If starting from that
viewpoint, the resulting submissions are likely to be little more than desk
exercises produced by ‘compliance people’. I think such a response would be
both short-sighted and bad business. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Short-sighted because there will always be pressure from groups
within society to curtail some or all forms of gambling activity; whether reasonable,
well-meaning, protectionist or just plain atavistic. This pressure tends to get
politicised when issues are denied or obfuscated, rather than tackled
(convincingly) head on: if there is no problem then it is not unreasonable to
demand evidence to demonstrate that fact, failure to do so raises concerns even
from the previously indifferent. <o:p></o:p></div>
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<br /></div>
<div class="MsoNormal">
Half-baked attempts to provide such evidence are at best
unconvincing and at worst grist to the mill of tougher regulation. In order to
escape current and future politico-regulatory issues the industry must be seen
to be taking its social responsibility seriously: that is the reasonable
expectation of large swathes of society; and now - election year after all - is
the time to do it.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
To see why it is bad business, let’s consider what the
Commission is really asking for.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The Annual Assurance Statement essentially comprises six questions:<o:p></o:p></div>
<div class="MsoNormal">
</div>
<ul>
<li><span style="text-indent: -18pt;">What control systems and governance does the
operator have, especially relating to crime (AML, criminal spend, integrity)
and social responsibility (fair, protecting the vulnerable)</span></li>
<li><span style="text-indent: -18pt;">What actions have been taken in the last 12
months to improve these</span></li>
<li><span style="text-indent: -18pt;">What plans are there to improve systems and
governance in the next 12 months</span></li>
<li><span style="font-size: 7pt; font-stretch: normal; text-indent: -18pt;"> </span><span style="text-indent: -18pt;">What is the operator’s narrative assessment of
the extent to which its revenue potentially comes from harmful gambling</span></li>
<li><span style="text-indent: -18pt;">What tools are being used to identify problem
and at risk gambling</span></li>
<li><span style="font-size: 7pt; font-stretch: normal; text-indent: -18pt;"> </span><span style="text-indent: -18pt;">What actions have been taken and how is
effectiveness and impact evaluated and improved</span></li>
</ul>
<br />
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo3; text-indent: -18.0pt;">
<o:p></o:p></div>
<div class="MsoNormal">
None of these questions are particularly onerous or
dangerous and most operators should be doing some or all of the above already. Further,
developed properly this can have significant positive impact on the business
and the industry as a whole. We see five key business areas where this
increased scrutiny and process should generate clear benefits. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Reputation</b> is the
most obvious starting point for a gambling industry which is regularly battered
in Parliament and the press. A clear policy of focus and improvement is
something forward thinking operators can use to demonstrate that they are on
top of the problem, in a more sophisticated (and therefore convincing) way than
before. The Gambling Commission and the industry can also reasonably argue that
sufficient duty of care is being carried out. This could prove to be a key
pillar in protecting the industry from further regulatory encroachment.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Risk management</b>
is another area which can prove to the benefit of the business. There have been
several reported incidents where both remote and landbased operators have been
caught inadvertently handling the proceeds of crime or assisting in money
laundering. To state that this is bad business is to state the obvious
(commercially, legally, reputationally) and systematically improved measures to
prevent this bad business can only be a good thing.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Better <b>customer
understanding</b> should come from enhanced problem gambling tools. Ladbrokes
has flagged that it is rolling out its leading algorithm developed from its
Odds On card. The temptation to believe that only card based or remote play is
data rich is dangerously myopic, however – practically all forms of gambling
are data rich and customer engagement is key. It has long been a valid criticsm
of the gambling industry that it is not customer-centric enough (even in terms
of customer service), a clear spotlight on customer behaviour should be used to
accentuate the fun as well as reduce harm.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The Assurance Statement is clear that it is to be signed off
by very senior executives (eg, CEO). This is important in ensuring that social
responsibility is recognised as a key business driver right from the top (and
when a CEO cares about something the organisation tends to). While all
operators pay lip service to this, a pervasive <b>culture </b>of pushing problems the way of compliance is only just
being overcome and any accelerant to this will make operators much stronger in
being able to deal with issues of public concern, from both a cultural and <b>operations management</b> perspective (ie,
minimise poor practice and mistakes, and handle the mistakes that do occur more
effectively).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
I am also encouraged that the Gambling Commission intends to
take an active role in fostering and spreading best practice: this is an area
where the industry will fail to gain from a lob-sided or patchy approach: even
though some operators are already embracing this approach, they are in danger
of being let down by the laggards. Effective coordination, and even leadership,
is therefore vital.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
In short, by fully embracing and embedding the purposes of
the Annual Assurance Statement, the industry will not only justify the logic of
relatively light touch regulation, it will also improve its reputation and produce
more profitable and more sustainable businesses.<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-36611250245052428712015-02-19T12:32:00.001+00:002015-02-19T12:32:59.305+00:00Time to think outside the box<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8iqA5CJa5CYHQYWFewRqeIo6Xa9CApdAxFsMJoQ6Pyd1maM2RztNyN2qDnamJ0WeAhzEOm_Uwasg1PKRZp4CaX8JvKkXfmLxWdFPtjCZrTE2l_JmH4stQUOJIkuGWgXpMc5LYR7aZn7A/s1600/dreamstime_xs_31454519.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8iqA5CJa5CYHQYWFewRqeIo6Xa9CApdAxFsMJoQ6Pyd1maM2RztNyN2qDnamJ0WeAhzEOm_Uwasg1PKRZp4CaX8JvKkXfmLxWdFPtjCZrTE2l_JmH4stQUOJIkuGWgXpMc5LYR7aZn7A/s1600/dreamstime_xs_31454519.jpg" height="320" width="320" /></a></div>
<br />
<b>By Dan Waugh, Principal Consultant Regulus Partners</b><br />
<br />
<h3>
<span style="font-family: inherit;"><span style="background: white;">“<i>Creativity requires
the courage to let go of certainties.</i>”</span> Erich Fromm</span></h3>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">It may seem strange to suggest it now at a time when gambling
is once again at the centre of a fairly major public policy debate – but there
may come a time when even the <i>Daily Mail</i>
recalls with misty eyes a time when gambling was part of the fabric of British
high-street life.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Looking at data from the last five years suggests that – notwithstanding
the current concerns around proliferation (principally betting shops) - we
should be concerned about the future of land-based gambling. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Everyone knows that bingo clubs and arcades have been under
pressure for some time. According to the latest Gambling Commission data, revenue
from these sectors has shrunk by 4% and 19% respectively since 2009. These are
the show-ers.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">What is less widely reported is the state of the supposed growers.
The betting shop sector has experienced solid growth this decade delivering a
c. 40% gross win increase since 2004 – but decline in its core product (horse-racing
and greyhounds) has been masked by stunning (and relatively easy) growth from
machines. Over and above the political risk on machines, there is something
unsettling for the industry about this situation. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">It’s all a little reminiscent of Robert Putnam’s 1999 work
‘Bowling Alone’, in which the Harvard Professor of Public Policy described the
decline in community participation in the USA during the second half of the
twentieth century as age cohort by age cohort people gradually disengaged from
traditional methods of interaction. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Meanwhile, the casinos sector exceeded £1bn in table revenue
for the first time last year and has generated an impressive 7% compound growth
rate over the last five years. However, the lion’s share of this growth has
come from London (where Mayfair has benefited from a buoyant international
market and the mainstream has been bolstered by about £90m of capital
investment split between the Hippodrome in Leicester Square and Aspers at
Stratford).Taking London out of the reckoning, casinos start to look a little
anaemic with CAGR of just 2% over the last five years. Meanwhile, annual participation
rates (for playing casino games in a casino) were stuck at just 3% according to
the most recent health surveys – hardly the boom we were led to believe would
follow the Gambling Act 2005.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">On the other hand, remote gambling – now in its 21<sup>st</sup>
year – keeps growing, with mobile putting a new spring in the step of the
sector. Indeed at over £3bn in revenue, remote is now bigger than any single
sector of land-based gambling (other than the National Lottery)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">One of the problems facing the land-based element of our
gambling industry is that the unit classifications have not really changed in
the last 40 or 50 years. We have on-course betting, betting shops, bingo clubs,
casinos and amusement arcades – concepts defined in the 1960s. There have been
product ‘innovations’ (but these have largely been limited to EGMs) as well as
some significant regulatory gains. Bingo clubs and casinos are typically larger
now than back then and betting shops are permitted to admit natural light and even
to offer toilets (as well as four B2/3 machines per shop) – but the core nature
of the units themselves has remained largely unchanged. We have had supply-side
and regulatory modifications on a theme but nothing more fundamental.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">In land-based gaming (unlike in the remote sector) the
licence – rather than customer needs - still largely determines the product and
experience: casinos are distribution points for roulette and card games; bingo
clubs for bingo games; arcades for slots. Betting shops may now generate the
majority of their revenue from machines but betting on horses is still the draw
for most customers.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Britain is a remarkably accommodating market for gambling.
Just about all products are available, gambling taxes are generally on the low
side, advertising is (controversially) prevalent, and regulation is designed to
be of the light-touch variety. Yet while we have all types of gambling, we
don’t have all formats – and attempts to add new formats have been limited.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">In Connecticut right now, a British company, Sportech is
developing sports and sports wagering bars under the Bobby Vs brand – yet the
idea that it might transplant the concept to its home market is almost
unthinkable because the necessary regulations are not in place.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Taking a global look at each of the key gambling product
categories – betting, casino, bingo and slots – it is apparent that our
solutions are not the only ones available. The obvious example is casinos where
Britain’s limited amenity locals market format looks increasingly out of step
with the global development of destination-style venues. However, there are also
international alternatives to the British model of bingo club (community gaming
centres in Canada for instance or the new style venues emerging in parts of
Spain), betting shops (casino-based sportsbooks in Nevada, PMU bars in France,
TAB outlets in Australia) and slots arcades (the Station Casinos Wildfire
concept in Nevada, arcades as mini-casinos in parts of Spain and in the
Netherlands). <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">The common strand to most of these examples is that they
tend to be larger and more complex outlets than their British counterparts –
and typically incorporate a wider range of non-gambling amenities, including
licensed bars. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Over the course of the last 50 years, Britain has developed
as a convenience gambling market (the Gambling Commission regulates more than
10,000 licensed venues, not including pubs with slot machines). This is in
contrast to the situation in a number of culturally similar jurisdictions where
governments have favoured concentration and control rather than dispersal.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">The problem with the UK situation (from a commercial
standpoint) is that convenience is now the trump card of the remote sector.
This presents a structural issue for ‘purely transactional’ gambling in
traditional outlets. In order to compete effectively, venues may need to
enhance the experience of gambling – and that is likely to require a much more
sophisticated approach to concept development (including a willingness to
embrace the risk of failure in order to learn and innovate). The alternative is
to give up gradually on land-based gambling and seek to shift one’s business over
time from venues to remote channels – but this is not without its risks.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Gambling often blames DCMS and the Gambling Commission for
impeding innovation. However, it seems likely that the real culprit is a lack
of industry imagination. Instead of trying to excite government about the
possibilities of new gambling formats, or testing new concepts on customers, operators
more commonly engage in trying to find loopholes through which to sneak in more
products (generally slots) without offering much in the way of economic or
social value or compensating customer protections. Unsurprisingly, this finds
few supporters in government and tends to spark in-fighting with neighbouring
sectors.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Remote gambling is now an important and valuable part of our
gambling industry – especially in terms of consumer choice - but it would be a
shame on many levels if it came in time to <i>be</i>
our gambling industry. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<br />
<div class="MsoNormal">
<span style="font-family: inherit;">Contrary to the current direction of travel, I believe that
there is a ‘win-win’ solution in the gradual replacement of our existing
formats with more sophisticated and more powerful land-based units – something
that would arguably be easier to regulate, better able to offer social
protections, of greater economic value and better suited to changing market
conditions. If so, it would seem that
now is the time for the industry to start thinking ‘outside the box’. </span><o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-39088737400256604642015-02-10T09:09:00.000+00:002015-02-10T09:13:05.110+00:00How I Learned to Stop Worrying and Love Taxes<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiirheE6RIGMXaYolMQxTxvPp4bUwkP84FctKUayQ-LatpWyOGu0W7i6ZTlyBY9O4-6uCnmXYYIDxisAXko5Z-uU5C53UM5oTzfcN4Ni_dVgCwc8Sgbo4Py9tM3-Ivk4HPgPS4XJWBMuqk/s1600/dreamstime_xs_22890203.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiirheE6RIGMXaYolMQxTxvPp4bUwkP84FctKUayQ-LatpWyOGu0W7i6ZTlyBY9O4-6uCnmXYYIDxisAXko5Z-uU5C53UM5oTzfcN4Ni_dVgCwc8Sgbo4Py9tM3-Ivk4HPgPS4XJWBMuqk/s1600/dreamstime_xs_22890203.jpg" height="300" width="400" /></a></div>
<div class="MsoNormal">
<span style="font-family: inherit; line-height: 107%;"><br /></span></div>
<h4>
<span style="font-family: inherit; line-height: 107%;">By Paul Leyland, Founding Partner, Regulus Partners</span></h4>
<div>
<span style="font-family: inherit; line-height: 107%;"><br /></span></div>
<h3>
<span style="font-family: inherit; line-height: 107%;"> “</span><i style="font-family: inherit; line-height: 107%;">Thinking is the one thing no-one has
ever been able to tax” </i><span style="font-family: inherit; line-height: 107%;">Charles F. Kettering</span></h3>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">2015 was always going to be a difficult year for gambling
operators from a fiscal perspective:<o:p></o:p></span></div>
<ul>
<li><span style="font-family: inherit; text-indent: -18pt;">UK remote Point of Consumption taxes (15%
revenue from December 2014)</span></li>
<li><span style="font-family: inherit; text-indent: -18pt;">UK B2 Machine Games Duty increase (5ppt increase
from March 2015 to 25% revenue)</span></li>
<li><span style="font-family: inherit; text-indent: -18pt;">EU Point of Consumption changes to VAT
(especially impacting Germany-facing operators</span></li>
<li><span style="font-family: inherit; text-indent: -18pt;">Italian machine tax increases (VLTs from 5% to
9% of turnover; AWPs from 13% to 17%</span></li>
<li><span style="font-family: inherit; text-indent: -18pt;">Austrian enforcement of its 40% casino tax on
non-domestic licensed operators</span></li>
<li><span style="font-family: inherit; text-indent: -18pt;">Ireland’s 1% turnover tax on remote betting
likely (finally) to come into force in 2015</span></li>
</ul>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">It would be wrong to suggest that this is a one-way street:
for example the UK bingo industry had its duty halved to 10% last summer (after
some effective socially-focussed lobbying). However, the tide across Europe is
very much in the direction of tax increases – in many jurisdictions and across many
products and channels. We probably haven’t seen the last of it this year either.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">This is hardly news, and I have written before (Sin Tax
Error, October 2014; below) that I see some (most) industry attempts to halt
the encroachment of the tax man as likely to be counter-productive on many
levels.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Tax is on my mind again now for two reasons:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">First, governments are generally persuaded that increasing
the taxes which obviously impact ‘ordinary’ people (sales and income) is deeply
unpopular and can be economically damaging; conversely the trend in business
taxes and treatment of the super-rich is, if anything, increasingly liberal.
And yet growth is proving elusive and deficits remain stubbornly high. So the
temptation is to look for ‘specialist’ taxes to levy, which cause minimal
economic and political (popularity) collateral damage. The only thing that
stops gambling from being the perfect victim of this trend is its small size
and fiddly complexity. Nevertheless, we are likely to be hearing a lot more
about gambling tax increases this year.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Second, all other things being equal, there tends to be a
correlation between a low tax footprint and growth. This is unsurprising - high
levels of tax and regulation tend to inhibit growth in all sectors, and
gambling is no different. Whereas business has largely won the debate since the
Reagan-Thatcher era, gambling is not always seen as the sort of business
governments want to encourage, even when those governments are supposedly ‘pro-business’.
Consequently, the principle ‘economic benefit’ of many forms of gambling is seen
by government as tax yield and an ‘optimised’ tax rate is the one that provides
the highest yield (rather than promotes growth). More tax and regulation can
therefore be handed down lightly by our political masters if it gets them out
of a political or fiscal hole, with the risk of hitting growth not really
bothering them.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">So, with fiscal pressure building and gambling likely to be
further squeezed (NB, there is likely to be two Budgets in the UK this year),
am I bearish on growth in gambling? Well actually no. Quite the opposite, in
fact (and for those of you who remember me as an analyst, not being bearish now
might come as a surprise).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">I am very bullish on medium / long-term gambling sector
growth precisely because of the developing fiscal squeeze. One of the biggest
problems with the sector over the last decade has been the relative ease with
which many operators generated comfortable double-digit operating margins (often
due to low-to-nil tax footprints). This led to big marketing budgets, big
dividends, and big senior pay packages. But did it encourage innovation? No.
Did it drive an even defensive focus on the customer? Quite the opposite. Did it foster a strategic and responsible
approach to stakeholders and suppliers? Again, painfully, belligerently and
often counter-productively, emphatically not.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">As with Tesco – once a doyen and now being dragged over the
coals – success rarely breeds anything other than arrogance and complacency,
which can lead to bad decisions and loss of control. Thanks to mounting fiscal
and regulatory pressure, I believe this attitude is now leaving the sector -
and its departure will leave it much stronger (when the humility stops – stop).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">A leaner, more humble, gambling sector will have to fight to
retain its customers, not just pay to obtain (and re-obtain) them. It will have
to get every last ounce of innovation from its supply-chain, not just every
last ounce of saving from a contract. And it will have to treat its key
stakeholders with responsibility and respect in order to avoid further
encroachments on its capacity to do business. All of this points to a more
intelligent, more productive, more customer-focussed, and more strategic
gambling sector. Each of those traits drives growth far more surely than big
cash flow returns.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">There are bound to be losers as well as winners because of
this change – not all will manage it effectively (or even try). The process of
change is also likely to be painful and difficult even for the winners.
However, my prediction is that 2015 will mark the beginning of a new culture in
gambling – a culture fit for driving growth which has been largely absent for
nearly a decade. Existing ‘big’
businesses need to play by these new rules to adapt to a less forgiving
environment – otherwise they will see themselves replaced by more dynamic
newcomers though some (much needed) “creative destruction”. </span><o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-42344973108947887202015-01-27T16:40:00.000+00:002016-01-06T10:12:05.258+00:00Time for Gambling to wise up<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwei4mjeGXWdLGpPLlTCrJhygvMEVFGFfaGdAlfMHj2B0tGWwXCCa6N6PlcR9QzntEju5ZUsn6CHbHGbZmrbm6MyTSRggYPg7CO4VlYi1uz9XoO8-OcVit2GsX6QR8818qjji2HC-ma80/s1600/dreamstime_xs_36644304.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwei4mjeGXWdLGpPLlTCrJhygvMEVFGFfaGdAlfMHj2B0tGWwXCCa6N6PlcR9QzntEju5ZUsn6CHbHGbZmrbm6MyTSRggYPg7CO4VlYi1uz9XoO8-OcVit2GsX6QR8818qjji2HC-ma80/s1600/dreamstime_xs_36644304.jpg" height="300" width="400" /></a></div>
<h3>
<br /></h3>
<h3>
<span style="font-family: inherit;"><i>Alan Alda once said: “Be as smart as you can, but remember that it is always better to be wise than to be smart”.</i></span></h3>
<div>
<span style="font-family: inherit;"><i><br /></i></span></div>
<h3>
<span style="font-family: inherit;">Ingenuity may have fuelled the growth of the gambling
industry in recent years but wisdom has often been in short supply. As the ICE
expo – pantheon of gambling smarts - prepares to hit London, Dan Waugh asks
whether now is the time for a return to wisdom.</span></h3>
<div>
<span style="font-family: inherit;"><br /></span></div>
<div>
<span style="font-family: inherit;">Looking at the state of gambling in Britain at the start of
2015, it is difficult to avoid the conclusion that the ratio of smart to wise
has moved a little out of whack. Everywhere one looks one is confronted with
problems – many of them the result of industry ingenuity – with no really
workable blueprint for resolving them.</span></div>
<div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">First, we have the ‘known knowns’. Most prominent of these
is the issue of the FOBT and betting shop clustering – a controversy that is
unlikely to go away anytime soon. This is supplemented by a host of other
issues which we can expect to grow in prominence over the course of the year –
TV advertising for (chiefly remote) gambling services; bingo licensing and fears
that Greene King will turn its pubs into gambling dens; the question of how
much (if anything) betting companies should pay to the sports that provide them
with markets; and sports integrity (albeit that is more of an international
than domestic issue). <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Then we have the list of ‘known unknowns’, headed by the
question of how the Gambling Commission intends to regulate remote gambling
once it moves beyond the licensing phase and gets its teeth into the specifics
of conduct. Meanwhile, mobile gambling (largely undeveloped at the time of the
Gambling Act), seems destined to become much more than merely a subset of
remote regulation precisely because it has the potential to blur the neat lines
between terrestrial and remote gambling.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">To this already long list we should add a couple of latent
issues. First of these is the embarrassing fact that a decade on from the
Gambling Act, ambitions for destination casinos in Britain remain largely
unfulfilled. Genting’s new £200m development at the NEC in Solihull, which
opens later this year, will be the first (and possibly last) venue that would
meet the expectations of those who framed the reformist legislation. It is
perhaps telling that over the last ten years the balance of gambling in Britain
has shifted even further towards convenience and away from destination.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Then there is the matter of so-called ‘social gaming’, which
so far seems to have evaded legislative scrutiny on the view that acquired credits
are not the same as cash. Given the reported spending patterns, the propensity
for customers to lose control of their play and the fears that social games are
‘grooming’ future ‘real-money’ gamblers, it seems likely that regulation of
this activity has been deferred on the basis of complexity rather than
principle. It may just take one of the world’s gambling regulators to show us
the way. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Then there are the ‘macro-issues’ from the European Union –
its fourth anti-money laundering directive and (potentially significant for the
industry’s advocates of ‘Big Data’) the forthcoming data protection directive.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Finally, there are two important questions of responsibility
– who is responsible for the minimisation of gambling-related harm?; and who is
responsible for enforcement of the spirit and the letter of the legislation?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">We may have a Responsible Gambling Strategy Board<a href="file:///C:/Users/Francesca/Downloads/Wisdom%20in%20gambling%20blog%20-%20January%202015v2.docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 11pt; line-height: 115%;">[1]</span></span><!--[endif]--></span></a>
– but it is difficult to decipher just what this country’s strategy for harm
minimisation is amidst the alphabet soup of competing (and sometimes antagonistic)
organisations and pressure groups. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Meanwhile, the Gambling Commission could be forgiven for
feeling a little unsure of its own mandate following two successful challenges
to its authority in the courts since May last year (<i>Luxury Leisure vs Gambling Commission</i> and <i>Greene King vs Gambling Commission</i>). Under its chief executive,
Jenny Williams the Commission has done a creditable job under trying
circumstances - with little in the way of thanks from any quarter. As Williams
prepares to step down later this year, her successor will need to feel
confident in the parameters of the Commission’s responsibilities.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">The sheer breadth of issues have turned gambling regulation
into a game of political ‘whack-a-mole’ - an exhausting and unproductive cycle
of opportunism and controversy. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">In the absence of a clear blueprint for gambling in Britain,
proponents and critics of the industry have a tendency to fall back on either
libertarianism or the Gambling Act’s mandatory licensing conditions. This is
facile. Freedom always has its boundaries (and very few gambling companies want
a truly free market) while the mandatory conditions are intended to describe <i>what gambling should not be</i> (unfair,
criminal and predatory) but they do not by themselves provide a vision of what
it should be.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">For the sanity of all concerned, now is the time to take
stock. By taking time to distil clearer views on the role of gambling in Britain,
what we want our industry to look like and how gambling might be harnessed to
the interests of the nation, we will become better equipped to develop coherent
solutions to tactical issues. The real ‘FOBT problem’ isn’t about whether the
maximum stake on a betting shop slot should be £2 or a £100; it’s about where
gambling sits within society and what expectations we have of different forms
of gambling.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">This will require creating time and space for wise and
independently-minded people to explore the complex issues (economic, societal,
sociological, psychological, political) that surround gambling, to reflect and
to propose a clear way forward. This was the chance given to the industry at
the start of the century, when the British government’s economic big gun, Sir
Alan Budd led a year-long review into gambling and Professor Peter Collins ran
a highly respected multi-disciplinary gambling studies unit at the University
of Salford. In theory at least, gambling policy formation never had it so good. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Since that time, we have had innumerable public
consultations on discrete matters of policy but only one period of reflection –
the disappointing select committee enquiry of 2012 (whose recommendations,
which included increasing the number of FOBTs per betting shop, have been
largely side-lined).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Today, even our academics (with a few notable exceptions
such as the excellent Professor David Forrest of Liverpool University) have
been suckered into trying to prove or disprove theories of harm rather than
engaging in systematic and long-term studies of costs and benefits (which might
then be used to inform policy).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: inherit;">The problem with all of this is that the scars of the
Gambling Bill (and its derailment by the media in the run-up to 2005) run deep.
Mention the possibility of new primary legislation and politicians and
operators alike turn ashen. Insofar as the country at large is concerned,
gambling is sufficiently unimportant for the current unsatisfactory state of
affairs to continue. Matters are only likely to change for the better if those
who care about the industry – operators, researchers and regulators – can
forget about being smart for a while and try to find a little more wisdom.<o:p></o:p></span></div>
<div>
<!--[if !supportFootnotes]--><span style="font-family: inherit;"><br clear="all" />
</span><hr align="left" size="1" width="33%" />
<!--[endif]-->
<div id="ftn1">
<div class="MsoFootnoteText">
<span style="font-family: inherit;"><a href="file:///C:/Users/Francesca/Downloads/Wisdom%20in%20gambling%20blog%20-%20January%202015v2.docx#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 115%;">[1]</span></span><!--[endif]--></span></a> In
fairness to the RGSB, its mandate is to advise rather than implement or
coordinate</span><o:p></o:p></div>
</div>
</div>
</div>
<div class="MsoNormal">
<o:p></o:p></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0tag:blogger.com,1999:blog-9135980104987654726.post-17829679354112837092015-01-24T12:20:00.000+00:002015-01-24T12:20:41.352+00:00Mad Men: Lib-Dems keep ad ban in-play<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEZxEB4zXrlmIhH4VyZFzbKbOdVidHQz-9YeRa2qNySbboIeGW-LGq-LcikdFWIK51FgAdGjpqGzWJEyBHE7qNcjy3TjFUrtJ_D1DdEz1-tvI_JeVa56w79Bl3r5Jz_jexJBjmCrQtZdM/s1600/dreamstime_xs_26563692.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEZxEB4zXrlmIhH4VyZFzbKbOdVidHQz-9YeRa2qNySbboIeGW-LGq-LcikdFWIK51FgAdGjpqGzWJEyBHE7qNcjy3TjFUrtJ_D1DdEz1-tvI_JeVa56w79Bl3r5Jz_jexJBjmCrQtZdM/s1600/dreamstime_xs_26563692.jpg" height="266" width="400" /></a></div>
<br />
<span style="font-family: inherit;"><b>By Scott Longley, Editorial Director, Regulus Insights</b></span><br />
<span style="font-family: inherit;"><br /></span>
<br />
<div class="MsoNormal">
<span style="font-family: inherit;">The timing
of the leaking of a letter from Danny Alexander, chief secretary to the
Treasury to his government colleague Sajid Javid, the culture secretary, about
the issue of betting adverts around sporting events was unfortunate for the
gambling industry.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;">The
publication of the letter in the <i>Daily
Mail</i> (of course) came on the same day that the new gambling industry body
Senet launched its own responsible gambling advertisements, with the tag line
‘when the fun stops, stop’.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Conspiracy
theorists within the gambling sector are likely to see dark motives behind the
timing of the leak, but whether coincidental or not the reported contents of
the letter suggest there is unlikely to be any let up in political pressure on
the sector in the run up to May’s General Election.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Alexander
said in his letter he was “increasingly concerned” by the prevalence of
gambling-related adverts around televised sporting events that, because they
occur before 9pm, are more likely to be watched by children. Alexander went on:
“<span lang="EN-US">It has now become almost impossible to watch any kind of sports event
without being bombarded by highly solicitous advertising. The decision by the
previous government to allow betting companies to advertise during sports
events before the watershed is completely anomalous. It was, of course, part of
a grubby deal cooked up by the last Labour government.”<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US"><span style="font-family: inherit;">This weaponising of the anti-gambling debate on the
part of the Liberal Democrats is sure to make life even trickier for the
sector. Polling evidence last year would suggest the party sees gambling as one
of its potential touchstones with potential voters. A YouGov survey in April
last year found that fully 71% of intended Lib Dem voters thought there should
be further tightening of the regulations around gambling.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US"><span style="font-family: inherit;">Barely have the Senet ads got an airing, and the
industry is once again on the back foot. As a part of the new industry body
platform, the industry has already imposed a voluntary ban on the advertising
of free bets before 9pm, but this has clearly failed to quell disquiet among
the industry’s critics over the insistency of ‘in-play’ ads around football
matches.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US"><span style="font-family: inherit;">Specifically, Alexander was calling for the DCMS to
speed its own response to a recent review of gambling advertising issues by the
Advertising Standards Authority (ASA). The DCMS responded by repeating its
mantra that player protection was “at the heart of gambling policy”, adding
that its review would be published shortly.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US">The difficulty for those now lobbying the government
is to know what to expect next. The ASA report, covered previously by this
blog, did not recommend any actions with regard to pre-9pm watershed. Recall,
though, that it did note that the ‘bet now’ ads typified by bet365’s Ray
Winstone spots were due further scrutiny. </span><span lang="EN-US">“We’ll be more proactive on issues relating to social
responsibility, especially around ‘toughness’ in ads and particular appeal to children,
finding ways to continue to source data to inform our decision-making,” the ASA
said back in November.</span><span lang="EN-US"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US"><span style="font-family: inherit;">As the news this week about plain packaging of
cigarettes has proved, just because there is every indication that an issue is
being kicked into the long grass doesn’t mean it is going to stay there. The
shooting of Labour foxes is likely to be a general pastime on the part of both
coalition partners, and the Liberal Democrats in particular will be looking to
aim both barrels at any issue which they think they can legitimately own. Increased
regulation of is arguably one of those.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<span lang="EN-US"><span style="font-family: inherit;">The <i>Daily Mail</i>
article suggested the DCMS was ‘resistant’ to change, but it is unlikely the
gambling industry and its lobbyists can take much comfort from that. In the
words of Alexander, “this is a matter of principle, and I believe the time to
act is now”. It’s the handicap bet the industry never wanted to see come about
– bet now v act now. There can only be one winner.</span><span style="font-family: Times New Roman, serif;"><o:p></o:p></span></span></div>
Regulus Partnershttp://www.blogger.com/profile/09074060443669315189noreply@blogger.com0