The potential impact of FOBT verdict

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Now this blog is a little late on this particular subject (1 week in fact). However, such is its importance, I still felt it necessary to put something out there on what could prove to be a very significant piece of news.

For those who follow this blog on a regular basis you’ll know that in our last outing we covered the government’s proposed action on Fixed Odds Betting Terminals (FOBT’s). The impact of which, it was believed, would be widespread.

However, in an article that came out this week in the Gambling Times, the impact may be more significant than even the most pessimistic among us may have first thought. At this juncture it is worth noting that, as of the time of writing, the impact remains little more than speculation. The government is notorious for grand gestures when it comes to the gambling industry, and their actions often result in somewhat of an anti-climax.

So, on to the article in the Gambling Times. The title of which, serves as a sufficient summary for the article as a whole: “Ladbrokes could lose a fifth of annual revenue depending on FOBT verdict”. Hyperbole? Perhaps. However, logically this does hold quite a bit of weight. After all, Ladbrokes recently merged with Coral – two of the biggest high street bookmakers, with more branches than nearly all the UK competition. And within all these branches are the infamous FOBT machines. So, to say that nearly a fifth of annual revenue could be wiped of Ladbrokes books’ may not be such an exaggeration after all.

Not only that but this estimate of a fifth involved real maths, done by real mathematicians over at the Financial Times. Using Ladbrokes recently posted net year-on-year revenue report, they claim to be reasonably confident in their prediction, should government reform be implemented to the full extent suggested.

It is important to note the term ‘full extent’ here. Revenue being impacted by a fifth would only come about if the FOBT limit was set at £2, down from the current £100. In fact, a Barclay’s analyst provided a more comprehensive breakdown:"A cut to £50 would have a negligible impact, a cut to £25 would cut £84m in revenues, but a cut to £2 would result in Ladbrokes Coral losing £437m."

I personally remain unconvinced by the Government’s assertion that they will seriously consider a £2 cap. Realistically, at least in the short term, a 50% reduction to £50 seems far more likely. However, the threat is still real to bookmakers and could (and should) lead to changes in their priorities as to what sector of their business they choose to focus on next.

Among the numbers thrown about by the FT, the ones that caught our eye were the revenue figures for digital. Ladbrokes’ digital sector is the out and out strongest performer, lifting net sales by 12%, all due to an 18% increase in sportsbook net revenue and a 6% increase in online gaming. An 18% increase on the online sportsbook is huge!

It is this news that Matched Bettors should be happiest about. If the digital sportsbook is Ladbrokes strongest performing assets, then in the face of reduced revenue it is highly likely that they’ll double down on their strongest performing sectors. I truly believe that a push to stimulate greater online sportsbook growth will result in not only more offers, but also a relaxing of Ladbrokes/Coral’s willingness to gub players quite so quickly.

Further, this whole threat of lost revenue will spread to other bookmakers. All of which is good news for us. Next year could be huge for matched betting in terms of the increased opportunities presented to us.