The white paper preview
The value bets and the lively outsiders for Britain's pending Gambling Act review
Britain’s long-awaited Gambling Act review looks to be heading to some form of a conclusion in the next few weeks with the publication of a white paper. This is basically the government’s formal proposals on what the legislation should be and will form the basis of any new laws passed. So what can we expect?
Well…nobody really knows for sure. The possible range of outcomes is still really wide. We’re basically playing pre-flop poker here and any big bets are still pretty risky at this stage. What we can do though is explore what some of the potential outcomes might look like in the longer term.
So first things first let’s look at the big ticket item.
Affordability Checks
I am absolutely not getting into the rights and wrongs of these, as everyone is convinced they are right anyway so what is the point? But checks on customer’s financial capacity to gamble are pretty likely to be a part of the eventual regulations either directly through the revised Gambling Act or more likely via additional codes of practice from the Gambling Commission or whatever replaces it.
There has been a lot of noise from some fairly genuine and some very non-genuine commentators that these checks will be brought in at £100 net deposits (losses) per month. The idea being that this isn’t a hard limit, but one above which operators are supposed to check if the customer can afford more than this and if so set an appropriate limit based on their income.
The chances of it being set as low as £100 feel fairly remote based on my conversations with those with some knowledge of the review, and the £500 per month limit that has been discussed a few times before feels a more realistic floor for this. But £100 isn’t impossible, just unlikely. It does feel like the £5,000 a month limit many operators asked for in evidence submissions will be even less likely, however.
So where do we settle on this? Anything between £500 and £2000 a month seems probable to me. Anything above or below that feels unlikely, but not impossible. And that is, frankly, an absurd range of potential outcomes.
£2000 a month as a soft limit would have a large impact on the sector, even assuming a big number of players spending at these levels would comply with affordability checks. This is NOT a forecast, but a revenue impact in the 10% range would be probable depending on the nature of the system imposed. A £500 a month soft limit is likely to be closer to 20% in my mind. This will vary by product (casino more impacted) and operator.
Limits above this are mostly baked-in to the current market with a lot of high-value customers having already been through extensive checks and operators bringing in due diligence at much lower levels than previously. Interestingly some smaller operators have been guided to £500 limits for new customers for some time and if the eventual limit ends up being above this it might create some considerable ill will and maybe even some legal challenges.
Stake Limits
This is a pretty big one, but again it depends massively on where and how it is brought in. A stake limit of £2 on slots, bearing in mind the existing controls around spin speeds, multiple slots games and auto-play will have a pretty sizeable impact. It’s very hard to accurately model what it will be but let’s just say it won’t be great.
A stake limit of even £10 on table games, however, would be pretty ruinous. There is no real suggestion that this will happen, but it is a real risk that is worth looking out for and would have the biggest impact on live casino. A stake limit on sports betting feels extremely unlikely to me and I just don’t see that happening.
Advertising Bans
An outright advertising ban as (sort of) seen in Italy seems exceptionally unlikely, although as with anything is still possible. What is broadly expected is some curtailment of sponsorship around high-profile sport and possibly a reduction of TV and radio advertising generally. There is a certain segment of commentators who say this would be a net benefit for the gambling industry and it almost certainly would be for tier 1 firms in the short-term.
I don’t really buy the argument that removing your largest brand awareness options is going to be net beneficial for either acquisition or retention in the longer term, but we have an industry full of optimists. What is vital for the sector, however, is that digital is left largely alone. If there is a significant crack down on affiliates, social media marketing or digital communications (email, push messaging etc) that could really hurt retention and player values.
What the government in turn needs to ensure is it is really explicit with any advertising restrictions as Italy has proved if you give the industry a small gap they will run through it. This is a business raised on operating in the margins and with limited visibility in grey markets and if you do something as daft as allow “informational” advertising then you deserve what you get in terms of proxy brand marketing.
One thing that surely has to go is daytime Bingo TV ads, although stranger things have happened. You also suspect daytime radio ads may be for the bin, and it could even be that gaming is banned from the airwaves and radio waves entirely with the suspicion being that gaming will get a generally harsher ride than sports betting from the legislation.
Another interesting area is affiliates, which to-date have pretty much avoided any gambling specific regulation. There is growing discontent with some of the less salubrious ends of the affiliate business, however, and some element of regulation here feels likely to me. A US model where some degree of licensing is required, perhaps with more stringent licensing for revenue share affiliates could be possible.
But advertising to me feels like the biggest variable of all and has a massively wide range of outcomes, but few seem that value destructive and only a really harsh package of restrictions that include all digital channels will have a big revenue impact you suspect. It could be, however, that any curtailment of TV and radio will be a boost to the long-tail casino operators and a hindrance to the tier 1 firms in gaming.
Bonuses, Free Bets and Retention Marketing
Not much is talked about this, but this feels an area where there could be some action taken. Limiting bonusing is a key aspect of some other European regulatory setups and it’s an area that has some campaigning effort behind it. A limit on the total value of bonuses allowed to be awarded to each customer would certainly impact casino revenues, while clearly any ban on free bets or bonuses would be very impactful indeed.
The increasing focus by reform campaigners on this area of inducing people to gamble hits squarely in line with the increasingly industrial scale use of free bets and bonusing in all products. Customers have come to expect to get free bets every week and casino retention depends on regular bonusing. Can the review entirely ignore this massive area of the business? Yes, quite clearly it can. But will it? I’m not so sure.
Other Items
In terms of other aspects to watch for there are a few key things that are unlikely to be addressed, but may come into consideration.
In-Play betting is an area some reform campaigners have been focusing on for a while as it has a much more rapid style of play and does feel more closely aligned with gaming than betting in some ways. I haven’t seen much talked about in-play and there doesn’t seem to have been much research done around it so I expect it to escape this round of legislative review, but any cutbacks here would be big for the sector.
Cross-Sell is another area where you feel the boat has been missed, but could potentially be an area ripe for fairly simple but hugely impactful changes. Any restrictions on cross-selling customers from one vertical to another or requirements for separate gaming and sports wallets (I can hear bet365 devs crying from here at the thought) would not be a small deal.
Slots Spin Speeds. These have already been set at no less than 2.5 seconds, but it’s possible this is extended further or that other restrictions on the rapid speed of play are brought in. This may be one for the Gambling Commission rather than government as it starts to feel a bit more technical, but is one to watch for.