Gambling Firms Agree to Blanket Advertising Ban – The Key Takeaways

Posted by Harry Kane on Sunday, February 3, 2019

The gambling industry in the UK has been placed under the microscope in recent times, with concerns surrounding Brexit, the FOBT cap and a 6% increase in the Remote Gaming Duty (RGD) dominating the headlines.

A more stringent regulatory focus from the UK Gambling Commission (UKGC) has also caused consternation among operators, with the organisation committed to safeguarding the interests of vulnerable gamblers and the industry as a whole as part of its core strategic objectives through 2021.

The way in which operators promote their brands and plaforms has come under particular scrutiny, especially with the prevalence of problem and underage gamblers in the UK having increased marginally during 2017. We’ve recently seen a major development in this space, however, with several of the market leading operators having agreed to a blanket advertising ban during live sports broadcasts nationwide.

We’ll explore this further in the article below, while asking whether or not this represents a significant and positive sea change within the industry.

A Brief Background – Why Have Advertisers Come Under Scrutiny?

Before we delve into the latest development, it’s important to understand how advertising and the protection of vulnerable gamblers have become such hot topics over the course of the last 18 months.

The UKGC announced its new set of strategic objectives in 2017, after the regulator came under pressure amid the rising numbers of so-called vulnerable and underage gamblers.

One set of statistics revealed last year confirmed that there were an estimated 25,000 problem gamblers aged between 11 and 16 in the UK, with many of these individuals accessing casino-inspired games through social media outlets such as Facebook.

However, the regulator also recognised the failure of major operators to successfully verify the identity of new customers, particularly as demand continued to increase and the market became saturated with players.

The prolific nature of television advertising within the gambling industry also captured the attention of the regulator and public health campaigners, as this continued to normalise the practice amongst young and impressionable consumers.

These developments undoubtedly informed the regulator’s strategy, while the Commission was certainly quick to begin clamping down on operators who failed to buy into their new vision for the industry.

Market leader 888 Holdings was one of the first operators to feel the regulatory wrath of the UKGC, as the Commission fined the firm a record £7.8 million as a result of “serious failings” in its handling of vulnerable customers.

This trend has continued as the wider failure of social responsibility within the industry has been laid bare. William Hill were hit with a hefty £6.2 million fine in February of this year, for example, while Paddy Power faced a £2.2 million sanction earlier in the autumn following sustained failures to protect customers who had shown signs of problem gambling.

With a failure to also implement effective anti-money laundering checks also reported by the UKGC, these operators have clearly struggled to adapt to the Commission’s new strategic perspective while striking the perfect balance between profits and transparency.

In terms of the hot topic of advertising, operators were placed on high alert following a detailed investigation into the Russia World Cup during the summer.

This research, which was carried out by Radio 4’s You and Yours programme, found that 62 out of 66 selected ad breaks features at least one sponsored gambling message. A relatively high number of commercial breaks even included two competing adverts, despite the fact that the vast majority of matches took place before the 9pm watershed.

But how did this come to pass? This is due to a loophole in the existing legislation, which allowed for advertising during live sporting events regardless of the time of day that they were broadcast. Given the competitive nature of the market, it’s clear that operators looked to capitalise on this as a way of boosting revenue and promoting lucrative in-play markets during the World Cup.

As a result of this, both regulators and operators began to express concern about the proliferation of advertising in the wake of the summer showpiece in Russia, which also appears to brought the market’s issues to a head and laid the foundations for progressive changes going forward.

Major Operators Agree a Ban – A Closer Look at the Details

While many public health campaigners and observers have waited for either the government or the UKGC to take action against the proliferation of sponsored gambling messages, it’s actually the operators who have broken cover to provide the solution.

More specifically, last week saw several of the UK’s biggest gambling firms showcase their commitment to the protection of vulnerable players, by publicly agreeing to a blanket ban on television advertising during live sports broadcasts.

Interestingly, this drive was led by the gambling brands that had emerged as the biggest television advertisers during commercial breaks at the World Cup, namely William Hill, Ladbrokes and Bet365.

These operators, alongside other members of the Remote Gaming Association (RGA), voluntarily agreed to a ‘whistle-to-whistle’ ban on betting ads during live broadcasts, following continued discussion and concerns surrounding the challenges present in the real-time marketplace.

The details of the new arrangement have yet to be finalised, of course, while the RGA has also confirmed that it’s continuing to review the industry’s advertising code in a bid to permanently change legislation for the better.

Similarly, the new measures have to be ratified by the Industry Group for Responsible Gambling, with process likely to be time-consuming and capable of requesting further changes from all participating operators.

According to some sources, there’s also suggestions that a number of smaller, online operators are holding out on signing up to the new agreement, perhaps fearful that their revenues and market share could be adversely affected without TV advertising.

The nuances of the agreement also dictate that horse racing should be exempt from the self-imposed ban, thanks to the fact that the sport relies on betting to be commercially viable in the modern age. This may also change in the future, of course, but for now live racing broadcasts will continue to promote standard and in-play wagering.

Despite its relative lack of clarity and the absence of ratification from regulators, this bold and proactive move by the leading members of the RGA has been well-received across a number of public and industry bodies.

However, many prominent campaigners have declared that this measure should represent the tip of the iceberg in terms of new regulatory changes, with further and more permanent legislation changes required to safeguard players and future of the industry.

What Will this Mean for Operators and the Industry as a Whole?

At first glance, it appears as though the leaders of the RGA have sacrificed profit for principles with the new measure, which has already had an impact on individual brands and their respective share prices.

The news certainly sent shares in a number of major gambling brands tumbling, with 888 and GVC Holdings declining by 4.6% and 4% respectively.

We must also consider that this decision has followed a turbulent period in the gambling industry, with multi-channel brands having already seen their share values and revenue projections fall following various legislative changes.

More specifically, the Treasury recently announced that both the £2 FOBT wagering cap and the 6% RGD increase are to be introduced in October 2019, with the result that outlets such as Paddy Power have had to reduce their earnings forecast considerably for the next financial year.

But is the agreed ban really the sign of a sea change in the attitudes of operators, or more of a strategic move that simultaneously appeases regulators and reflects the changing advertising trends in the market?

Sure, operators have had to take an initial hit to their share values, but it remains unclear whether the move will actually have a detrimental impact on their prospects in the longer-term.

After all, research from GambleAware has revealed that the gambling industry and its market leaders currently spend five-times as much on online advertising as they do on television. This means that operators have already begun to eschew television spending in order to invest more heavily in social and digital channels, in a bid to more effectively target their customers and achieve a greater return on their marketing spend.

The greater spend on digital marketing is also indicative of changing consumer behaviour, with both adults and children increasingly active online and more likely be influenced by online ads. The news that an estimated one-in-eight 11 to 16 year olds are currently following gambling companies on Facebook (where aspiring members can register for an account from the age of 13) seems to highlight this shift, and arguably offers a greater cause for concern from a regulatory perspective.

The effectiveness of TV advertising in the gambling industry has also been questioned of late, ironically after the same World Cup that saw record levels of spending by gambling brands.

According to sponsorship analytics firm Hookit, gambling operators did not appear in the top 10 of most engaging brands during the course of the Russia World Cup. By analysing a number of social channels including Facebook, YouTube and Twitter throughout the tournament, it was revealed that the usual suspects of Nike, Coca Cola, Adidas led the way while brands such as Paddy Power trailed far behind.

While it can be argued that the lack of engagement through social channels is misleading as punters are able to respond directly to an ad by placing a bet, it may also be surmised that operators are struggling to leverage television successfully and achieve a return on their investment.

This may also have played a part in the decision making of the industry’s leading operators, who have failed to see TV advertising deliver a viable return on what is a considerable spend.

From an industry perspective, the voluntary ban is undoubtedly good news, as it makes the lives of regulators easier while also helping to safeguard the interests of potentially vulnerable players.

It will also afford regulators, government bodies and the Industry Group for Responsible Gambling the propose longer-term modifications to the market’s existing advertising code. This is an important consideration, as the voluntary advertising ban will only be sustainable in instances where all operators agree to it fully.

The Last Word

There’s no doubt that the situation regarding vulnerable gamblers and compliance has come to a head in the gambling industry of late, with the UKGC having recently issued fines totalling £14 million to three different operators in the UK.

This has followed hot on the heels of several high profile sanctions during the last 18 months, which has left the market and its leading operators reeling.

Advertising is another central focus for the UK regulator, and there’s a sense that the market leading gambling brands have initiated a voluntary ban as a proactive way of avoiding sanctions in the near-term. This has certainly placed the onus back on regulators and the Industry Group for Responsible Gambling, who must now ratify the ban or propose alternative changes.

Either way, participating operators are currently in control of the situation, while the data also seems to suggest that a blanket TV advertising ban will not be particularly impactful on each company’s coffers.

This is even true when you account for the loss of share value and the impact of future regulatory changes on turnover and profitability, as brands will be able to adapt their marketing strategies and may even use the ban as a way of establishing themselves as ambassadors for fair and responsible gambling in the UK.

Instead, the challenge will come when regulators propose more sweeping advertising changes, including a potential clampdown on digital marketing and social media promotions. Similarly, a ban of shirt or league sponsorship and pitch-side scrolling displays could be highly contentious, while it would also directly target lucrative sources of revenue.

“This is long overdue, but to be truly effective it must include all operators and should also commit to bans on shirt and league sponsorship, and pitch-side scrolling displays,” he added.