The 2017 Gambling Year in Review

Posted by Harry Kane on Friday, February 2, 2018

Make no mistake; 2017 was a roller-coaster year for the gambling industry in the UK. Some will argue that this is fitting, of course, particularly when you consider the unpredictable and occasionally high-rolling nature of sports betting and casino gaming as a whole.

From legal changes and regulatory pressure to a high-stakes robbery involving a toy hand gun, both on and offline gambling channels have endured peaks and troughs throughout the last 12 months. The sector may be braced for further changes and a raft of new challenges in 2018, particularly as it continues to grow and diversify at a frightening rate.

In this post, we’ll look back at the last year in the gambling industry and ask what we can expect in the next 12 months?

Taxation Challenges – How Operators Have Been Forced to Pay More in 2017

As the gambling industry has evolved (particularly online), the profitability of the market has also continued to grow. This was reflected by the sector’s financial performance in the year ending September 2016, which revealed a gross gambling yield (GGY) of £13.8 billion.

Incredibly, this means that revenues have increased by 65% since gambling laws in the UK were liberalised a decade ago, while the money generated by online operators now accounts for 33% of the overall marketplace.

As a result of such exponential growth, two things were to be expected in 2017. Firstly, the industry was braced for further expansion in line with player demand, with every facet of gameplay (aside from video poker) showcasing incremental growth during the previous 12 months.

Secondly, it seemed obvious that the government would target the industry with new and increased tax levies in order to capitalise on its inherently lucrative nature. August 2017 saw a brand new consumption tax enter national legislation, for example, which required UK operators to pay a 15% levy on all free or discounted bets that were wagered online.

This new regulatory measure followed the introduction of basic, 15% point of consumption tax in the winter of 2014, which was applied to all remote gambling operators active in the UK.

Similarly, this year also saw online sports betting operators impacted by a new tax levy implemented by Sports Minister Tracey Crouch. While this move was celebrated by the British Horseracing Authority (BHA), this government-backed scheme required operators to 10% of their profits on all wagers from UK-based customers above the first £500,000.

Despite claims from sports betting brands that this could have a negative, cumulative impact on operators and the market as a whole, the initiative was given the green light by the European Commission in April and quickly implemented for the new financial year.

These new and contentious rules remain unchanged for now, with a proposed legal challenge by The Association of British Bookmakers yet to materialise. The changes certainly reflect the apparent desire to tighten regulations and increase the tax revenues generated through the lucrative gambling sector, however, and we should definitely expect this trend to continue in the next 12 months and beyond.

In fact, fixed-odds betting terminals (FOBTs) could be the next to feel the regulatory crunch, with the government pledging to cap the maximum wagers available through these machines. The current, maximum threshold enables punters to wager a staggering £300 per minute, for example, and the initial proposals suggest that could be slashed to anywhere between £2 and £50 per minute.

This would represent another sizable change, and one that would cause operators’ margins to depreciate further in the New Year.

Football’s Sports Betting Fouls

The relationship between football and betting remains tenuous at the best of times, as while the major brands have never been more immersed in the game we also live in an age when players are prohibited from placing wagers. Such conflicts have created an increasingly uneasy and confused union, which may become even more incompatible in light of the UK Gambling Commission’s (UKGC’s) desire to create a more transparent and customer-focused betting experience.

This issue was personified across numerous interests last season, with the most famous involving the former Manchester City and England star Joey Barton. A magnet for controversy throughout his career, Barton was found to have placed wagers on numerous matches involving his side during his time at Burnley, and subsequently handed an 18-month ban that effectively ended his top-flight career.

This high-profile incident highlighted a conflict of interests that the Football Association (FA) could no longer ignore, forcing the body to take action and end any existing partnerships with operators that compromised its code of conduct.

This led to the termination of a £4 million deal between the FA and Ladbrokes, which was just twelve months into a lucrative, four-year partnership. Similarly, it confirms that the FA will look to create further distance between itself and the sports betting market next year, as it looks to create greater transparency for fans and players alike.

Conversely, the stance of central organisations such as FA did little to dampen the overall enthusiasm for welcoming profitable sports betting firms into the footballing fold. Just four weeks after the dramatic split between English football’s main governing body and Ladbrokes, for example, Unibet announced a big money sponsorship deal with Aston Villa, while Betfair also partnered with Serie A giants Juventus.

This is also a trend that will continue at pace next year, with sports betting brands increasingly keen on the notion of entering into direct partnerships with privately-owned football clubs. While we may see some form of crackdown by regulators in terms of how such brands are able to promote themselves through sporting equipment, kits and premises, such measures will not be enough to threaten the status of current or future deals.

Elsewhere in the weird and wonderful world of football and sports betting, there was also a spectacular and high profile fail for former Sutton United goalkeeper Wayne Shaw. As the club’s heroic run to the fifth round of the FA Cup ended with a 2-0 defeat at home to Premier League outfit Arsenal, the portly stopper courted controversy after being caught by BBC cameras eating a pie.

While this act in itself was neither unusual for Shaw or against the rules, it quickly emerged that a leading bookmaker had offered odds of 8/1 that the 45-year old would eat a pie on camera during the tie. Although the keeper denied intentionally influencing a football betting market, he was found to have breached FA rules and subsequently hit with a two-month ban and a £375 fine.

He was then sacked by the club just weeks later, following a sustained backlash and a severe dressing down from the UKGC.

Now, Shaw can hardly have been helped by the heightened sensitivity of the FA and the UKGC to gambling practices, while many will feel that the keeper deserved the same leniency shown to John Terry after a staged, 26th minute substitution during his final Chelsea game against Sunderland.

Still, players can expect more of the same in the year ahead, as clubs and governing bodies will continue to focus on establishing themselves as ambassadors for responsible gaming and creating a clear distinction between gameplay and betting practices.

The UKGC Expands it Remit

The relationship between traditional gaming and betting was fortified in 2017, as these two entities shared a growing number of bonds and the concept of cross-platform gaming became increasingly popular.

Not only has this seen several video games integrate online betting and casino gameplay across consoles such as Xbox and PlayStation, but it has also increased the potential profitability of both markets with almost immediate effect. This has also placed greater demand on the UKGC, however, which is constantly required to adapt and expand its remit in order to protect the needs of players and operators alike.

Similarly, console games have also seen the integration of features that offer players so-called mystery prizes in exchange for a fixed-price cash buy-in. This practice was the subject of a petition commissioned by Conor Rhys Deeley in the spring, which suggested that tighter regulations were required given that the average value of the in-game bonus or purchase was effectively lower than the cost of the mystery box or feature.

The nature of these features, promotions and in-game purchase options clearly fall under the remit of the UKGC, who responded to the popular petition by quickly tightening the relevant guidelines on computers games. It has also taken proactive and decisive action to regulate real-money wagering in console games such as Grand Theft Auto V, with a focus on minimising betting thresholds and clarifying the value proposition for players.

We expect the UKGC to come under further pressure in 2018, particularly as it looks to uphold its new strategic priorities (the majority of which revolve around safeguarding player interests and protecting potentially vulnerable gamblers from harm). The UK regulator will also need to maintain an agile model that can adapt to the increasingly blurred boundaries of online and offline gaming, particularly if it is to remain effective in the near-term.

And Finally

Aside from seemingly mundane and never-ending regulatory issues, there were also several incidents that raised eyebrows in the industry during 2017.

One of these was the story of Islam Uddin, who hit the headlines after the robbery of high street betting outlets owned by Paddy Power and Betfred earlier in the year. While the robberies themselves could have been lifted from the screenplay for a comedy heist caper, Uddin’s inappropriate use of a Nerf Gun to hold up various establishments was deadly serious and left various employees in shock.

Having been finally caught, charged with committing robbery with an imitation firearm and brought to trial, Uddin was unsurprisingly found guilty and subsequently sentenced to a total of 10 years in prison. This brought his reign of terror to an end, while we will certainly never look at a Nerf Gun the same way ever again.

Then came an unfortunate incident in September, when Paddy Power Betfair found themselves at the centre of an unexpected media storm.

After the Birmingham City FC decided to sack the former Portsmouth and Spurs manager Harry Redknapp, Paddy Power followed the usual protocol of offering odds on his replacement and publishing these on their various websites.

In their haste, however, the brand may well have jumped the gun and ended up making a mistake that did not go down well at all with football fans. More specifically, they listed former Aston Villa defender at odds of 66/1 to be appointed as the Blues’ new manager, despite the inescapable fact that he had tragically died following a heart attack back in April.

While this unfortunate error was quickly spotted and corrected, it was still seen by thousands of fans and caused considerable uproar on social media (and Twitter in particular). Cue yet another promotional gaffe for the error-prone Paddy Power, who are renowned for pushing so-called banter with fans to the limit and have overstepped the mark on more than one occasion in the recent past.

These types of gaffes are likely to come under increased scrutiny from the UKGC in the future, particularly with the regulator committed to improving the conduct and perception of gambling operators nationwide. Sure, there’s no evidence that Paddy Power or other brands deliberately court controversy with these stunts, but the UKGC is focused on improving the consumer experience while also creating higher levels of trust within the gambling sector as a whole.

With this in mind, this will certainly be an interesting space to watch in 2018 and beyond!

The Bottom Line

As we can see, 2017 was an intriguing and unpredictable year for the gambling industry, and the next 12 months promises to be equally explosive. With further regulatory changes in the pipeline and a potential crackdown on how online gambling brands promote themselves, there’s even an argument to suggest that operators will encounter a wider range of challenges in the near-term.

Still, for now, let’s raise our glasses to 2017 and see the year off in style. Here’s to another spectacular roller coaster ride in 2018!