Maximum FOBT stake was reduced
Fixed odds betting terminals (FOBT) are similar to slot machines and are popular in betting facilities across the United Kingdom. They allow a player to place a bet on the outcome of certain events or games, all of which will have fixed odds. Roulette is one of the most popular games on FOBTs.
A powerful campaign has been mounted against these machines. Some gambling addiction experts say that they are the “crack cocaine of gambling.” This is because players can wager large sums of cash quickly and the games are very addictive.
For many years, the largest bet allowed on FOBTs was ￡100 ($128). These machines were very profitable for their owners. However, worrying statistics led to the maximum stake being slashed.
A review from the UK Department for Culture, Media, and Sport showed that gamblers could lose as much as ￡18,000 ($23,000) in a single hour. That finding led to the maximum stake being cut from ￡100 down to ￡2 ($2.56). This law took effect on April 1.
William Hill’s reaction
When the news of this proposed cut came to light, William Hill alerted investors that they might have to close as many as 40% of their 2,300 betting shops in the UK. The decrease in the max stake for FOBTs would mean that a lot of their stores would no longer be profitable and it would make no sense keeping them open. They were estimating a drop in revenues of about ￡70m ($90m) a year.
The company has now revealed that, since the lower FOBT maximum stake came into effect, its revenues from FOBTs have fallen by about 40%. This is what they were expecting. The announcement came in a trading statement which covers the initial four months of 2019.
Paddy Power Betfair has seen a similar trend. Their revenues from FOBTs have fallen by almost 43% since the change came into place.
The William Hill CEO Philip Bowcock did reassure investors that this revenue drop was in line with their expectations. He said: “The impact of the introduction of the ￡2 stake limit has been in line with our expectations. We are confident in our plan to manage this major change and will update more fully at the half year.”
In order to try and avoid store closures, William Hill is requesting a drop in rent from 1,800 landlords. Bowcock says that there has been some progress on this front, but a few shops have already stopped their operations.
Recent revenue results
Despite this decrease, the overall net revenue for the period was up 2% over the same period in 2018.
Online net revenues increased by 8%, largely due to their acquisition of the Mr. Green online casino. Net revenue for retail operations was down 7% but sportsbooks’ net revenue increased by 2%. Revenues from in-store games dropped by 15%, largely attributed to the cut in the FOBT maximum stake.
William Hill has been trying to capitalize on legal sports betting in the United States. Net revenues in the region have increased by 48% since the federal ban on sports betting ended in May 2018.
Talking about US expansion, Bowcock said: “Just one year on since PASPA [the Professional and Amateur Sports Protection Act] was overturned, William Hill has doubled the sports wagering it handles in the US, seen record performances at the Super Bowl and March Madness, is live in all seven states to have allowed sports betting and expects to enter further states soon, with Indiana and Iowa the most recent states to pass bills to legalize sports betting.”
Therefore, the company will look at their US operations to make up for the shortfall in revenue from the decreasing FOBT revenues.