One of the questions I’ve been pondering lately is just how big a year of change 2015 is likely to be for the UK betting industry. My feeling is that it is going to be quite dramatic. I think we are heading into what could be a very turbulent and tumultuous year for the betting industry. There are a few reasons why.
1) POCT – this tax has been well flagged up at this stage. If any serious company in the space doesn’t know what the exact impact is going to be then they are both chronically under prepared and also, in for quite a shock. Of course, the city analysts should be all over this tax, crunching down the numbers so as to ensure there are not going to be any nasty surprises when firms start reporting their annual figures. I don’t know why exactly, but I have a feeling that a lot of eyebrows are going to get raised when this tax hits the bottom lines of the big UK quoted firms. It could signal a very depressed year for many and might also open the door for some consolidation (my next point).
2) The impact of the tax will also squeeze company’s budgets – particularly in marketing. It will become absolutely imperative that each company gets maximum ROI on their precious marketing spend. I expect to see analytics in this area become vital (aren’t they already you may ask….well, not with every firm IMO) but those days are coming to an end. Expensive brand deals will come under pressure unless they can be tracked right through. Of course, TV advertising will continue to lead the way but don’t be surprised to see more ads from fewer players as this area is now becoming so expensive it will rule many out of bidding. All of this will inevitably lead to smaller players either going to the wall or being taken out by bigger ones. I expect the Oddschecker grid could look slightly different to today, where 25 firms appear across the line.
3) Regulation – anyone working inside the industry right now will know that this topic has probably resulted in the shredding of several product roadmaps over the past year. Well, it has well and truly landed now but the extent to which it will snowball is, as yet, unclear. My feeling is that we are at the start of a never ending road – which is another reason why consolidation will happen. Lawyers, compliance teams, responsible gambling departments – these teams usually made up a very small part of a firm’s overall headcount. I expect that will all change over the next few years and we can expect red tape galore as the big firms clamber to prove that they are doing everything right by their customers. This is already happening. Online is one thing, but where this could really be felt is in betting shops (my next point!)
4) FOBTS are the lifeblood of the high-street firms. I don’t know a great deal about them and I have never played on one, aside from perhaps to kill 5 minutes in a train station once. That said, I know I did pretty well that day just to get on one without needing to queue. These machines are keeping many hundreds of otherwise non viable shops in business. Last year we saw the surprise announcement of an increase in FOBT tax and I expect to see more of that and perhaps even rules on max stakes or deposits coming in. The issue of self exclusion and these machines is also knocking around and don’t be surprised to see GC focus on this at some point. Right now, someone who has self excluded from one online operator can register freely with another…is that right? Is it right that he can leave his house and play roulette in a betting shop, without the need for ID, having told an online operator that he can’t control himself playing it online. I’ll leave it to you to decide. I expect change.
5) Tough comparisons – I am a holder of a few shares in a gambling stock that is doing well, after a long period of doing not so well. I am thinking of getting rid. Point 1 above on POCT is one reason, the other main one being what I think could be an extremely tough set of year on year comparisons. 2014 saw, in general, favourable football results, including an extremely bookie friendly World Cup. Cheltenham was ok and so was the Grand National. Next year sees no major football tournament in the summer, with only the Rugby World Cup to look forward to as a real headliner. But rugby just doesn’t connect with the betting public and I don’t expect that to change so overall I expect a lot of tough interim statements, some profit warnings and serious bottom line issues for several firms. Betfair have had a fantastic year, Hills not so great and Ladbrokes pretty awful. I would expect them all to suffer next year; although Ladbrokes may already have taken the brunt of their pain and could be positioned to have a relatively decent one if they get product moving and sign up a good CEO who can do what is required (probably a huge clear out).
6) Product – it’s all about product this year as marketing spend alone just doesn’t cut it. Expect to see some innovation from the big players, with the tier two and three operators scrambling to close the gap. That said, with regulation bearing down, it’s very choppy waters for the smaller firms who are unable to rely on a development force numbering hundreds.
Whatever happens, it certainly won’t be dull!