The average stake in a fixed odds betting machine (FOBT) in Britain is £14.50. That is what the average player will gamble on one play in any of thousands of FOBTs situated in the 9,000 licensed betting offices (LBOs) in British high streets.
Next door to the LBO, or bookmaker’s shop, there might be a pub, with a Category C machine (known internationally as an amusement with prizes machine or AWP), with a maximum stake of £1 and a maximum prize of £70.
But an FOBT has a legal maximum of £100 and a top prize of £500.
Understandably, a ‘betting man’ would probably choose to play his machine in a bookies’ shop rather than a pub, despite the only added attraction of a pub - a glass of beer.
Equally understandably, the operators of Category C machines in Britain are extremely upset at the unfairness of it all. And they get positively apoplectic when a group of so-called international experts on gambling pronounce that there is no increased risk of ‘problem gambling’ from FOBT machines.
It is a question that we have asked before in this publication: does the British Government have a ‘second agenda’ for AWP machines?
Those who believe that the industry has received open-handed honesty, will point to a doubling of stakes and prizes in machines in pubs this year. A player may now stake £1 and win up to £70. Surely that compares reasonably well with any jurisdiction in Europe?
Those who believe otherwise - and there are many within the ranks of AWP operators in the UK - will point at the gross inequalities that exist to justify a claim that all the government really wants is for gambling to be restricted to the National Lottery, bookmakers’ shops, bingo clubs and casinos. In other words the gradual erosion of the established market leading to total disappearance of machines in pubs and arcades.
Isn’t that a little dramatic? Is that the knee-jerk reaction of a beleaguered sector?
Britain has 248,000 gaming machines according to official statistics released by the Gambling Commission last month (August). Of that total, almost exactly half, 121,000 are Category C and another 71,000 are Category D.
The difference is in the payout structure. Britain, the birthplace of the amusement with prizes machine or AWP, as it has become known all over the world, has abandoned this simple description for a complex set of categories for machines with different applications.
The traditional home of the AWP in Britain, however, is in the pub - and that is now known as Category C and it has been under extreme pressure.
It is all about ‘level playing fields’, a phrase over-used in an industry constantly looking over its shoulder at what its neighbours are permitted.
A man may go into a pub, buy a pint and play a machine for £1 with the hope of a maximum £70 prize. Or he may go into a bookmakers’ shop next door, bet hundreds on a horse-race and another £100 on an FOBT machine in between races.
He may spend exactly the same few £1 coins in the bookies’ shop on gambling as he would have done in the pub. But with an FOBT, he can win up to £500. Which location should he choose?
The FOBT, is a video-based machine upon which a player may gamble on any type of game, including roulette, blackjack and simulated horse racing.
The FOBT takes up approximately 10 per cent of the established base of gambling machines in Britain - around 27,000 - yet probably accounts for 60 per cent of the ‘take’, a figure which is not confirmed by statistics, but illustrates the voracious nature of the animal.
This publication has gone on record in the past as describing the FOBT as ‘the crack cocaine of machines’ in the UK, a phrase which made us distinctly unpopular with some of our reader/advertisers who make the machines, but it is blunt honesty.
A bookmakers’ shop may site up to four of the terminals, effectively turning the location into a mini casino in the high street. The dangers have been identified many times and flagged up to Britain’s Gambling Commission, which has reacted by carrying out some investigations into what it describes as ‘high stake, high prize gambling machines’. That includes the laborious setting up of various committees to report back, including one of ‘international experts’.
After a year of investigation, a report to the relevant government minister said that the size of stakes and prizes were not a major factor in driving problem gambling. The major bookmakers were ecstatic, as they feared a big crackdown would remove or diminish their ‘cash cow’, and it left the ‘street operators’, those who are running machines trying to compete in the pubs, appalled.
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In a ‘normal’ year, the UK might absorb 50,000-plus new AWP machines. In 2008, sales were around 22,000. In 2009 it will be about the same, despite the increase in stakes and prizes from 50p in and £35 out to £1 and £70.
In most markets an upwards review of the maximum stakes and prizes would trigger a surge in sales.
There are several reasons for the poor performance: the pubs, where many Category C machines are sited, are closing down at the rate of one a day due to cheap alcohol in supermarkets, the smoking ban and the recession; the changes in stakes and prizes were expected for January 2009 but actually came into force in June so all sales stopped; and initially most of the ‘sales’ were of kits.
The best overview of the situation can be found amongst those supplying the business. Britain’s top manufacturer is Bell Fruit at Nottingham.
In a conversation with its managing director John Austin and commercial director John McLoughlin, the pain of the past 18 months was obvious.
"We have one of the best licences you can possibly get (Deal or No Deal), yet it has unquestionably been a period you can only describe as one of survival, for everyone," said Austin.
"We hope that the effects of the doubling in stakes and prizes will see sales peak again next year, but I doubt very much that they will get back to the figures that they used to be."
There has also been some confusion in the market, driven by the changes this year. Said John McLoughlin: "When you site a new machine in a pub which probably has three machines already, the new machine will generate interest because it is new. But when everything changes at once it confuses the players and the machine returns. For example, we had to increase the hopper capacity from £250 to £350 to avoid a ‘starvation’ problem, and this affected the figures initially."
He added: "There is another reason why the AWP market will never get back to 55,000 a year. Before the FOBT entered the market in bookies’ shops, there were around 15,000 AWPs in those locations. They have been replaced by the higher performance FOBTs."
Bell-Fruit has the top games in the business today, but they are still struggling to match the numbers of two years ago. The Deal or No Deal sold 2,200 in a year and the follow-up Can You Beat the Banker sold 2,400, but the two latest variations are at about 50 per cent of those sales so far.
The whole picture is one of considerable concern to John Austin. "I think it is very much a changing market. With cheap alcohol in supermarkets, better quality home entertainment and a smoking ban, the pub is no longer a good place for people to go for a drink. Special destination pubs have emerged, many specialising in food, and the machines are being squeezed out to make room for more tables.
"Machines do better in pubs which can be loosely described as ‘drinkers’ pubs’, but they are declining. Now people sit at tables to eat while they drink, and that discourages standing around a machine."
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One leading chain of pubs, All Bar One, has actually introduced a ‘no machine’ policy.
"There will always be a market for Category C machines in pubs, but not as we have know it in the past. If we are lucky, a ‘good year’ for Category C machines may see a top injection of about 35,000 machines."
Austin, McLoughlin and undoubtedly others within the supply sector, are hedging their bets as quickly as they can, working on the international market, mixing analogue machines with fresh digital products, working on the lower Category D machines (seaside arcades) and some are even tilting at the FOBT market themselves on the basis that if you cannot beat them, then join them.
Is it all bad? "Of course not," said Austin. "Managed house estates (pubs which are owned by major groups who install managers, rather than let out the houses to tenants) are much more tightly controlled. Their rigid discipline has led to much better returns from their Category C machines than you will find in tenanted locations.
"And there are many success stories where themed pubs have been introduced, good quality food has been introduced and other attractions installed to help boost clientele."
But Austin and McLoughlin both expressed concern at the other major outlet for Category C machines, the ‘arcades’, which these days are known as adult gaming centres (AGCs). They tend to be just as close to bookies’ shops in the high street and unlike pubs, don’t have the attraction of alcohol.
"AGCs are my big worry," said Austin. "Until the changes in the UK they had what we used to call Section 16 games to run alongside their AWPs and they did very well and helped the locations to offset the challenges from the bookies’ shops. Now they don’t have those games, and if you like, they ‘educated’ players into higher stakes and high prizes games, perversely preparing them for the attractions of the FOBT.
Admittedly the AGC is permitted four Category B3 machines, with £500 jackpots, which offsets some of the disadvantages they face, but for Austin, McLoughlin, Bell Fruit and the other manufacturers, it is a hard task to produce Category C machines which can live side-by-side with a £500 jackpot machine.
Britain has 632 adult gaming centres, most of them in town centres, compared with the seaside arcades which are in holiday destinations and which tend to use Category D machines with lower stakes and prizes and which are intended as fun destinations for families. Those machines operate on 10 pence in and £5 as a top prize.
One or two experiments have already taken place in switching part or even all of an AGC into a bookies’ shop in order to install FOBTs. The operators freely admit that they cannot compete any other way.
It is in Category C that the problems persist, mainly because the two major operating sectors, the pub and the adult gaming centre or arcade, are under such intense pressure. While the pub may be struggling more with self-identity than with the competition from bookies’ shops, the FOBT is undoubtedly a factor in the challenges facing the traditional AWP. In the AGCs it is a straight battle for survival against a predator holding all of the aces.
