The UK government has responded to a petition calling for it to abandon plans to implement so-called ‘affordability checks’ for gambling customers.
The petition, launched on 1 November, has more than 86,000 signatures at the time of writing.
The government is obliged to respond to any petition which exceeds 10,000 signatures. At 100,000 signatures, the petition must be legally considered for a debate in parliament.
In its written response to the petition, the Department for Culture, Media and Sport (DCMS) reiterated several previously argued points around the frictionless nature of the proposed checks.
“We are committed to a proportionate, frictionless system of financial risk checks, to protect those at risk of harm without overregulating,” it said.
Both the government and the Gambling Commission (UKGC) recognise concerns over the checks, it added.
The government and UKGC agree that the new system “should not unduly disrupt the millions of people who gamble without suffering harm, and should not cause unnecessary damage to sectors which rely on betting, in particular horseracing,” it said.
DCMS also suggested that the proposals will represent a “significant improvement” for businesses and customers alike when compared to the current situation.
At present, it argued, operators are applying “inconsistent” affordability checks on customers, often without clearly explaining why, and requiring customers to provide data to them manually.
The government has “challenged operators to be more transparent with customers in the interim,” it said, but the industry will benefit from the introduction of clearly defined rules by which all operators must abide.
Further, the proposed system will allow financial data to be “shared seamlessly with operators instead of burdening customers with information requests,” it added.
It also insisted that the government and UKGC will not mandate the proposed checks “until we are sure that they will be frictionless” for the vast majority of customers checked.
In its response, DCMS also pointed to the “important link between betting and horseracing” raised by the petition.
The government recognises the “enormous value of horseracing,” it said, both as a spectator sport and through its contribution to the UK economy.
It pointed to previously published estimates from the Gambling Act review white paper, which suggested financial risk checks would reduce online horseracing betting yield by between 6% and 11%.
That, in turn, would reduce the income of the racing industry by between £8.4m and £14.9m annually, it said, or around 0.5%-1% of its total income.
The drop in income would come about via a reduction in levy, media rights and sponsorship returns, it said, but the government is “working with racing and refining that estimate”.
It has also “commenced a review of the Horserace Betting Levy to ensure a suitable return to the sport for the future,” it added.
Both the government and UKGC continue to work with the industry to ensure checks can be implemented in an effective but proportionate way, the response said.
They are also “exploring the role of pilots or phased implementation to help ensure this.”
The UKGC is expected to set out more detailed plans related to the checks in due course.
NFL gives slots a spin
This week CNBC put out a report on a curious development in the US, as Aristocrat Gaming unveiled its first ever NFL-themed slot machines.
The American football-themed reels are due to hit casino floors when the NFL season kicks off this September.
The new slots are “symbolic of a major reversal for the NFL,” CNBC points out, “from its vehement opposition to legalised sports betting prior to the 2018 Supreme Court decision, which paved the way for states to adopt sports wagering, to partnering with the AGA on responsible gambling initiatives.”
The NFL itself put a more positive spin on the new products, with its SVP of consumer products Joe Ruggiero suggesting “the unveiling of the first NFL-themed slot machines represents an opportunity to bring the League closer to our fans in a new area.”
Aristocrat Gaming was equally optimistic about the development, as CEO Hector Fernandez said: “I truly believe that this could be an industry changing event for slot machines and for casinos themselves … pushing the boundaries, driving innovation to something that really has never been done before.”
The slots will feature customisable skins, allowing players to choose their favorite team, and the game will then load relevant imagery, videos of key game moments and even stadium anthems.
Fernandez suggested that the machines will encourage younger men to give slots a go, helping bring them into a vertical currently dominated by older, female demographics.
When you think of the crossover between sports and casino gambling, is this what springs to mind?
Elon Musk hit the headlines once again this week as he unceremoniously dropped Twitter’s existing branding and logo in favour of a minimalist new brand, X.
The change occurred suddenly and without warning, which The Conversation suggested was in keeping with Musk’s movements since taking over the social media giant last year.
“Such drastic changes are usually accompanied by presentations delving into rebrand reasoning from company execs desperate to show how the new image aligns with organisational strategy and company vision,” said the article in its assessment of the rebrand.
Musk’s sudden dropping of the much-loved blue bird is “in keeping with Twitter’s disruptive nature of late,” the article suggests, as the social media network has undergone a series of rapid transformations since it was overtaken by Tesla boss Musk.
The rebrand apparently aligns with Musk’s plans to develop Twitter (sorry, X) into an “everything app”, offering users much more than the ability to simply communicate.
Taking inspiration from China’s WeChat, Musk wants to turn X into a central component of users’ daily lives, facilitating financial transactions, written, audio, and video content, and more.
“But of course, one of the biggest risks of changing a brand identity from one that has global recognition, recall and awareness, is that users may not like the change,” The Conversation suggested.
“By removing the Twitter brand there is an immediate loss of brand equity – the positive associations consumers have with the brand – which could ultimately encourage people to move to other platforms.”
If the conversation on X this week has been anything to go by, plenty of users have already been “encouraged” to jump ship from the platform.
How do you solve a problem like affordability?
The Racing Post this week offered up a response to the UK government’s Gambling Act review, with one commentator suggesting “I don’t think they truly understand a lot of betting.”
The article focuses closely on the introduction of so-called affordability checks, described as “background checks taking place at a trigger of £125 net loss within a month or £500 within a year.”
A higher tier of enhanced checks has also been proposed for customers crossing thresholds of a £1,000 net loss within 24 hours or £2,000 within 90 days.
Under more detailed proposals set out in the Gambling Commission’s consultations on the matter, however, “anyone triggering checks at that second tier could be forced to undergo an enhanced check into their finances as often as twice a year,” the piece suggested.
Added to that, it explains, “for the purposes of calculating a net loss, it is proposed that any money won more than seven days ago for those at the £1,000 threshold, and 90 days ago at the £2,000 threshold, would be ignored, meaning that some could be made to prove they could afford their gambling, despite being in profit.”
The piece goes on to set out a number of different example customers, whose gambling activity either would or would not lead to enhanced financial checks being carried out.
The examples point out certain oddities in the way checks would be carried out under the proposals due to the time limits applied to what winnings can be considered, when assessing who needs to undergo checks and who doesn’t.
The piece also suggests that the checks may have the opposite of their intended impact.
“If you are truly trying to get people to gamble in a more responsible way, if I win some money on the first of the month and by the ninth of the month that money doesn’t count any more as my winnings, isn’t that encouraging me to punt through my money quicker, rather than when I actually fancy something?” asked professional gambler Neil Channing.
“’I’d better have a bet because otherwise it won’t count’. That feels totally counter-productive to what they are trying to achieve,” he concluded.
The Gambling Commission’s consultations on the matter are far from over, but the topic of affordability checks continues to be a sticking point for many in the UK gambling market.
Entain has posted a Q4 2022 trading update, including record online NGR as the World Cup helped to offset disruptions elsewhere.
Below, we break down the newsworthy numbers for you:
Total NGR climbed by 11% year-on-year in Q4 as its retail segment grew by 10% and online by 12%.
For full-year 2022, those figures gave Entain overall NGR growth of 12%. Including the firm’s 50% share of its BetMGM joint venture in the US, full-year NGR growth was 15% (in constant currency).
Full-year EBITDA is expected to come in between £985m and £995m at a year-on-year growth rate of around 12%, ahead of previous expectations.
Q4 2022 was a record quarter for Entain in terms of online NGR, which grew by 12% year-on-year.
That growth reflected a successful World Cup, which was partly offset by weather disruptions to other sporting fixtures, the operator said.
It was also a record quarter in terms of the number of active customers, the firm added, which also grew by 14%.
For full-year 2022, however, online NGR was down by 1%, which Entain said reflected a strong comparative period as a result of the Covid-19 pandemic and the absorption of regulatory changes, particularly in the UK and Germany.
The UK is the exception according to Entain CFO Rob Wood – and not in a good way: “Other than the UK, we’ll be shooting for growth in all our major territories.”
Adhering to stricter regulations under guidance from the Gambling Commission has put a financial drag on all UK licensees over the last 12 to 18 months.
CEO Jette Nygaard-Andersen said the gambling white paper might not be as bad as first feared, however, with recent noises from parliament pointing to a more optimistic outlook.
“What we’ve heard in the last couple of weeks from the government is somewhat more pro industry and advocating freedom of choice,” she told analysts.
“They also want to talk about frictionless checks, instead of affordability checks, which is all positive.”
The white paper should be published by the end of Q1, if not the end of February.
Two weeks ago, Entain said it would withdraw from all unregulated markets by the end of January. Most analysts on the earnings call wanted further clarity on this pledge.
The regulation of online gambling in Brazil has been thrown into disarray due to political upheaval and a new president, but the country is a major top-six market for Entain by NGR.
Entain is still counting Brazil as a regulating territory – despite the lack of a timeline for regulating sports betting – and will not be withdrawing from the country anytime soon.
“We still expect regulated sports betting in Brazil in 2023 with the new legislation,” said Nygaard-Andersen. “We are waiting for the new administration to pick up the letter and provide more detail in Q1.
“Sports betting might be regulated in 2023, or slip into 2024, then probably online casino at the beginning of 2024, but that doesn’t change our excitement about the market,” she added.
Entain CEO Jette Nygaard-Andersen: “Sports betting might be regulated in 2023, or slip into 2024, then probably online casino at the beginning of 2024, but that doesn’t change our excitement about the market.”
Entain said that 93% of revenue is currently derived from fully regulated markets, with Brazil likely to make up a fairly sizeable chunk of the remaining 7% via Entain’s Sportingbet brand.
In H1 2022, Entain grew Brazilian NGR by 38% year-on-year amid a 44% annual climb in active customers.
However, that growth was lower than anticipated due to “greater than expected competition” from rival operators – some of which may not be seeking a licence even when the country does decide to regulate.
When pushed for an update on Brazil’s competitive landscape, Nygaard-Andersen added: “There is a lot of noise in the market, mostly coming from smaller operators. It shouldn’t have a longer-term impact, but there will continue to be some noise until we get regulation.”
Current trading and outlook
Entain continues to expand its geographical footprint having recently completed the acquisitions of SuperSport in Croatia and BetCity in the Netherlands.
US-facing BetMGM is expected to become EBITDA positive in the second half of 2023, as reported recently.
The brand continues to perform strongly in the US, with NGR of $1.44bn in full-year 2022, up 71% year-on-year and ahead of expectations.
BetMGM boasts a 19% market share for sports betting and iGaming in the states where it operates, while its iGaming-only market share is higher still at 30%.
Finally, Entain has also launched its Unikrn esports betting operations in Brazil and Canada and has further launches planned for the remainder of 2023, it said.
Commenting on the results, London-based brokerage Peel Hunt said: “There is much to like about Entain: it has a diversified international footprint, has eliminated its grey market revenue, and has upside from optimising relatively recent acquisitions.
“BetMGM is a jewel in the crown, and we believe it likely that MGM will pay up to buy out Entain, or to acquire Entain in its entirety.”
Entain CFO Rob Wood “really spooked” investors with his commentary on the operator’s Q2 results, according to one prominent financial analyst.
Last week, Wood explained how the macroeconomic environment was behind a reduction in customer spend per head of approximately 5% since April, with that trend expected to continue for the rest of the year on Entain’s “prudent” estimates.
This pattern was a driving factor behind a 7% annual dip in online net gaming revenue for Q2, which in turn saw the FTSE 100 firm’s share price drop by 10% at one point on 7 July.
Entain CEO Jette Nygaard-Andersen said: “As a business, we are relatively resilient to cyclical macroeconomic effects. However, no business is completely immune.
“We’ve seen some moderation in the rate spent by customers, resulting in lower underlying growth across many of our markets versus our expectations earlier in the year.”
Entain CFO Rob Wood: “There has been an impact in the Baltics, for instance, where inflation is nearing 20%. You’d be mad to think you’re not seeing an impact as a result of those kinds of conditions.”
But it was Wood’s in-depth analysis that sparked concern in the market. Entain is one of the first operators to report its Q2 results this year and it will be interesting to see whether this trend is company-specific or reverberates right across the sector.
“Really the step down began in April when across the globe, the headlines really started to hit consumer confidence levels,” said Wood. “This prompted us to investigate.”
During its investigation, Entain realised some territories were witnessing a more severe decline than others.
“Australia, for instance, is going fantastically well,” said Wood, who was at pains to point out that all macroeconomic environments are cyclical. “It’s sort of being flagged as a risk but we don’t think we’re seeing a macro impact in Australia yet.
“But in other parts of the world, particularly in Europe, it’s clear. There has been an impact in the Baltics, for instance, where inflation is nearing 20%. You’d be mad to think you’re not seeing an impact as a result of those kinds of conditions,” he added.
Retail was the shining light of Entain’s Q2 results. Its portfolio of shops, including Ladbrokes and Coral, came in ahead of expectations, with volumes in Q2 ahead of pre-Covid levels.
Entain’s Q2 retail revenue rose 79% year-on-year, soaring to 243% for H1 on the back of a comparative period where shops were still closed for the most part due to Covid-19.
Despite the growth, Wood warned it was “unlikely” that macro factors would have no impact at all on retail spend and performance.
He did say however that Entain was outcompeting its high street rivals (888 via William Hill and Flutter via Paddy Power) due to a stronger gaming machine and bet station offering.
“We’re really confident that we’re outperforming and hopefully that will continue,” said Wood. “Market share gains are really the best way to offset any potential impact from macro conditions.”
More than macro
As well as the macro declines, more than one analyst has suggested to iGaming NEXT that Entain’s decline in online NGR could also be put down to the cost of implementing affordability measures in the UK.
Main rival Flutter front-loaded a bulk of its affordability improvements last year to the cost of £93m. This included a pre-emptive £10 limit for online slots in the UK, which has also been adopted by 888.
Entain, by contrast, has not adopted any such limit and is awaiting concrete guidance from the UK government’s white paper review of the 2005 Gambling Act.
“That to me would say there is a bit more pain to go,” said one gaming and leisure analyst.
That is not to say that Entain is not making progress in this area. Its proprietary Advanced Responsibility & Care (ARC) platform implements checks on customers at different thresholds, while the company said revenue contribution from higher spending cohorts has halved, although it did not elaborate on what constitutes a higher spending customer.
“Operators have worked through the last 18 months on implementing tighter measures like affordability checks, at least when it comes to the licensed operators,” said Nygaard-Andersen. “This goes across the industry, but operators have different approaches.”
Entain CEO Jette Nygaard-Andersen: “As a business, we are relatively resilient to cyclical macroeconomic effects. However, no business is completely immune.”
After being pushed by analysts for a figure, Wood said UK market online NGR was down 15% for the first half of the year (H1). He conceded the drop-off was due to a combination of the macroeconomic environment and also the cost of employing affordability measures.
“On the question of the impact of affordability, it is hard to unpick the competing drivers,” said Wood. “We’re seeing spend per head fall in the UK. How much of that is affordability measures versus ARC but also versus macro conditions? It is hard to separate with confidence.
“We do see macro impacts in the UK, because if you look at spend per head on the lower spending cohorts, you can see a fall off there as well. It is not just driven by less top-end activity. But it is really hard to unpick the two, so I wouldn’t attempt to do that.”
Flutter and 888 are scheduled to report their interim results in August. Perhaps only once its rivals have released their reports will analysts be able to truly assess whether macroeconomic factors or affordability measures were the main driver behind Entain’s Q2 decline.
UK-based trade association the Betting and Gaming Council (BGC) has called upon the nation’s government to take heed of customer reactions to the possible introduction of enhanced affordability checks for bettors.
The BGC pointed to evidence from a survey conducted by British horse racing-focused television channel, Racing TV, which found that 95% of 2,000 surveyed members would not be happy for gaming operators to have access to their banking information in order to carry out affordability checks.
A further 88% believed they “should have the freedom to choose how much they bet without government interference,” while 85% of those asked said there was a danger that overly stringent restrictions on regulated gambling would push customers to use the “unsafe, unregulated black market online.”
The BGC has voiced its support for enhanced affordability checks, however, but said they should be targeted at those customers who are vulnerable or at higher risk of experiencing problem gambling, and 74% of respondents to Racing TV’s survey agreed.
The association pointed to another survey carried out by YouGov, which found 59% of respondents also believed if there were “too many limits placed on people to bet,” that customers would shift towards using unlicensed operators.
Responding to the surveys, BGC chief executive Michael Dugher said: “I’m alarmed at the findings – particularly the high number who believe that punters will simply move to the unsafe, unregulated black market online if blanket enhanced spending checks are introduced – and hope that ministers will take heed of punters’ views.
“We strongly support the Gambling Review as an evidence-led process, but it’s vitally important that it strikes the right balance between protecting the vulnerable and not spoiling the enjoyment of the vast majority of customers who enjoy a flutter safely and responsibly.
“I am not opposed to spending checks, but believe we should use the technology that is now available to target those people who are at vulnerable or at higher risk of problem gambling and providing them with the help they need, rather than blanket checks on every punter.
Dugher concluded that “if the government fails to get the necessary changes in the Gambling Review right,” it will be the black market that stands to benefit most.
Furthermore, he said, a reduction in the number of bettors using licensed operators could also have a serious detrimental impact on the horse racing industry, as it could jeopardise the £350m a year currently paid by operators to the sport through sponsorships, media rights and the betting levy.