Paddy Power retains unwavering anti-FOBT stance

Paddy Power retains unwavering anti-FOBT stance

Friday, March 16, 2018 Posted by Joseph Streeter
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Paddy Power's CEO has accused the industry of “scare tactics”

When newly appointed Paddy Power Betfair CEO Peter Jackson accused the industry of “scare tactics” over the potential consequences of impending FOBT regulations, it marked the group’s continued resolute stance on the issue.

A significant moment in the heated nationwide debate over FOBT terminals was when Breon Corcoran, who at the time was Paddy Power chief executive, reaffirmed the anti-FOBT stance of former Paddy Power co-founder and CEO Stewart Kenny.

Issuing a letter last year to the minister at the Department for Culture, Media and Sport (DCMS), Tracey Crouch, Corcoran stated that due to the “toxic nature” of the debate that now surrounds the terminals only significant action would suffice in “addressing societal concerns”. In doing so, Paddy Power became Britain’s first major bookmaker to set out its stance in favour of cutting the maximum stakes on the terminals, which led to a backlash from the rest of the industry.   

The letter read: “Whilst we are not aware of any evidence which links stake size to problem gambling, we are acutely aware of the increasing reputational damage to the gambling industry that has followed lack of progress in this area.

“We now believe that the issue has become so toxic that only a substantial reduction in FOBT stake limits to £10 or less will address societal concerns. I am confident we could operate our retail business successfully and profitability under such circumstances. Other well-run operators should be able to do the same.”

Since then, the government has confirmed that the maximum stakes of FOBTs will be cut in the coming year, with it widely believed that the stake will be below ten pounds, which much of the industry has warned will have an adverse effect on the jobs, sponsorship and the retail industry as a whole.

With the warnings spearheaded by UK’s biggest bookmaker Ladbrokes, who emphasised that such a drastic cutting of the stakes would have a significant impact on its leveraging for sporting sponsorships. Something that could have severe consequences for the sport of horse racing, as almost £3.5m of Ladbrokes sponsorship portfolio is dedicated to the sport.

Ladbrokes warned: "A severe stake cut has many implications not least on jobs, the Treasury and the sports we support. Sports sponsorship is a two-way street, yes we get exposure but it also helps sports finance their entire structures right down to grass-roots funding.

"Horse racing is in the bookie DNA and some sponsorships and partnerships go back many years and have a history and association that make them very valuable and high on the list to continue."

Ladbrokes wasn’t alone in warning of the implications of impending regulations, with William Hill, who hold a £1m horse racing sponsorship portfolio, also underlining that sponsorship deals could be “at risk” in the event of such a drastic stake decreasing.

However, these warnings evoked a dismissive response from Paddy Power CEO Jackson, who described them as “scare stories”, even going as far as to reveal that he didn’t envisage closing any Paddy Power shops after regulations were implemented.

At an earnings call last week, Jackson stated: “Our shops are more profitable and outperform on sports betting, enabling them to better withstand reduced machine stakes limits, and we don’t envisage closing any shops following regulatory changes.”

Many in the industry fearing the impact of FOBT regulations have sought to outline that Paddy Power stands to lose out on far less than its competitors in the event drastic stakes reductions, as it has a far smaller retail footprint than William Hill, Coral and Ladbrokes.

Paddy Power has approximately 100 retail outlets in the UK, in comparison to William Hill which has around 900 and Ladbrokes and Coral, which combined have over 3500 UK shops, hence why the operator has intended to disparage the industry’s united front on the issue.  

Dan Waugh works at Regulus Partners, the strategic consultancy focused on international gambling and related industries, he detailed that few would would blame Paddy Power from diverging from the sector’s established approach to regulatory risk mitigation.

Additionally he told “Paddy’s actions might seem strange if you consider that the FOBT issue has been well-managed - but I’m not sure how many (outside the sector) would ascribe to this point of view.

“It seems entirely plausible that Paddy has considered public concerns regarding a specific form of gambling and that it has responded to those concerns. It has certainly been consistent in this view which argues against the suggestion of opportunism.”

Totally Gaming says: It’s important to follow the money in a case like this.  Whilst Paddy’s may generate short term losses in the aftermath of drastic reform, impact on their direct competitors may well benefit them in the long term. In a report published by the Telegraph in the aftermath of the last election, a Barclays Bank analysis revealed that cutting the stakes on FOBTs to just £2 would have major implications on the annual revenue for bookmakers, with Ladbrokes Coral being hit the hardest losing £439m, William Hill losing £288m and Paddy Power Betfair taking a £58m hit.

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