Subscribe
Share
Share
Embed
A daily podcast delving into the biggest stories of the day throughout the sports betting and igaming sector.
:
I will also reform gambling taxes in response to the rise in online gambling. Remote gambling, remote gaming is associated with the highest levels of harm. And so I am increasing remote gaming duty from 21 % to 40%. With duty on online betting increasing from 15 % to 25%. I am making no change to the taxes on in-person gambling or on horse racing. And I am abolishing bingo duty entirely from April next year. That was the Chancellor, Rachel Reeves, delivering her UK budget and her Judgment Day tax hikes on online gambling. While online casino will bear the brunt, with rates going from 21 % to 40%, online sports betting will be taxed at 25 % from 2027. while machine gaming duty was omitted altogether alongside retail sports betting and horse racing. But the ramifications of the Chancellor's judgments could be long lasting and era defining for the UK while delivering 1.1 billion to the Exchequer by 2030. So what now for UK gambling and how will operators plan ahead for the future now the debate and the lobbying is over? Welcome back to iGaming Daily, supported by Optimove, the creator of positionless marketing and the number one player engagement platform. I'm Charlie Horner and today I'm joined by SBC News editor Ted Omclay and Dan Wohr, partner at Regulus Partners. uh Dan, thank you ever so much for taking the time to come on. How are you doing today? I imagine it's been a busy one for you. It has, not necessarily for the reasons you'd suppose. Institute of Licensing Conference in Stratford and I've had to dash back to London for this. um very thoughtfully the OBR decided to release the numbers early. So I had time to read them before I went and then did my presentation. So that was very considerate. Yeah, that was it was very considerate of them. I'm not sure Reeves herself was too impressed by it. Ted, how are you? Yeah, I'm good. Thank you, Charlie. Just got back from a long weekend, but yeah, had to get back for this. was probably Probably the biggest day, news day for British betting we've had this year, I think. Looking back over it, it's come towards the end of the year. And yeah, I'm looking forward to hearing some of Dan's thoughts and insights on this. Yeah, what is being discussed on LinkedIn and that is probably the biggest, one of the biggest days in years for British betting. Well, yeah, let's begin with just some initial reactions, some blanket overviews because Ted, you mentioned it there. Some of the reaction has been treating this as an existential issue. uh Dan, how would you summarize this tax rise? guess we all expected it, but how would you assess it? I mean, the first thing is it's a relief it's finally come out. I mean, this has been tracking on for a long time. It's been quite painful. It's sort of damocles hanging over the industry. And I think also, you know, there was speculation it would go far wider. So uh to a certain degree, you when you look at the proposals advanced by the Social Market Foundation and the Institute of Public Policy Research, really quite reckless proposals would have destroyed land-based gambling because they both ended up supporting massive increases on taxation on bingo clubs and betting shops, casinos and arcades. So there is some relief there. It is not as bad as some of the think tanks would have liked it to have been. um But, but, you know, remote gaming duty was probably the part of the gambling ecosystem that probably could afford it to pay a bit more. um But 40 % is a massive rise. And I think the only thing you can say with certainty is that nobody can really model what happens next and certainly not the Treasury. So I think if the Treasury had moved up in 21 to 25, 30%, there's a certain degree of what's the worst that can happen. What is the downside to this? 40%, they've almost doubled it. They have absolutely no idea what's gonna happen. The OBR admits in the report that There's a very good chance the black market will grow. So that's not scaremongering. There is a, you know, they accept that illegal gambling will grow. And that's almost that's part of the reason why they're there. They're modeling far less taxation than you would get just by starting modeling. So um not as bad as today, I suppose, not as bad as Vird. But if you're an online casino operator, it's pretty dreadful. Online sports books, when that comes in in twenty twenty seven. Also, that that could be pretty disastrous. And think, yeah, modelling what happens next is pretty much guesswork, but it's not good. You mentioned the OBR and what they said. think they said that around 90 % of the cost of this will be passed on to consumers in the end, which, Ted, you would assume would then send those players into the black market, which is where these fears are coming from. And the OBR itself has admitted that. Yeah. mean, Dan's already mentioned this. I'd imagine... quite a few operators right now are feeling quite vindicated by what the OBR wrote in that forecast. Yeah, I'd imagine a lot of operators, like I say, feeling quite vindicated with that. The industry's been sounding alarm bells about this for quite some time now, as well as alarm bells about some other areas like shop closures and things like that, which might not be quite as extensive given the tax changes weren't as... you know, weren't the worst case scenario for the industry, which was the SMF and IPPR recommendation that Dan mentioned earlier. But yeah, you know, there's been a lot of data and lot of evidence about the black market risk for some time. It's estimated that it accounts for around 10 % of UK betting and gaming volumes. I think Gamstop have also acknowledged before that I think something like one tenth of self-excluded users via their platform have. admitted to using illicit and offshore uh gaming sites. So what they put in their forecast wasn't really anything new for the industry. And it is interesting to see the government acknowledge that. Yeah, how much of an impact it will have, only time will tell really, regarding the black market at least. An online casino now, as of April 26, in the UK is going to be one of the highest tax jurisdictions. in the world, particularly in mature markets. What do you think the impact is going to be on the viability of the UK as a market for maybe some of those mid-tier operators or new entrants to the market? And how will those operators look to update their strategy? I guess one thing they could do is bolt on a sports book. Dan, what do you make of that one? Well, it makes it a far less attractive market to be in. And I think the attractiveness of the British market has been eroding over some time. We've already seen some operators leave it. uh I would anticipate that will continue. You'll see operators leave. You may therefore expect to see some greater degree of consolidation, but also you might see some of the big operators severely damaged by this. ah I think we could see some big beasts of the gambling industry in this country, not just mid-tier, but really suffer uh as a result. um So yeah, we will see what happens. I struggle with the idea. There was a line in the budget book about, maybe operators will seek to reposition themselves away from higher tax products. But that's a line. I think we see this an awful lot in gambling policy discourse. It's almost as if the idea is that consumers are just sort of mindless beings that float around and do what operators tell them to do. I don't think that's actually true. We're talking about adult consumers here. uh They have certain activities they enjoy doing. We saw during COVID, for example, when if you weren't an online casino player before, if you did online sports betting, COVID comes in, you can't do online sports betting or it was very limited opportunities to do it. You didn't see people suddenly jump into online casino. If you weren't doing online casino before, you didn't suddenly transfer it. So people have the games and betting activities they enjoy. And this idea that, you know, if you make online casino less attractive because it's higher cost that They'll go, oh, well, I'll go do football betting or race betting instead. One, I think is quite insulting to these consumers and just two, isn't it borne out by any evidence. So yes, I guess you could say set up a sports book. I sports books already is a tough market to be in. It's not as though their taxes stand the same. They're having a fairly big, they've got a 66 % tax increase excluding racing. So no, I don't really see that there's a, I don't really see there's an opportunity for those operators to defray the risk by doing something else in this market. know, this market is increasingly hostile to gambling and it's not just the taxation. This is on the back of, you know, repeated changes to regulation. And the other thing you might come with this, but you know, this is not the end. Today's is not the last bad news the sector will face. You already got, you you'll, example, now have a situation where, you know, online sports betting's taxed at a higher rate than slot machines in land-based venues. I predict the same thing tankers and MPs who've been demanding these tax rises will at some point go, well, that's not right. And we need to whack those up too. So yeah, we're far from the end of the road on this. I'd love to pick up on a point that you made, which is the consumer side of things. Because in this debate, think somewhat the consumer has been forgotten in all this and I'd love to know how much consultation the Treasury Committee did, DCMS have done, the gambling commission have done with consumers because they've spoken to operators, they've spoken to pressure groups and think tanks, but how much contact do think they've had with consumers themselves? Well, would guess none. I mean, in fairness, you know. It's quite hard to consult with consumers and there aren't really any consumer groups, which is a shame in some respects. So it's quite difficult to consult with consumers. Bill Edington, who's the father of modern gamely studies, wrote in a paper in 1999 that gamely consumers are treated as second class citizens and their desires are not fully respected in public policymaking. And that's absolutely true. As far as most of the bodies involved in this conversation. They haven't represented the consumer. The gambling commission is sort of concerned with consumers who suffer harm, but doesn't really care about recreational consumers. And the industry should be the champion of their customers, but too often isn't. yeah, their voices have been that they've been marginalized. Nobody really cares about them, to be honest. we will, know, but you know, it is what happens next is the result of consumer behavior. So unless you understand how consumers will respond to these pressures, then all your predictions, all the things you think might happen, probably won't happen. Yeah, really, really interesting. And Ted, I mentioned that if you were an online casino, you could maybe bolt on a sports book. But Dan's right. Taxes on online sports betting are going up as well in 20, 27 to 25 percent. In what is already a low margin sector, it feels as though those odds are probably going to be less favorable for consumers. What do think the future is for Sportsbooks in terms of their profitability, their viability moving forward? Yeah, it's going to be a very tricky situation for them to say the least. at least, I guess one saving grace for them is that they at least have about a year and a half until March 2027 to prepare for it and think of some solutions and maybe make some restructuring to account for this. But yeah, I'd probably make a similar prediction to the online casino space that we'll see, we'll probably see quite a few mid-sized companies potentially wind down or exit the UK. We've seen this internationally. We saw this in the Netherlands, for example, didn't we? LiveScore being quite a prominent example of a company that withdrew from there because as their leadership have told SPC News before, they just didn't see it as a viable market anymore. The taxes were hitting them too hard. And yeah, we could probably expect the same to happen to, as Dan said, some of the bigger companies, some of the big PLCs as well. em I think they face a bit of a double-edged sword in this regard really because you'd think that obviously a way for you to respond to taxes is obviously to make, is find new sources of income, new revenue, get more customers in. But as a result of the new taxes, they will also be looking at ways to reduce spending, which will probably include marketing and advertising and things like that. which is already an area facing a lot of regulatory and political and public pressure, know, with scrutiny of like betting's relationship with sports and so on, scrutiny of betting adverts on the TV and online. We've seen the ASA referring countless complaints lately about social media posts and other sort of adverts. So yeah, they've really stuck between a rock and a hard place on that one. I think it's going to require some quite innovative thinking to get through it. It's probably also going to see some reductions in headcount, unfortunately, as well, and possibly some redundancies across a few firms. um Yeah, it's very difficult situation. Dan, just before we go for a quick break, I'd love to get your thoughts on that as well. it's, you know, arguably, you know, they were in a, you know, they've got a 66 % tax increase. Okay, it's not the same as a doubling, but um they were arguing the market's in a less strong position to start with. So yeah, the impact of the tax rise there could be devastating. And then you've got knock on effects potentially on, you know, on sports itself, on racing, on rugby league, on darts, and all these things that are part of the ecosystem that, that, that, that in part rely on funding from the betting industry. So, yeah, it's, it's, it's a time of deep concern, would have thought, for all involved. Ted. Dan, we'll take a quick break and then we'll come back and we'll carry on the discussion. Welcome back to iGaming Daily. Today we're talking all about the fallout from the UK budget and the online gambling tax hikes that have come with it. One part of the sector which may be breathing a sigh of relief is the retail sector. Maybe not a sigh of relief, that might be over-egging it, but there have been spare tax rises so what do think the... retail sector is going to be thinking about this and how will, because all of these retail, or most of the operators in retail are online as well. So there's going to be some ramifications. Dan, how do you think operators will be approaching this one? Well, I think it depends where you are. mean, one thing that's worth noting is that the bingo club sector has actually been a winner. know, bingo duty is to be abolished. you know, so if you... Think about where we were yesterday. Bingo clubs were threatened with an increase in machine games duty, which would have closed, think Rank's been very open about this. It would have closed a large number of clubs. Now they're in a position where actually machine games duty is being held steady and bingo duty is being abolished. So bingo clubs have done well. And this is not the first time. I worked in the bingo sector a long time ago. I think bingo actually, they keep their heads down and they're very quietly effective. in terms of what they do. um So bingo's benefits, casinos also were looking at potentially an increase in machine games duty. The IPPR, so I've not often forgotten, but they were recommending a 66 % tax on land-based casinos at a marginal rate. So again, the threat to land-based casinos was pretty concerning. In fact, machine games duty has been held and um the treasury's also said it's gonna recommence the convention. of calibrating gaming duty against for inflation because Kazina has attacks on a sliding scale. So if you don't do that, you get sort of fiscal drag. So that has been that has not been adjusted for inflation since 2022. So at least they know that from in a couple of years time, that fiscal drag will ease off because you will get inflation adjustment again. So those two have done sort of better way better than they might have feared out of this. I think though, the concern will be that the anti-gamming campaign has seek to come back for more. As a reminder, both the SMF and IPPR wanted a 50 % duty on all machines in land-based premises and the IPPR wanted 66 % duty on casinos at a marginal rate. So, are they suddenly satisfied and go, our work here is done, I doubt it. I think they'll be back for more. sort of groups, it's never really enough, anything that you do is not pure enough. Ted, another sector that we've talked about a lot on the podcast and we were really fearful for was the horse racing sector. The BHA put on a protest, I believe that was in September, it seems to have paid off because racing has been omitted from these tax hikes, but I guess there's going to be an indirect impact on on race courses across the country because of some of these tax hikes anyway, they all have a relationship with operators and somewhat dependent on them. How would you assess the outlook of the horse racing sector? So like you say, racing has been involved in a very extensive campaign for some time now and yeah, on the face of it, it would appear that has paid off because it's one of the exemptions to the increase in general betting duty when that comes into play along with a few other exemptions. m Yeah, you'd think that that's obviously quite good for them. Like certainly it's the biggest softening of any blow they could want from that really. And the fact that retail betting has also not been hit as hard is also good news for them. Obviously what with horse rating being a core retail product, if not the core retail product really traditionally at least historically, it's what the sector was based off. But yeah, as you say, there will be some knock on effects. Obviously a lot of horse racing betting turnover still goes through online channels. the tax will impact that. And em I think Dan referenced this earlier actually. The relationship between betting and sports, in particular racing, is incredibly strong. There's an incredible financial lifeline there that betting provides for the sport. not just through the levy payments and so on, but also through sponsorships and media rights payments. em And I mentioned earlier about the pressures that tax could put on marketing budgets and so on. It's hardly uncommon to see online only operators sponsoring horse racing. em know, like BetVictor, Bet365 and so on. You see their signs and banners at racetracks throughout the country. m Yeah, potential knock-on effect of that could be the... If operators are thinking, right, we need to reduce marketing costs, we need to reduce costs in general, we might have to cut some sponsorships, racing will lose out because of that. So yeah, they've escaped their nightmare, like worst case scenario that they were campaigning against with the Axel Racing Tax campaign, but they'll probably still feel the pinch somehow. We've addressed most of the affected gambling verticals now, but I want to talk a little bit more macro because I think from a player safety perspective these tax hikes might have an impact. We've already referenced the growing black market and the OBR itself admitting that the black market is going to grow because of this. Dan, I believe you have uh quite a bit of special specialisms when it comes to the player safety aspects of the industry. How do you think the these tax hikes are going to impact player protection policies? Well, very simply, if customers are displaced from the legal market into the legal market, there are by definition, lesser protections for them because they don't have to comply with the various regulatory rules that licensed operators do. I know that some people say, well, licensed operators don't always take very good care of their customers. And that is the That is correct. But if you're pushing people into a market where there literally are no rules governing player safety, then clearly the risk is on the downside. I think there's another thing that really hasn't got enough attention. But since April, we've had funding for gambling disorder treatment services in this country has been pegged to spending in the licensed market via the statutory levy. So if spending in the licensed market is reduced as a result of these tax changes, funding for treatment service in this country will fall. That's a straight mathematical equation. know, it's not, that's not our opinion. That is just what will happen. And it's worth reflecting that if you look at projected funding from the statutory levy to fund treatment services and other harm prevention measures, about 80 % comes from online gaming and betting. It's about 50, it's more than 50 % from online gaming. So if there is significant displacement, from the licensed market into the black market in online casino, the statutory levy that was put in place in April to fund treatment services and harmful engine will collapse. And it's worth happy for the, you know, if you're a charity involved in this space, because first of all, the commissioners under the levy generally are self-interested. So OHID and NHS both have their own services. They will likely prioritize them, which means that charities will be at the back of the queue. But second, because of this ideological purity that some of the anti-gambling campaigners insist on and public health insists on, these charities have been told you cannot seek money from the gambling industry, which has funded you for the past 25 years or more. You're not allowed to. So charities will put in a real pinch. I sort come back to some of these think tank proposals, incoherently said, if you raise taxes that increases player safety. One, I think that's entirely speculative. But two, the chances are it will push people to the black market. if you're doing that at the same time as you're pulling the rug out from underneath the treatment services that look after people who get into difficulties with their gambling, then I think that the net consequences of that could be absolutely devastating. There could be massive, massive harm arising from these really very poorly thought through proposals. we're facing a really scary situation where more players are sent to the black market. and they fall into the horrors of problem gambling but because they're doing it in the black market there is less funding available to treat them which is essentially the worst of all worlds. Ted, something that Rachel Reeve said in her budget speech was quite interesting. She said that remote gaming is associated with the highest levels of harm. Now of course we can maybe debate that. And of course, it's probably to appease backbenchers and make it sound good in a speech. do you think this is a wider frame in that gambling is now being treated as a public health issue? if so, does raising taxes help public health? Does that make sense to you? em Yeah. mean, there's been an increasing trend, I think. over the past year, more than a year or so, where we've seen gambling increasingly being treated as a public health issue rather than a business one, certainly from the political side of things. I mean, obviously, I think a bigger indicator of that really than this speech was em the inclusion of problem gambling in the men's health strategy earlier this month. uh And we've seen various MPs and campaigners calling for gambling to be increasingly treated as a public health issue. I don't think that's anything new. I think this will probably continue down the same path. As for taxation, yeah, this is where there's a bit of tricky connection here, I guess, because yeah, logically you'd think, well, an increase in taxes could be, if you're just to be very black and white with it, yeah, some of that can be directed towards the NHS. I know that Rachel Reeves has said, to be fair, that one of their, she did confirm today, one of the main targets of it is lifting the two-child benefit cap, and let's do healthcare funding. But yeah, they're now in a situation where the industry is being taxed heavier, not as heavily as the worst case scenarios were, but still being taxed heavier to fund public initiatives and is also obviously paying into that statutory research, education and treatment levy that was introduced as part of the Gambin Act review. So yeah, it's sometimes a bit of a struggle to join the dots between them and see how it all lines up and matches up. But yeah, I think in terms of the idea of gambling being treated as a public health issue, I think that will only continue. There's been a lot of MPs who are quite vocal on that topic who are calling for another review em of British gambling legislation that would include framing gambling as a public health issue within it. Obviously with the gambling act review of 2020 to 2023 still being implemented. And there's a lot of pressure around the retail betting shops as part of that as well, interestingly. you know, despite them escaping the worst kind of excesses of taxation, they're still facing some political pressure elsewhere as part of that kind of public health narrative. So, yeah, I can only expect that to continue kind of linking in with what Dan said earlier about how this isn't, you know, this isn't the end. We've already seen the peers for gambling reform group put out a statement, haven't we, this afternoon saying that they're they welcome the increase in taxes, but feel it could have gone further. yeah, this is just going to continue for I don't know how long. Dan, where do you stand on this gambling as a public health issue? Yeah, well, this has been there. always there long been public health components to gamut legislation and to harm prevention. And that's nothing. There's nothing wrong with that. Public health has something to offer in this space. But I think what we've seen over the last decade is the emergence of what I would call radical public health. um which sort of seeks to sort of position gambling as inherently harmful. And we've seen, you know, Public Health England before its demise said that it wanted to treat gambling in the same way as it had treated tobacco consumption. And it was telling, didn't say harmful gambling, said gambling. You want to treat gambling in the same way as it tackles tobacco consumption. ultimately, a lot of the time when, I think there's a lack of clarity, sometimes people, particularly politicians, they talk about public health, they actually have very little understanding of what that means. But certainly if you're looking at this from, you know, OHID, which is part of the DHSC, if you're looking at their perspective, public health approach means prohibition. Not today, not tomorrow, but someday soon for the rest of our lives. So, yes, we are. I think a lot of the framing is incredibly dishonest. You know, it seeks to amplify the harms and suggest that there are no benefits from this. And yet we know that isn't true. While people with gambling disorder do suffer, you know, really severe negative health impacts. Recreational gamblers actually tend to have better mental health and well-being than non-gamblers. you know, the sense of balance that we normally have is gets lost when you bring in this sort radical public health approach. uh But this has been coming for a long time, the industry has been warned about this, and the industry by and large has decided to stick its head in the sand. uh And I just think that if this week isn't a wake up call for the gambling industry in Britain and in other markets, then I'm not sure whatever will wake them up because as I say, this is a prohibitionist movement. They want to increase the costs of gambling and they want to reduce the opportunities for customers to spend money. And I'll just give you one indication. laugh when I say this because it seems so absurd. But three and a half years ago, the Office for Health Improvement and Disparities published a journal paper in which they looked at, they had 81 recommendations to reduce gambling harms. One was increasing taxes every year above the rate of inflation. You know, this is the crazy one. And this sort of shows how they look at everything as tobacco. They said, we need plain packaging for gambling products. And you look, what the hell is that? And you look to the footnotes, it says, no colors, logos or images on any gambling products. So when you think about a casino and a deck of cards at the blackjack table, no colors, logos or images. I mean, that is how unhinged a lot of this public health approaches. They just copy. everything from their tobacco play, but they copy into gambling. And at some point, unless the industry sort of stands up to this, you know, the public health will win. Well, I'm sure a game of roulette would be really fun under those rules. But yeah, we are sort of coming towards the end of our time today, gentlemen. But just quickly, because we've both said that this isn't over. The gambling industry needs a bit of a wake up call. So just briefly. Where do we go from here? And how will industry leaders be planning ahead and adjusting their strategies in the wake of these, these tax rises that are coming in the next six and 18 months? Ted, how about you go first? Sure. Like I say, I'll try and keep it brief. I would obviously expect a lot of restructuring efforts. I think that even though retail betting isn't going to be hit as hard as many feared, we're still going to see some shop closures as companies review. Yeah. most cost effective locations and things like that to uh maximize returns and keep outgoings low. em I think we will also probably see a couple of market exits. I couldn't really predict who, but I wouldn't be at all surprised. Maybe not over the next six months or so, but certainly further down the line. We will see changes to costs like marketing budgets, advertising, maybe even investments in tech, head counts, things like that. And potentially even on like a macro level, we could see some people, maybe some like mergers or divestments and things like that as people look at ways to better structure their business and their assets to deal with the increasing costs. Dan, I'm sure that in the next few weeks and months, you'll be having plenty of conversations with different stakeholders in the industry. So I'll give you the final word as our guest. How do you think leaders will be viewing this? Well, saw that you all color, everyone's colored by their own personal experience. And I was sort of in the situation 18 years ago when I was at the rank group and I was the mug who had to ring up our largest investors and all the analysts and explain why we'd issued another profits warning. I think we had two that year, one due to regulation and one due to taxation. And I think the first thing businesses do is actually go, okay, our margins are collapsing. Where can we take out costs? That's the first thing. It's just a pragmatic instinct. Where can we cut costs? you will see that's the first thing they'll be doing. Where's the, is there any fat in the business or is there anything even remotely resembles fat? What can we take out? So there'll be cost cuts. I would hope, and this is what happened with me. I remember when these things happened, your first reaction is anger. Your first reaction is, why is the world against us? Okay. That really doesn't get you very far. I think you have to. you have to have a period of introspection say why did these things keep happening to our industry? You have to then figure out, know, be very honest about that. And you have to accept that whatever you're doing isn't working. So I really hope that amidst all the necessary things operators have to do around cutting costs and all the things Ted talks about, I really think that there ought to be a process of introspection. The industry needs to take a long hard look itself in the mirror, including land base, because although they haven't been hit, this week, that was definitely on the list of options. So think the whole industry really has to take a long hard look at itself. So why are in this position? Why do we keep getting into position? What's going to break the cycle? And I think it can be broken. uh This has not always been the industry's not always been in this spot. It's allowed itself to drift into this situation. I think it can get to back to a better place, but it really requires some hard work and it requires honesty. We can't just carry on pretending everything's okay and we can muggle through. we can't, things need to change. Well on that note, there's plenty of work for us all to be doing as an industry and I'm sure we'll be going away and having some more conversations based on this news. But in the meantime, Dan, thank you ever so much for taking the time out of your schedule to talk to us on this one today, really appreciate it. And thanks to Ted for sharing your insights as always. And thank you to our audience for tuning into today's episode of iGaming Daily and come back and join us tomorrow to keep up to date with all the latest. Global Gambling News.