Regulus Partners examines the media speculation of who will replace Bill Moyes as Chairman of the UK Gambling Commission (UKGC) – a regulatory body in need of strategic reforms over PR messaging…
The identity of the new chair of the Gambling Commission was the subject of fresh speculation this week as the Sunday Times published a short-list of candidates. The newspaper suggested that Lord Chadlington, Dr Anna van der Gaag, Marcus Boyle and an “internal candidate” (presumably an existing commissioner rather than a regulatory officer) were all under consideration by the Department for Culture, Media and Sport.
Assuming that the rumour is accurate, then we must assume that Mr Boyle (of whom we know very little) is likely to be front-runner. Lord Chadlington may be a very charming man and probably has his heart in the right place on gambling issues – but the market regulator requires leadership rather than the PR messaging on which he has built his career. Chadlington may also struggle to demonstrate that he has the requisite “ability to ensure sufficient detachment to be seen as independent” – having lobbied actively in Parliament and the press on matters of gambling regulation and having set up his own charity, Action Against Gambling Harms.
The current chair of the Advisory Board for Safer Gambling, Dr Anna van der Gaag (also named by the Sunday Times) has not exactly established a reputation for independence either and is likely to fall down on the need to be able to “command the confidence of the companies and organisations within the gambling industry…as well as have empathy and respect within the consumer landscape”.
Under Dr van der Gaag’s stewardship, the ABSG (formerly the Responsible Gambling Strategy Board) is understood to have sealed itself off from the gambling industry – presumably on the basis that it is easier to disparage organisations that one knows next to nothing about. Any internal candidate may suffer from the idea that they have been complicit in the regulator’s shambolic performance under outgoing chair, Bill Moyes.
By process of elimination, we are therefore left with Marcus Boyle from the purported list of runners and riders. Boyle is a former board member of the advisory firm Deloitte, chair of the British American Dance Academy and a trustee of London’s Serpentine Gallery. His involvement in the arts may suggest that he has a greater interest in consumer enjoyment than the current chair.
Most importantly though, Boyle understands the need for strategic clarity (having been head of strategy for Deloitte) – a quality that has been sorely missing at the Commission in recent years. In recent years, the regulator has churned out innumerable strategy documents (Three Year Strategy, Safer Gambling Strategy, Business Plan, ABSG Strategy Report) – all long on platitude and short on practical detail or any structure to bring together the various stakeholders constructively to address clearly defined challenges; followed-up with no real attempt at honest evaluation of strategic progress or the lack thereof. This is the challenge facing the incoming chair of the Commission whoever he or she proves to be… As Thomas Edison said, “vision without implementation is hallucination”.
UK: online gambling statistics – ‘normalisation’ does not mean ex-growth
The GB Gambling Commission has been publishing monthly data by product since the pandemic began. As we have written previously, capturing the top operators causes a number of interpretative traps (eg, betting is far more consolidated by market share than casino; smaller operators taking market share are not captured), but they provide a clear pattern of revenue development, rivalled only by Italy and US states for month-on-month granularity (caveat: GGR vs. ‘GGY’ revenue). We can therefore see clearly what has been going on in the first full comparative period of Covid-19 policy disruptions. What this actually means is far less clear, however.
The overall shape of the chart suggests that in Q220 gaming took up the slack caused by the lack of sporting events while in Q221 gaming revenue held up while betting staged a strong recovery. This pattern is broadly true, but the customer behaviour and product drivers which created this outcome are not as simple as direct substitution. The UK’s continued lockdown and retail restriction policies during the period are also important factors in the comps. Deceptively simple patterns are being caused by complex and sometimes conflicting underlying KPIs therefore. Indeed, the reason why we have not been covering Q2/H1 company results in the normal manner with ‘Financial Updates’ (contact us if you want to be added as a subscriber) is that YoY comparisons still offer more heat than light, in our view. Q3 will be far more instructive for identifying underlying patterns with retail offers and consumer behaviours adapting to a ‘new normal’.
Betting was the product most obviously bent out of shape by sports event cancellations. Betting has made a more than full recovery, with RP estimated total revenue (adjusting for share capture) in Q221 of £750m, up 96% YoY and even +35% over 2019 figures. However, while this implies a strong (by recent standards) 16% CAGR, Q221 events and margins have been very favourable to bookmakers as the ripple effect of pandemic policy responses continued to impact the sporting calendar. Tellingly, June 2021 saw the lowest volume of bets placed since the previous October, despite the Euros Championship. The underlying data therefore points to a normalisation of trading against increasingly tough comps; albeit assisted next year by the Qatar World Cup (albeit in an already busy Q4 rather than boosting summer trading). Virtuals betting has sunk back to pre-pandemic levels since August 2020 and continues a seasonal pattern, suggesting the engagement was pure substitution for live events which has not stuck. The much-vaunted growth of esports has also returned to March 2020 levels from last August, meaning c. 65% of the pandemic boost has been lost and esports betting represents just 0.6% of live event betting for larger operators in the UK (two important caveats). Overall, H2 is likely to be increasingly challenging, albeit the England-Italy result will no doubt help July figures.
Poker was the biggest flash in the pan for larger operators, with normalisation occurring from August 2020 (a recurring theme). Following lockdowns have had nowhere near the boost for the operators reporting to the gambling commission and Q221 is slightly down on Q119. However, an unknown within these figures is GGPoker, which is making very strong headway globally, especially in 2021. It is possible that the UK’s 2021 lockdowns created more of a poker spike than the large operator statistics suggest, with the larger operators – PokerStars especially – losing material share. The extent to which aggressive bonusing sticks as liquidity and therefore revenue share is an additional key question in deciding how the poker market shakes out. The sedate and predictable pattern of reported poker revenue is therefore likely to be hiding a much more dynamic segment, in our view.
Online casino and bingo were clear beneficiaries from first lockdown, with YoY Q220 growth of 31%. Unsurprisingly given the tough comps and market maturity, revenue for Q221 was down slightly (-0.4%). However, within this, April and May (lockdown months) set gaming records while June was down 14% MoM. This pattern can largely be explained by seasonality and the number of days in each month, but it may also augur an H2 correction, particularly given the impact of ‘Freedom Day’ from mid-July.
A level of H2 correction is inevitable, caused by a combination of four short-term factors:
- The continued normalisation of the sporting calendar evening out the number of events
- The full re-opening of retail gambling normalising some expenditure habits (the gain of £400m per quarter should be set against the loss or disruption of £1bn of landbased gambling, 65% of which is gaming)
- The reduced time people (who have not been pinged) have to gamble as they go back to work
- The reduced disposable income some people might have as furlough unwinds and the cost of more active living increases (eg, spending money on travel, eating out and holidays again)
Set against these pull-back drivers, we still discern a level of above-inflation growth in online gambling in the UK, which the digitising habit drivers of Covid-19 policy disruption are likely to cement. The initial negative revenue impact of tighter social responsibility measure are also starting to wash through comps. Equally, while some retail operators will return with an entertaining bang, others might be facing more of a transactional whimper. In a mature market like the UK, channel shift is more of a grinding process of changing customer habits than a ‘light-bulb moment’ where a critical mass of customers discover online gambling (along with other online transactions and entertainment) for the first time. Despite the H2 ‘normalisation’ we expect the UK online gambling market to be able to grow by c. 5% next year (in a like-for-like regulatory environment), after a rather more savage ‘hangover’ H2 YoY decline of 15%. However, a great deal now depends upon how governments and
To put the UK into context, it is worth considering this growth relative to how less mature digital jurisdictions have responded during the pandemic crisis (all Q2), especially when compared to pre-pandemic 2019 revenue:
- UK: +25% YoY; +32% vs. 2019
- Italy: +30% YoY (albeit with telling sequential MoM gaming declines); c. double 2019
- New Jersey: +75% YoY; 3x 2019
- Latin America: + c. 100% YoY; 3x 2019
- South Africa: + 90% YoY; c. 4x 2019
We expect all of these markets to give up at least some of these gains, but the structural growth boost has been significant: effectively concentrating c. 4 years of channel shift / adoption into one. Therefore, while Covid-19 policy responses might have raised some interesting question on growth and channel shift in more mature markets, they have transformed emerging markets. We will be blogging on our expected longer-term impact of Covid-19 by markets in September: the global impact is likely to be profound, in our view.
Featured article edited by SBC from ‘Winning Post’ Sunday 15 August 2021 (click on the below logo to access a full unedited version)