FOBTs Stake Cut Has Negative Impact on William Hill and Other Operators

Discussion in 'Gambling News' started by Marina, Mar 26, 2019.

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  1. Marina

    Marina Administrator Staff Member

    The UK’s decision to cut the stakes on fixed-odds betting terminals from £100 to £2 has started causing panic to UK operators.
    A major name in the UK, Williams Hill, has started asking landlords to reduce the rents or they will risk losing their business as a consequence of the stake cut.


    The Stake Cut Consequences at Their Peak

    The stake cuts, apparently, will have an immediate impact on the operators, but on landlords as well.
    William Hill has sent out a letter to 2,000 landlords, asking them to reduce the rents, and given the situation, other operators may do the same.

    As William Hill has shown with this move, its shops and the shops of many other smaller bookmakers will most likely be at risk of closing, specifically due to the new laws regarding FOBT maximum stakes. Players will only be allowed to bet £2, compared to the £100 that they could previously bet. The new regulations are around the corner and will take effect from 1st of April. This will result in huge revenue loss to all operators, and evidently, they have started considering their options. William Hill opted for pleading with landlords to reduce rents, but what could other bookmakers do?

    Those operators that were depending on FOBTs had already taken action to sign up as many online players possible, so they could work around the new laws. They have started giving players lucrative, rewarding promotions to convince them to join and start betting on other online games. Their aim is to make players consider other options that would replace for the FOBTs. These players will have freedom of choice and access to bigger wagers than £2.

    William Hill has thought of another strategy, apparently. The operator’s plan is to pray and beg landlords to reduce the rents, believe it or not, in half. The company wrote that the change in regulations would mean that many shops would see costs rise significantly while the revenues will decline by 50% in many cases. The operator is hoping that landlords will realize that some business (half the rent) is better than no business at all. As William Hill stated, the operator’s hopes are that for many landlords, it is better for their shops to be paying a lower level rent than having empty shops.

    However, this plan is pretty bold. The operator is asking landlords to reduce their rents by half, meaning to agree to give up half of their revenue. The landlords would have to be pretty desperate to keep William Hill as a tenant, considering that the operator basically explains that in order not to get its own revenue to half, it asks landlords to do precisely that. Will William Hill pull that off eventually?


    The Solution

    You may think that no landlord would agree on that, but, as it turns out, analysts believe that William Hill might succeed in that. William Hill's move is indeed bold, but the operator must have considered all the possible outcomes for its business and the landlords' businesses before sending out 2,000 letters.

    An equity analyst Nick Hyett, which works at Hargreaves Lansdown, believes that William Hill actually does have a chance to succeed with this plan. In his opinion, there are enough weaknesses on the high street that landlords may actually agree to reduce their rents in half for stability sakes. With Brexit still pending, they would be aware that economic instability and tenant uncertainty are yet to come over the next few months, so keeping at least half of what they have would be a reasonable step in these terrible times.

    As it turns out, there is a lot going on in the UK at the moment, and the stake cut couldn’t have come at a worse moment. With Brexit still being negotiated, the stake cut taking effect in mere days and the tougher regulations, the UK gambling industry and the landlords are yet to receive the hardest blows. But as the analyst suggested, considering a solution that would suit both sides would be the most reasonable thing landlords could do. This way, they would still have tenants, and the bookmakers would keep their shops. We cannot say that this is a win-win situation, but at least, it is a solution that at the moment would be the most suitable.
     

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