Casino owners lash out at Gambling Bill

Like old-time gold prospectors, international gambling giants are lining up to rush to the UK, lured by promises of easy profits in a deregulated British market. It’s a market with a lot at stake – it is estimated the industry will generate an annual turnover of &£2.5bn gross profits by 2009.

There is no doubt the Gambling Bill will revolutionise the gaming industry, liberating the rules, including marketing, in every area from bingo and bookmaking to casinos and lotteries.

But the excitement overseas is not matched by domestic operators. As Lord Mancroft, a Conservative member of the Government’s cross-party scrutiny committee on the draft Gambling Bill and chairman of lottery operator Inter Lotto, points out, the industry most affected by the bill – the casinos – is the one that hates it most.

The UK gaming industry is seething with rage following culture secretary Tessa Jowell’s refusal to allow Category A unlimited prize machines in all sizes of casino. Rank commercial director Nigel Sibley says the Government is creating a “very peculiar and uneven playing field” that will disadvantage existing UK operators.

Category A machines are crucial to the casino industry, with anecdotal evidence suggesting casinos in the US make a majority of their profits from the machines. The scrutiny committee had called on Jowell to allow all sizes of casino to house these giant jackpot machines (MW July 22).

Jowell insists Category A machines will be available only in the super-size “resort” casinos. The reason, she said, is to reduce the risk of problem gambling. However, the UK industry has its doubts, with sources claiming unrestricted access to Category A machines will make little difference to gambling levels.

Sibley adds: “It is a shame our voice has been disregarded. There is a growing feeling that all the Government cares about is to bring in foreign investment.”

Others in the industry have condemned the decision as a cynical attempt to pander to foreign money. One gaming industry chief, who asked not to be named for fear of “a petulant reaction” by the Government, says the bill is “for foreign entrants that will adversely affect UK companies”.

Gala sales and marketing director Richard Sowerby also admits “disappointment with some aspects of the bill” but adds the legislation is still a necessary step in the right direction.

However, Dresdner Kleinwort Wasserstein leisure analyst Andrew Lee says Sowerby might have reason to be worried about the bill. Lee questions whether incumbent operators have the money, skill and experience to match foreign operators. He also says restrictions on Category A machines call into question the future of UK operators: “I think many small casinos will be so adversely disadvantaged by the bill that they will struggle to survive.”

But the future may not be so bleak with many believing talk of a US invasion is hot air. Gala’s Sowerby agrees it will be “very interesting to see how much of the stated casino developments actually end up here”.

MGM Mirage European chief Lloyd Nathan reacts spiritedly to suggestions that US companies are not committed to the UK, saying that MGM has “put real money on the ground” through its deals with Earls Court, Olympia and Newcastle United.

But, Nathan adds, there is still a lot to be resolved before US companies will commit to UK gaming. He says tax levels need to be lowered, while the European directive on money laundering is prohibitive to the regional model. The directive says casinos need to identify customers before they enter the site, effectively creating a membership law for the operators.

Nathan struggles to see the rationale behind claims the Government will create a biased market. “The Government says anyone can set up a casino. UK operators have the same access to capital and everyone is pursuing the regional casino model, one way or another.”

Indeed, UK companies are jockeying to position themselves with the bigger US competitors, with many establishing joint ventures, such as Harrah’s with Gala and MGM with Metro Casinos.

Others are moving to reposition themselves for the new era with the help of ad agencies. Ladbrokes appointed Bartle Bogle Hegarty (BBH) to work on its strategy (MW March 11), while Rank is reviewing its advertising and branding approach (MW June 10).

However, Sibley still says the high street is where Rank’s core business will remain, and this is where the legislation will hit. Lord Mancroft says the gambling industry will have its chance to alter legislation although this is not likely to happen until the “horse trading” begins to push the bill through.

With a first reading expected on October 11, this is likely to happen before the anticipated General Election in May. The Government may have other priorities grabbing its attention, but for the indigenous gaming industry it could be the last roll of the dice.