The gambling industry is one of the most profit-yielding industries in the world. Starting from the US that makes almost $137 billion a year all the way to Australia and its online gambling sites such as Casinos-australia.net, where almost 4 out of 5 people are involved in some form of gambling, the world is full of attractive gambling possibilities.
In the UK, the industry has produced around 14.5 billion pounds in 2018 and is set to grow even larger. However, there have been several setbacks to the industry that contributed to the growing fears of dropping stock prices and low profitability of investing in them.
In this article, we’ll take a look at what some of these setbacks were and how the industry can make its way out of this burden.
Hit with restrictions
2018 has been a major year for the UK’s gambling industry. The government hit the industry with two of the most severe legal blows, possibly curbing its profits.
The first blow was slashing the maximum stake on highly profitable fixed-odds betting terminals (FOBTs), which are essentially the slot machines with a wide variety of games, from 100 pounds to just 2 pounds.
According to the Gambling Commission, people betting in brick-and-mortar shops and other gambling establishments currently add up to 3.2 billion pounds. Out of this number, almost half – 1.7 billion pounds, is put in those FOBTs. As a result, the future for such establishments, which currently include 33,000 FOBTs, is looking incredibly dim.
The second blow was in part directed at mitigating the reduced tax returns by the first blow. The fees and duties for online and mobile casino games have increased from 15% to 21%. On the balance sheet, this might be offsetting the revenues received by the government, however, for the gambling industry, these two measures are expected to tear a big hole.
However, despite the gloomy setback and dim future expectations, the market and stocks might not be a lost cause after all. Yes, there will be financial hardships in the short term but in more long-term calculations, the industry seems to be in flux.
There are two main reasons why such prospects might be realistic. One is associated with internet and online/mobile gambling, and another – expanding the markets and improving the coverage.
For William Hill and GVC, which are the most popular and largest high-street betting shop operators in the UK, as well as other major actors, these two possibilities can alleviate severe legal blows and contribute to getting more sustainable growth.
As a first measure, these groups are increasingly transforming to the online platforms. Even though online betting has been around for almost 20 years, the rise of smartphones from 2010 has really contributed to the flux of online and mobile betting.
The major UK operators, William Hill and Ladbrokes, have started incorporating the online platforms from as far back as 2000, which gave them a considerable amount of know-how and experience in the field. And even though going online has also reduced the entrance barriers on the market and contributed to the lost influence of these big operators, the future for them is still looking up.
While the UK is in its peak online development, beyond it remote gambling is in its infancy. This makes for a perfect opportunity for the UK groups like William Hill, GVC, and others to start cultivating new markets. Their experience and expertise, as well as fertile markets with virtually no competition and high demand (their inhabitants are constantly demanding online opportunities), can yield much higher profits than the industry is getting right now.
Besides, making a comprehensive mobile platform for online gambling can contribute to creating a more streamlined and tailored products for the customers. The data generated from the customer feedback can be used by gambling operators to make more precise generalizations about their customers.
The second measure is going worldwide, and especially towards the US. The US has outlawed sports betting almost 25 years ago, except in four states (Delaware, Montana, Nevada, and Oregon). In Spring 2018, the US Supreme Court ruled that the Professional and Amateur Sports Protection Act was unconstitutional. This created the framework for individual states to regulate sports betting themselves.
Despite such strict regulations in the past, the US has still been flourishing with illegal gambling. According to the American Gambling Association, the underground market has said to be worth almost $150 bn. Therefore, the market is very lucrative for foreign operators.
In fact, William Hill, as well as GVC and other operators are already owning major gambling sites in the US. For example, William Hill owns 57% of the sports betting market in Nevada and is the exclusive bookmaker in Delaware.
As for legalization prospects, seven US states are expected to legalize sports betting this year, yielding nearly $1.5bn in revenues in both physical and online betting. In the near future, the additional 20 states are also expected to make sports betting legal.
Short-term vs. Long-term
Overall, the government might be inflicting severe blows to the UK gambling operators, they still have various remedies under their sleeves.
Online and mobile platforms are already booming in the UK, as well as beyond the UK. The experience and the know-how of William Hill, GVC, and other operators might help them garner more coverage outside of the country and get more revenues.
Cultivating the US market can be another important factor in offsetting those legal blows. Several US states are said to legalize sports betting and the US gambling groups have to be quick to jump to this opportunity.
All in all, the UK gambling stocks might experience short-term drops but are set to expand in a long-term perspective.