Indicators of betting as primary gambling activity

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1 Indicators of betting as primary gambling activity Advice note, October Introduction 1.1 The Gambling Commission s (the Commission) interpretation of the framework of the Gambling Act 2005 (the Act) is that it expresses Parliament s clear intention that permission to site category B2 gaming machines should be restricted to betting shops and casinos. The question of what constitutes a betting shop then arises. 1.2 The Commission has established its position that in order to make category B2 gaming machines available in premises, there must be sufficient facilities for betting available. In making judgements about whether the betting facilities are sufficient and ultimately whether the business is in fact a betting business the focus is primarily on the actual facilities available for betting and the use made of them. The Commission will take into account the expected or actual use of the betting facilities being provided but what matters is whether there are, or are intended to be, sufficient facilities for betting to constitute a betting business rather than an arcade business. 1.3 The Commission reinforced this understanding of the Act in May 2009 with the introduction of licence condition 16 to the Commission s Licence Conditions and Codes of Practice (LCCP), following extensive consultation with industry. 1.4 However, the question of what constitutes sufficient facilities for betting continues to be a subject of some debate, and therefore the Commission has issued this revised advice note to help clarify the approach taken when assessing compliance with licence condition The advice note does not represent additional statutory requirements in the form of s.24 or s.25 guidance under the Act but will be of interest to any party seeking to understand the approach taken by the Commission. The advice note does not seek to prescribe a particular or approved betting business model that new entrants must follow. Instead, it seeks to provide operators with greater clarity about what facilities might reasonably be expected to be present in premises operated as part of a betting business. 1.6 If an operator chooses to provide only some or none of the facilities described in this document, it does not necessarily indicate a compliance failure. However, where provision of facilities differs significantly from the advice set out, particularly if it is accompanied by very low levels of betting activity, the Commission is likely to require more persuasion that the business provides sufficient facilities for betting to meet its licence conditions. Where an operator is unable to satisfy the Commission that sufficient facilities for betting are available, the operating licence (or the betting part of a combined licence) may be at risk. Victoria Square House Victoria Square Birmingham B2 4BP T F

2 1.7 The Commission has sought to avoid providing a prescriptive definition of the term sufficient, in order not to stifle unnecessarily the ability of the industry to innovate, and to avoid encouraging a tick box approach to compliance. However, the Commission does consider it appropriate to consider the core characteristics shared by the vast majority of UK betting premises in order to help distinguish between betting businesses and arrangements that have been created with the main purpose of making gaming machines available. Where the main purpose of a business is to make gaming machines available, the business should be licensed as an Adult Gaming Centre and B2 machines should not be made available. 1.8 The six indicators below set out these shared characteristics and are therefore referred to by the Commission when assessing whether sufficient facilities for betting facilities are available. The Commission considers it a reasonable starting point to consider a business model within the context of the wider industry (ensuring that like for like consideration is made as far as possible), overlaid with the necessary judgements about whether departures from expectations of standard provision are consistent with a betting business. 1.9 Each case will be judged on its merits and the Commission accepts that operators with specialist or niche betting operations may not share all the characteristics of the wider industry. Our primary concern when considering such models is that they nonetheless operate within a framework that is consistent with the legislation and represent a genuine niche rather then a vehicle designed merely to enable the provision of gaming machines Indicators of betting as primary gambling activity: offer of established core products (including live event coverage and bet range) provision of information on products and events promotion of gambling opportunities and products actual or expected use made of betting facilities size of premises delivery of betting facilities. 2

3 2 Background LCCP and betting primary gambling activity 2.1 In respect of primary gambling activity for non-remote general betting standard licence holders, LCCP includes a specific licence condition and an ordinary code of practice. 2.2 Licence condition 16: Gaming machines may be made available for use in licensed betting premises only at times when there are also sufficient facilities for betting available. Such facilities for betting must include: the provision of information that enables the customer to access details of the events on which bets can be made facilities to enable to place bets facilities to establish the outcome of the events facilities to calculate the outcome of their bets facilities to be paid or credited with any winnings. Where licensees provide facilities for betting only by means of betting machines the licensee must ensure that the number of betting machines is greater than the number of gaming machines made available for use in reliance on the premises licence Ordinary code provision The factors listed in the ordinary code provisions with regard to betting as the primary gambling activity are the principal factors to consider in determining whether sufficient facilities are being provided to satisfy the requirement for primary gambling activity. The four indicators are as follows: range and frequency of events on which bets can be made ratio of the space available to customers allocated to the primary gambling activity, to that allocated to other gambling activities extent to which the primary gambling activity is promoted on the premises and by way of external advertising compared to other gambling activities use, either expected or actual, to be made of the different gambling facilities. Not all the indicators need to be present in a particular case, nor do they preclude others. 1 See paragraph 3.26, this element of the licence condition is redundant and the Commission is consulting on a proposed amendment to the licence condition. See consultations on our website. 3

4 3 Indicators typically characteristic of genuine betting businesses 3.1 This section sets out some of the indicators used by the Commission to assist it assessing whether sufficient facilities for betting are available at the time gaming machines are made available for use. 3.2 Each indicator is listed with a brief description of the facilities made available to customers in the majority of UK betting premises. The offer of established core products (including live event pictures and bet range) Overall range and frequency of events 3.3 High street bookmakers offering sufficient facilities for betting would typically look to optimise customer spend and time spent per visit by offering regular betting opportunities during opening hours. 3.4 The default opening hours for betting premises, set out in regulations, are 7am-10pm. Those hours may be extended with the approval of the local authority. In practice, shop opening times tend to vary slightly based on local business features. A typical betting shop offering sufficient facilities for betting would, for the large majority of hours of opening, broadcast live betting opportunities from one or more of the five core products listed below throughout the day. For illustrative purposes, we also have set out the off-course betting operator s average percentage of betting turnover 2 on each product as follows providing a range to one standard deviation: Off-course betting operators Average operator betting turnover by event (% of total turnover) mean and range (1SD)* Betting event Lower Mean Upper Dogs 6% 13% 20% Football 1% 18% 34% Horses 52% 75% 97% Numbers (including virtual content) 1% 9% 16% Other 0% 8% 17% * Data trimmed to 95% and excludes operators subject to PGA activity Range and frequency of events involving core products 3.5 A typical betting shop is likely to offer the following range and frequency of betting events involving core products. 3.6 This list does not make it a requirement for operators to accept bets from all customers at all times on such events. Operators may well restrict access, partially or wholly, to markets for sound commercial reasons, which can be explained to the Commission. Horseracing: regular daily service offering horse racing betting from Great Britain and Ireland in line with the respective fixture lists morning meetings staged elsewhere, for example South African typical day will include two or more staggered British horse meetings with up to eight races per card. Greyhound racing: 2 Data includes all operators last submitted returns post 1 January

5 regular daily service offering greyhound betting from up to six venues divided into morning, afternoon and evening slots. Football, including: UK domestic league football European league football domestic and European cup competitions international matches. Numbers, including virtual betting products: numbers betting products (such as 49s and Irish Lottery) virtual racing events available throughout each day. Other sports betting including: PGA European Tour and US PGA Tour golf each week tennis international and domestic cricket. Broadcasting live event coverage for core products 3.7 One of the most effective ways to promote betting events on premises is through the provision of live event coverage. 3.8 Events such as football, golf and tennis are often shown on terrestrial television or via commercial agreement with satellite providers such as Sky (although all operators would be advised to satisfy themselves that the terms of any arrangement they have with content providers are consistent with the use to which they put that content). Domestic coverage of the free-to-air listed sport events such as the Grand National is also often made available. Genuine betting businesses are likely to make investment, often significant, in the provision of live pictures because of the positive impact on levels of custom. 3.9 A typical betting shop will often provide an audio service to alert customers to the live events that are imminent and available to bet on. Range of bets available on core products 3.10 A typical betting shop is likely to offer a range of types of bet that includes the following: single bets on all of the five core products referred to above multiple bets across all of the above five categories, for example some, or all, of the following: doubles, trebles, patents, Lucky 15s, Lucky 31s, Yankees and Super Yankees ante-post betting on high profile competitions in all core products. Specific bet type range by core product 3.11 In addition, it is characteristic of typical betting shops to offer a range of specific bets for individual core products, including the following: Horse and greyhound racing: forecast and tricast betting are likely to be available when betting on horse or dog races a customer placing bets on horse or dog racing would typically be offered the choice of the current price or the starting price. Football: bets available are likely to include first goalscorer, correct score and scorecast betting dedicated football coupons are likely to be available in midweek and weekend formats to facilitate the placing of multiple bets. Provision of information on products and events 5

6 Customer information screens 3.12 A betting shop typically has means of providing customers with details of upcoming events and betting opportunities and also results of previous events. In particular, the following information is likely to be readily available on the next betting opportunity: event type participants odds of participants time and location of event each-way place terms. Horse and dog events may also include details of going, jockey changes, non-runners and rule four details. Event details including form/results 3.13 Betting shops typically provide easily accessible details of the day s horse and dog meetings which include runners, form guides and tips, commonly (but not exclusively) provided by the Racing Post Publicising results in the customer area helps to promote the range of betting events available and reminds customers of the availability and the scope of individual betting products. Promotion of gambling opportunities and products External promotion 3.15 A typical betting shop offering sufficient facilities for betting uses promotional tools to advertise products and betting events in window displays, in particular to generate interest (and ultimately revenue) in the build up to a significant sporting event, for example the Grand National or a live Premier League football match Where other forms of advertising are used, a typical betting shop would usually reference betting products as part of their advertising Trading names used and other external fascia may also provide an indicator of the true nature of the business. Conversely, such displays may indicate that betting may not be the primary gambling activity of the premises (for example where it references other forms of gambling). Actual use made of betting facilities 3.18 A typical betting shop would be likely to attract a mix of customers each day, some of whom would be in the premises to place bets In making judgements about whether individual premises are being run as betting businesses, the Commission will take into account expected or actual use of the betting facilities being provided. What matters is whether there is, or is intended to be, sufficient betting to constitute a betting business, rather than an arcade business. In assessing this, the Commission takes into account the actual use of the facilities in terms of, number of bets accepted, total betting stakes received and gross gambling yield (GGY) generated To provide operators with a clearer idea of the level of betting activity carried out by typical betting businesses, taking data from all betting operators in licence fee category A (which permits the operation of up to four premises), the average number of betting slips taken per shop per week is 1379 and the range (within one standard deviation) is

7 3.21 In the public debate surrounding the provision of gaming machines in betting shops, much has been made of the ratio of gaming machine to over-the-counter turnover (the argument that tends to be made is that if machine turnover exceeds over-the-counter turnover, a business may not in fact be a betting business). The Commission s view is that such arguments are misguided. A betting business may well have a machine turnover greatly in excess of its over-the-counter business due to the low margin nature of gaming machines. What matters is whether there is, or is likely to be, sufficient facilities for betting. To provide further illustration of this point, the average proportion of total GGY accounted for by betting GGY of Category A bookmakers is 58% and the range (within one standard deviation) is 36% to 80% The Commission will therefore consider an operator s actual use data on number of bets, turnover and GGY against comparably sized operators. Where actual usage is significantly lower than comparably sized operators the Commission may be particularly concerned to understand from the operator how it is complying with Licence Condition 16, despite the low usage. The Commission will also consider the measures of expected use outlined in this document. In effect, it will look at the whole business in forming its views rather than focusing on single measures. The Commission considers that usage data is important because (depending on all circumstances) it shows the sufficiency or otherwise of the facilities for betting being provided A key test of whether a business is in fact a betting business is that it has business objectives that are based on betting, and the provision of sufficient betting facilities, which may include interim targets (and supporting promotional activity). Size of premises sufficient to provide facilities 3.24 In order to provide sufficient facilities for betting as outlined above the Commission will have regard to the actual size of the premises and whether the premises are adequate to provide sufficient facilities for betting, rather than act as a gaming machines area. Delivery of betting facilities 3.25 If an operator chooses to use self-service betting terminals (SSBTs) as part of their operating model they will require the relevant ancillary remote operating licence in addition to their non-remote general betting standard licence The use of SSBTs is a form of remote communication, therefore a betting premises which relies wholly on the use of SSBTs for the making and accepting of bets would require a remote operating licence only, which would not confer any entitlement to make gaming machines available for use. The element of the licence condition at paragraph 2.2 is technically redundant and will be amended at a suitable opportunity Characteristic of a typical betting shop will be the ability to satisfy the customer s wishes to be able to place bets, be paid winnings, and query betting products and services within the premises. Gambling Commission October 2013 Ref number ADV 13/09 3 Proposals to amend Licence Condition 16 are included in the September 2013 LCCP consultation. If introduced the proposed amendments will make it absolutely clear that gaming machines may only be made available on licensed betting premises where the operator holds a non-remote general betting (standard) licence and is providing non-remote betting facilities as its primary gambling activity. 7

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