You may look at the gambling and betting industry and think there is a lot of healthy competition with hundreds of brands today vying for our attention. There are many businesses, however, while they may appear to be independent, are actually part of the same company, and you may never even. Similar to the majority of markets it is true that there are only a handful of major players, while the rest are left to be a bit shaky for the rest of the market.
It’s not just the traditional high-street bookshops like Paddy Power and Betfred that hold the top spot in the most prestigious betting leagues. Many of the early online-only bookmakers have already defeated the previous local-based ones, such as Bet365, and the largest and the first online exchange, Betfair. Mergers between already large companies such as Ladbrokes and Coral and Betfair and Paddy Power has created massive bookshops and giants, and they are now combining to create multi-billion pound corporations like Entain and Flutter Entertainment, who are growing into America.
It is believed that the future of publishing in the UK is in the balance since it could become the sole monopoly of just a handful of huge companies, similar to the energy market.
In this piece, we examine the growth of the UK gambling industry, and the size of the profits made along with the progressive transition to online betting and gaming.
The size of UK Gambling Industry
The UK gambling industry generates approximately PS15 billion of annual revenue and was growing rapidly 8 percent a year, until the pandemic of 2020. Of this total, well over one-third (PS6.8 billion) is made from online gambling, which is an approximate split of 60% casino and 40 percent betting on sports.
The whole industry contributes approximately PS8 billion towards the UK treasury each year and directly employs over 50,000 people (perhaps up to 100,000 if you include the indirect employees).
Despite the steady shift towards gambling online since turn of the millennium , there are still around 7600 betting shops within the UK (90 percent of them are run by Coral, William Hill, Paddy Power, Ladbrokes and Betfred), 648 bingo halls fourteen48 arcades and 84 casinos that are located in the UK (52 of which are owned of the Rank Group and 32 by Genting). There are currently in the area of 200,000 gaming devices used in the UK also, and of those, around 40,000 are the controversial fixed-odds betting machines (FOBTs).
The National Lottery (and other lottery) revenues are also part of the overall gambling revenue figure. It amounts to PS4.15 billion of the total, with around PS300 million going back to good causes.
High street bookmaking is responsible for a much smaller amount, PS2.4 billion annually, accounting for more than 54% of all non-remote gambling revenue in the UK. Arcades, family entertainment centers casino, bingo halls and bingo halls along with pool betting (such like the Tote) and bookies on track are the remainder.
Casinos that are located in the land generate more than PS1 billion in annual revenue. In a complete switch with online casinos, in the real world, machines for gaming like slots account for just 21% of casinos’ revenues, while the table games like blackjack or roulette make up the other 79 percent.
On-line Betting and Casino
The majority of gaming revenues generated by online casinos come from remote casinos. In this, almost three quarters (72%) comes from slots, while the remaining comes from table games and others (an opposite trend to land based casinos). Poker, which is classified under the category of casino, is only 3.5% of the total revenues.
Sports betting is second largest sector, accounting for about 38% of total online revenues. The majority of this is from football betting, around 32% come from horse racing and the remainder from other sources. Virtuals make unexpected appearances as the 3rd most popular sport to bet on. This shows the trend moving away from football, indicating that people tend to diversify their gambling options, since footy used to account for around 54% of all online sports bets.
Other sources of online revenues include online bingo, exchange betting, and betting on pools. The lottery industry is not included in this list.
The online sector in 2014 made up 29% of the overall market share. By 2016, this was up to 32%. By 2020, it was 44.5 percent. In reality, if we take out lotteries from the equation, the online industry took 60% of remaining annual market share of gambling-related activity in UK which shows how fast the internet is taking over the gambling industry.
Development from High Street into Online Betting
With the exception of the odd independent bookie, and a few of the stalls that you can find at the racetracks, every bookmaker now offer online betting. It wasn’t have to be that way prior to the advent of the internet entering the market was much more challenging than it is now. To learn more about the history behind gambling, visit our dedicated page.
Before 1960 in the UK it was not legal to make bets off greyhound and horse tracks. Gambling was tightly regulated by the government. Even though it was true that illegal operators existed, overall you would find it difficult to place bets off the track.
Bookies could still take bets off-course through loop-holes in the law that permitted bets to take place via telephone or by postal order. This is how William Hill started out. If you were rich enough then there were many alternatives available to you. Ladbrokes for instance, began as a gentleman’s bookmaker for famous clients. If however, you were a typical working class lad or lass , however, there were very few choices available.
Even then most betting at the time was for dog and horse racing. Football betting was in general outlawed and only permitted for lower stakes pools betting syndicates, like the football pools (which still exists to this day).
In the past, betting was an easy task as you needed to go to a race-track for it (or gamble illegally in a backstreet gambling den). This was unless you were wealthy and the law wasn’t applicable to you and you could place bets through a reputable merchant.
1960 Betting and Gaming Act and Betting Shops
In 1960, the federal government finally acknowledged the modern age. People with a normal life had more money from their pocket and wanted more freedom with what they could spend their money. The act on betting for the first time permitted betting off-course and, by the year following, May 1961, an array of betting establishments had were open across the country at a speed of 100 a week.
The betting market was mostly restricted to horse racing. There were rules that were in place like the ‘trebles rule’ in football. This meant all footy bets needed to be accumulators with at least 3 or more options, otherwise you were not allowed to place bets. The only sports you could place singles on was racing.
The new venture was well-liked by the citizens of Britain and sowed the seeds which eventually led to UK becoming the leading betting country (per head) in the world.
One of the first persons to open betting shops is Joel Coral and 10,000 shops are said to have opened within the first six months. The UK’s largest bookmaker in the high street, William Hill, initially refused to open betting shops as they considered them to be a cancer on society. He changed his mind in the year 1966.
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1970s and 1980s
The bookmaker market grew rapidly during the years following the legalization of betting on high-streets. By the 1970’s there were 15,000 shops in the United Kingdom.
This was the time when some of the most famous names that we have today established and established their name. The oldest bookmakers in Britain, Ladbrokes, William Hill and Coral were earning such a high amount that they began investing in other sectors of leisure.
Despite the immense success of high-street bookies during the last three decades, the industry was still dominated by a limited customer base. The vast majority of punters that patronized betting establishments were middle class men and the reputation of stores as being seedy dark and smoky with smoke and foul language didn’t assist in changing this.
Bookies sought to create a larger customer base by introducing new features such as live sport in stores and football-related coupons, which encouraged more diverse customers and bets. The removal of the “trebles rule’ on football in 1990’s was a major step towards helping the bookies expand their offerings to allow punters to place bets on singles on many sports.
A steadily better image, wider range of markets and bets, more televised sports (especially Premier League football) and an ever-growing disposable income and saw the fortunes for bookmakers rise again.
In the mid-1990’s, the gaming industry seemed locked down with five major companies ruling the landscape, along with several independents from across the country. Many people thought that gaming and betting could be the same for all time. It was only until the internet came along.
New Millennium and the Internet
As the 90’s came to a close , a brand new threat began to emerge against the old orderof online betting. This was more dangerous for the bookies that had been established on the high street than you’d think.
The bookmaking market on the high streets was regulated by different gambling and betting legislations and betting was taxed (9p/PS1 placed). Online gambling however was a somewhat like the wild west, you could basically set up wherever you wanted, create an online platform and then begin accepting bets on customers for tax free.
While tax-free winnings and stakes in gambling was, at the time, technically illegal it was almost impossible to police. New businesses, along with the bookies that were once on the high streets started to establish new websites, most of them located off shore within Gibraltar or Malta, to take advantage of the tax-free trade (most are still based there even today).
In the late 1990’s and beginning of 2000, the market share for online shopping was very low and although the new , unregulated online trading was a concern it was not widespread enough to bring about changes. The bookies were still making enough profit from the market despite tax-free new companies were now taking a share from the profit.
Victor Chandler and Tax
In 1999, Victor Chandler (now BetVictor) transferred his bookmaking business from shore to Gibraltar in protest at the rates of tax on betting in the UK by selling his 41 bookshops to Coral. This allowed Victor to offer betting opportunities for international customers, particularly from Asia, without paying UK tax. It also allowed UK punters to bet without having to pay the 9p stake tax.
It is believed it was this decision that led the then UK chancellor, Gordon Brown, to remove the betting tax in 2001. He claimed that despite removing the tax that was paid directly by the punter , the new tax were levied on bookies’ profits made in the UK and by the time the ship had mostly gone and the majority of traditional bookshops operated online through a foreign location.
2005 Gambling Act
The government eventually realized that the status quo could not last for any length of time. This wasn’t just about taxing businesses either as anyone could create an overseas website and it was not a guarantee for UK customers under law.
In 2005 the UK government created a new independent body which is independent of the Department of Culture, known as the Gambling Commission. This commission was established to issue and supervise the new UK gambling licences as required in the law of the current Act for any business that wants to provide gambling services (both offline and online) within the UK.
Overnight this changed the landscape of online betting, with all companies having to have a licence to operate legally in the UK.
The old high street bookies had the best of all possible worlds. They still had their traditional high-street operation that, although not growing at the rate of the pre-online days, was not declining as many had hoped. It appeared that online and offline betting was booming and the big old businesses were in the ideal position to take advantage of this.
Still they didn’t have the luxury of doing things their way. There were a handful of companies that started in the late 1990’s and the early 2000’s were starting to challenge the previous orders, specifically Bet365, Betfair and 888. By the time they reached 2010, they had taken over a significant part of the online market.
The second decade of the century witnessed a critical switch where online gambling surpassed street wagers. Many people had access to the internet, specifically when they were on the move via mobile phones. With the absence of stigmatism in betting online vs . on the street, the industry experienced its biggest growth since the 1960’s.
There was no win-win situation for the big bookies and the book stores, 2010 also saw a number of new companies launch into the market. The majority of these new companies weren’t weighed down by the cost of running a load of high street stores or by employing a large number of people. In addition, by focusing on niche markets they could compete with larger companies. The effect of this has been an abundance of mergers and acquisitions over the last few years as the bigger operators try to snatch up competitors and new innovations.
2014. Gambling Act Amendment
In 2014, the majority gambling online was carried out by companies operating in non-UK markets. The consequence was the UK government paying lots of tax.
The 2014 amendment to the gambling act was brought in for several reasons, such as more attention to responsible gambling and protecting vulnerable persons. The main motive was being honest is to allow the government to better tax the gambling industry.
The law introduced an entirely new point of consumption tax for UK licenced betting sites and bookies. This meant, whether based on the UK or not, all merchants with that intention to provide casino services inside the UK were required to pay tax on their UK earnings. It evened the playing field, and to be frank put the burden on the larger operators.
However the law on gambling is expected to be updated to keep up with modern technology, which means there could possibly be more to talk about very soon.
Mergers and Acquisitions
Mergers and acquisitions have not been something new for bookmakers Many have bought up smaller independents for a long time. The trend in recent years however of the big companies merging is unique and possibly could signal a new age of publishing.
Like all markets that are free, the biggest challenge for the future will be to keep competition alive. When markets are fresh (as online betting was in the latter half of 1990, and into 2000) there are many different niches that companies can fill. As time goes on however money talks and the bigger companies are able to purchase smaller companies, either to include their own products or simply to eliminate the rivalry.
Only time will tell but there is a distinct possibility a number of betting companies will be able to dominate the market and, much like what has occurred in the banking and energy markets, might begin to join forces. This will only be a bad thing for gamblers and companies that are looking to get into the market.