Aug 28 2020
The Gambling and Betting Activities industry has not been immune to the effects of the COVID-19 (coronavirus) pandemic. All non-essential retail establishments closed on 23 March 2020, which obliterated physical revenue for bookmakers and pushed consumers online. For example, over the six months through June 2020, GVC Holdings, the parent company of Ladbrokes Coral Group, reported a like-for-like 50% decline in UK retail net gaming revenue (NGR), reflecting the government-imposed closure of bricks-and-mortar stores between March and June.
Even as remote gambling launched, growth expectations were muted as governments around the globe postponed key sporting events such as the Premier League and the 2020 Tokyo Olympics. Compounding this, the ban on using credit cards for gambling and betting came into effect on 14 April 2020, further depressing revenue expectations. Over 2020-21, IBISWorld expects the Gambling and Betting Activities industry’s revenue to fall by 27% to £11.1 billion.
Adaptation and shifting products
Despite the problems posed by the coronavirus pandemic, both operators and gamblers quickly adapted to the changing landscape. In the absence of football and horse racing, which account for approximately 75% of the UK sports betting market according to the Gambling Commission (GC), operators have introduced new games and individuals have looked to other arenas to place bets.
Remote gambling sites quickly moved to fortify e-sports offerings, while others made e-sports products more prominent on websites and apps. The global gaming industry has thrived as individuals look for a distraction and an element of social interaction at home, and sports leagues across the world have used e-sports to maintain interest and a sense of competition during lockdown. For example, after the cancellation of races, Formula 1 launched a Virtual Grand Prix series in late March 2020. While the e-sports arena has also been affected by the pandemic with cancelled tournaments, the fallout has not been as large as the conventional sporting arena due to the remote nature of e-sports.
Individuals have also turned to alternative areas of interest. According to data from the GC, the gross gambling yield (GGY) for e-sports betting surged by 2,992% to just above £1.5 million over the year through March 2020, and increased by a further 124% in April and then by 36% to £4.2 million in May. While the initial increase illustrates e-sports was a rapidly expanding area, continued increases in GGY display how popular gaming was while traditional sports were off the books.
Meanwhile, in an April YouGov survey, although only 0.2% of adult respondents stated that they had started gambling for the first time over the first four weeks of the pandemic, 33% said they had tried one or more new gambling activities during lockdown, with the most popular category being games providing instant gratification, such as slots, followed by online poker, as additional leisure time helped spur the uptake of new activities.
Even as lockdown measures have started to ease, remote gambling is expected to remain the dominant channel. Data from the GC indicates remote GGY increased 115% to £217.5 million between May and June, with a higher GGY in June than the pre-lockdown average.
Sports betting is expected to drive future growth. Sports betting enjoyed a victorious return as major events resumed on-screen in May and even more so in June. Data from the GC states total bets placed on real-event sports increased 146% from £104 million in May to £255.4 million in June, after reaching its lowest levels of £61 million in April. This is a higher level than the average GGR pre-lockdown.
One hindrance to the recovery of remote and sports betting is the lack of spectators, especially with horse racing where there is widespread gambling on site. However, pilot events to test the safe return of spectators at UK sporting events resumed on 15 August and the government has announced a view to reopening competition venues for sports fans, with social distancing measures in place, from 1 October. Further, the British Horseracing Association has published its nine-point Racing Recovery Plan, where the return of spectators to the racecourse was a key priority.
Meanwhile, following a challenging spring, the 2020-21 Premier League season is set to begin on 12 September 2020, which is likely to help further boost NGR from UK sports betting. Looking ahead, IBISWorld expects 2021-22 to be a strong year for the Gambling and Betting Activities industry with the 2020 UEFA Euro tournament and the Olympics both being delayed until the coming summer. Revenue is estimated to increase by 23.9% over the year.
At the same time, the market for e-sports is expected to thrive. While initially a substitute for real-event betting during the pandemic, e-sports has grown rapidly in recent years and presents a new way to engage individuals and bring in revenue. Furthermore, immersive technology could enable fans to experience games live without having to be physically present, an idea that could help overcome social distancing capacity constraints.
Despite the positive outlook, the industry continues to face obstacles to growth. The accelerated shift towards remote gambling has compounded existing pressures for physical establishments, including maximum limits of £2 on fixed-odds betting terminals and rising duties. This has prompted a number of bookmakers to close their doors. For instance, in August 2020, the Gambling and Betting Activities industry’s second largest player, William Hill, announced the permanent closure of 119 establishments and plans to merge its retail and online operations. Those failing to adapt to a digital post-pandemic world risk losing out of a booming market.
However, the pandemic has also put problem gamblers at risk with more free time, uncertainty and rising access due to technology. Recognising this and following a yearlong data collection review, a group of more than 50 MPs, who have previously successfully campaigned for a maximum stake on FOBTs and a ban on credit card bets, have proposed even tighter regulatory oversight, including a ban on TV and online gambling advertisements, an end to loyalty schemes and inducements to bet, extension of the £2 stake to online slot machines, independent affordability checks to ensure that people do not gamble more than they can afford, controls on gambling game design, and a new ombudsman to resolve disputes. Tighter regulation is anticipated to constrain the industry’s recovery over the long term.