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From The EuroMillions To Simon Cowell's Red Or Black, Why Have Britons Turned To Gambling In A Recession?

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Last week, Adrian and Gillian Bayford won £148m on the EuroMillions, making the mild mannered couple from Suffolk richer than icons like Tom Jones and Eric Clapton.

The win came at “just the right time”, Ms Bayford told the Independent, as money had proved to be hard to come by in the previous few months.

Playing the lottery might not be considered by many as gambling, but it does prompt a poignant question: why, when UK unemployment is still 2.56m, and the average wage is less than £27,000, do people continue to spend what little money they have on taking a punt?

Gambling as an industry is booming, and it’s not just online, it's everywhere.

bayford

Money bags: Adrian and Gillian Bayford won more than £148m on the Euromillions

Saturday night sees the launch of the second series of Simon Cowell's Red or Black gameshow. Fans of the last series will notice a number of format changes after the Gambling Commission complained that the roulette-themed show encouraged gambling.

So, the nightly £1m jackpot will be reduced to £500,000 and contestants must use more “skill and judgement” to win the big money prizes. And that giant roulette wheel used during the game has been scrapped.

While the commission decided against further action, accusations of glamourising gambling signal a trend.

We have seen a high street revival in the last two years thanks to improved technology and better positioning on the nation’s high streets.

Changes to licensing and planning laws have enabled betting shop operators to benefit from a recession-led increase in availability of premises – as other shops have disappeared from our streets, bookies have been able to relocate to higher-footfall locations that deliver more customers.

Betting brands have also worked hard to restore the social aspect of visiting a betting shop – proponents argue it’s one of the few places that encourages a community to come together and doesn’t involve alcohol.

However, the biggest driver for the high street resurgence is the new generation of gambling machines.

machine

Gone are the simple three bell-jar fruit machines and £50 jackpots; modern gambling machines, known as Fixed Odds Betting Terminals by the industry, allow you to play all manner of casino games and place bets in quick succession, with potential prize money in the thousands.

David Walmsley, sport and leisure analyst for Mintel, wrote a report on the future of high street gambling in March 2012. His prognosis was positive, although he warned if machine growth was to stall, it could spell trouble for the shops.

“Fortunately, the industry can point to the comparative youth and technology-led nature of the machine segment as reasons to believe its recent growth rates can be sustained,” he wrote.

“Expanding the player base will be key to that too, but the indications are that it can be achieved.”

This view was supported by James Hollins, leisure analyst for Investec. Speaking to Huffington Post, Hollins said there was a still huge audience for high street bookies, driven by the new machines.

“These are ridiculously advanced compared to the machines of a few years ago; now you can play roulette, race cars…it’s really provided a huge fillip for the industry,” he said.

“The high street definitely isn’t dead yet; in fact it’s experienced year on year growth since 2009.”

will hill

William Hill and Ladbrokes are still the market leaders, owning more than 2,000 shops each. That figure has remained rather static in recent years, but the pitch locations have improved.

A spokesman for William Hill told Huffington Post that while times are tough on the British high street, the contribution by bookies remains a crucial part of British economy, contributing £3.2bn, and paying £941m in tax.

In its interim report released at the end of June, Ladbrokes said it was planning to accelerate its programme of shop openings following strong growth in UK Retail.

And Ladbrokes added £95.5m of additional revenue over the past two years from in-store machines alone and now has an average of almost four machines, per store, generating an additional £1.6m of gross win year on year.

One of the biggest climbers in this space though is Dublin-based Paddy Power.

“Paddy Power has grown the number of stores quite a lot – they were nowhere five years ago, but they’ve succeeded because customers think they’re offering something different thanks to a large advertising campaign, the success of its online arm and effective marketing,” said Investec’s Hollins.

Paddy Power’s high street venture saw it open 41 shops in 2011 and the firm plans to open between 35-40 more shops this year.

Online gambling

Despite the high street shops' success, it's clear the real growth driver is in online gaming.

The online gambling industry is believed to be worth £14bn a year globally, according to a report by Epiphany Solutions.

The same report noted that 11% of all internet users have gambled online, and that online bingo would overtake poker as the most popular game by 2014.

Research from GamblingData suggests the online UK market is worth £1.7bn, with sports betting making up 38% of all bets, followed by casino (32%), poker (15%) and bingo (15%).

The biggest brands online include William Hill, Betfair, bet365, Paddy Power, Bwin and Rank.

bet365

Trade magazine iGaming Business produces an index of the top 30 iGaming sites by percentage of the company’s business derived from online gambling.

Its September 2011 index placed Paddy Power at the top with 18.7% of the market and a market cap of £1.6bn, with Bwin and Betfair in second and third place respectively.

Traditional high street players come further down the list – William Hill is a respectable fifth, Ladbrokes in ninth.

According to Michael Caselli, editor in chief of iGaming Business magazine, the boom in online gaming has been driven in part by allowing people to play without travelling.

“Fuel prices rising certainly makes destination gaming more expensive - which raises the value in iGaming,” he said.

“Similarly, as the overall economy dwindles, iGaming is actually a cheaper form of entertainment than destination as the associated costs travel, dinners, hotels etc is removed from the equation.”

The internet is well suited to gambling – not least because customers now feel comfortable with the idea of wagering online.

Gambling is no longer seen to be as sinful as it once was, but there may be some who will feel happier betting in private. It also makes gambling more accessible since anyone with an internet connection can play.

It’s good for gambling businesses too, as it helps take care of a lot of the administration.

“The computers do the work,” explained Caselli. “Financing a huge casino and hiring a hundred dealers isn't necessary.”

In addition, online sites give “bonus” cash amounts to encourage players to stay online longer; a feat that physical stores cannot compete with.

Mobile gambling

The future of gambling however, is in mobile. Consumers are now familiar with a number of bet-in-play apps which can be used on smartphones – we even have a UK-listed mobile-only online casino called Probability.

GamblingData estimates that with a net gaming revenue of £7.3m in the year to March 2012 it could be the beginnings of a big sector for growth.

Another telling statistic comes from Paddy Power; mobile betting accounted for 38% of total sports book stakes on paddypower.com in the first 19 weeks of 2012.

Ladbrokes isn’t far behind with 37% of total sports book activities taking place on mobiles and William Hill reports 19%.

There is a clear link between the rise of smart phone gambling, the improvement in mobile technology and the rise of smart phone handsets. As the use of mobile internet grows globally, so will mobile gambling.

Even in countries where internet service is patchy, mobile gambling is taking off. Carl Rohsler, partner at Squire Sanders, told the Huffington Post there is already a strong mobile gambling industry in Europe and Asia, where consumers use text messaging to place bets.

roulette table

But why do consumers continue to gamble when money is tight? Rohsler believes he has some answers.

“Gambling is like any other sort of entertainment except here you have a slight possibility of winning something back,” he explained.

“Buying a lottery ticket is really about buying the permission to daydream of what you could do with life changing wealth. And with something like the National Lottery, if you don’t win people can still console themselves by the fact that it wasn’t a great expense and some of it went to charity.”

Disregarding the serious issue of addiction for a moment, if we accept this theory – that humans need entertainment and are willing to part with money in order to get it – it’s easy to understand why the gambling industry is among the most resilient in the UK.

Why do we play? Because it could be you.