15 February, 2021

How will the UK Gambling Act review affect affiliates?

Iqbal Johal, Tim Poole and Peter Lynch consider varying and contrasting viewpoints on the review of the 2005 Gambling Act as the government reassesses concerns surrounding regulation, digitalisation and advertising

Iqbal Johal
It’s hard to argue against the fact the time has come for an immediate review and amendment of the 2005 Gambling Act. I believe most of those in the industry will agree that certain regulations need to be tightened to ensure the UK market adheres to responsible gambling measures in the best way possible. Certain measures and proposals make sense. The decision to raise the National Lottery minimum age to 18 will help protect young people. And as my colleague Tim Poole alluded to, VIP and high-value schemes certainly seem outdated, and many would be happy if these were either abolished completely or heavily regulated, even if it will undoubtedly hit affiliate revenue, which in itself raises a moral dilemma of revenue coming from what in certain cases can be open to exploitation. The review will also look at online stake limits, which could follow in the footsteps of the £2 ($2.73) stake limit for fixed-odds betting terminals (FOBT) that came into effect in April 2019. The biggest debate here is greater control and focus on player loss and deposit limits, making sure people play within their means, rather than restrict stakes for everyone since each customer is different.

Reducing online stake limits will have the biggest impact on the industry, particularly with affiliates, and will cut off another revenue stream for them. It will potentially see fewer bets placed as it could discourage players from playing if they think it’s not worth the hassle with the financial returns undoubtably reduced. There must be a compromise here if stakes are reduced, making sure it’s a reasonable limit, rather than something similar to the FOBT reduction.
Restrictions on gambling marketing and advertisement have been discussed at length for several years now across the industry. Many countries in Europe, such as Spain and Sweden, have gone down the route of heavy advertisement restrictions for operators and affiliates, with Italy banning it altogether.

The industry has already taken great strides to reduce exposure of gambling advertisement to young and vulnerable people, with the voluntary whistle-to-whistle advertising ban coming into force in August 2019, prohibiting gambling adverts from being shown on television during live sport before the 9pm watershed lasting from five minutes before the start of a match and ending five minutes later. Of course, many would argue the industry could go further, which is true, but does not have to be a draconian blanket ban, which is being mooted by several committees, including the All Party ParliamentaryGroup (APPG). This doesn’t seem the right move and will obviously have ever-lasting effects for affiliates advertising online through social media, and might lead to a rise in black market activity.

Then there’s also talk about following Spain with the banning of gambling operators from sponsoring sports teams. Again, this is a heavily debated topic but arguably suchsponsorship does more good than harm when it comes to the sports industry, when you take into account the amount of funding operators provide to football clubs in the UK, which the Betting and Gaming Council (BGC) estimates at £40m a year to English Football League (EFL) clubs.

Former Interwetten speaker of the board Dominic Beier told Gambling Insider last autumn that such advertising is justified with sports fans the main target group for operators, especially when it provides crucial funds to teams and leagues, as well as working with them to promote responsible gambling messages. Much like an advertising ban, operators and affiliates would be heavily impacted if a sponsorship prohibition was implemented, which would arguably damage the UK market with a mass exodus.

A sensible and concerted collaboration between the government and gambling industry stakeholders is needed to provide a compromise on any regulatory measures that are implemented from the review, to avoid leaving catastrophic consequences to operators, affiliates and, indeed, the punter.

Peter Lynch
The ongoing coronavirus pandemic has dominated much of the talk in the global gaming industry in recent months, and will continue to do so. But its prominence in the UK gaming industry has been rivalled by the talk surrounding the 2005 Gambling Act review, which in itself is a major story for suppliers and operators who have largely welcomed the review, but at the same time have warned of its potential implications for themselves and for their customers.

The review may have been in place for quite some time, but recent events involving the pandemic have most certainly accelerated its launch, particularly given the fact that many customers have now turned to online gambling due to the closures of land-based venues. Various issues and sectors will be analysed in detail during the review, but major areas that look set for change include marketing, advertising and sponsorships. Whether it will be minimal changes or vast changes remains to be seen.

One thing that can be said with a fair degree of certainty, however, is that big changes will be made. That means marketing and advertising companies should brace for dramaticadjustments, primarily because of the support behind the review, with more than 50 MPs and peers backing stricter regulations, but also because of just how damaging even a slight change in legislation could be.

Take the football industry for example, where half of the 20 teams in the English Premier League benefit from gambling brands as a main or sleeve sponsor for the current season. Both major and minor betting firms are heavily involved in the sport, and enjoy a mutual relationship with the clubs they sponsor.

The issue is elevated in the competitions beneath the Premier League, with the English Football League recently reinforcing their need for gambling firms for survival, stating that over £40m per season is paid by the sector to the league and its clubs. A review of the Gambling Act, therefore, may have just come at the worst possible time.

But while gambling firms remain in the dark about what to expect when the review is complete, perhaps the period from now until then will provide sufficient time for affiliates to gettheir house in order. And that would involve affiliates being able to have their voices heard, as explained by Cian Nugent, who was recently appointed as Responsible Affiliates in Gambling chairman. Speaking to Gambling Insider, Nugent explained how affiliates can play their part amid the “inevitable” Gambling Act review.

“It’s very difficult to say where this will end up, and obviously the Gambling Commission is consulting on affordability measures separately. However, I do think the framing of the terms of reference and call for evidence in [the Gambling Act review] is encouraging. The opportunity is there for affiliates to explain the important role we play in the gambling ecosystem, as well as the key part we can play at the forefront of promoting safer gambling and the channeling of players to regulated operators.”

Safer gambling is, of course, one of the central points of interest within the review. But that again is another contentious issue, with the Betting and Gaming Council arguing that stricter regulations could lead to an increase in betting sites with no regard for customer safety. But the Department for Digital, Culture, Media & Sport have reportedly suggested thatadditional finances will be provided to combat the problem.

“Reducing online stake limits will have the biggest impact on the industry, particularly with affiliates, and will cut off another revenue stream for them. It will potentially see fewer bets placed as it could discourage players from playing if they think it’s not worth the hassle with the financial returns undoubtably reduced”
– Iqbal Johal

“While gambling firms remain in the dark about what to expect when the review is complete, perhaps the period from now until then will provide sufficient time for affiliates to get their house in order. And that would involve affiliates being able to have their voices heard”
– Peter Lynch
It seems then that for every complaint raised by the industry, the government is ready and waiting with a response. But a war of words certainly won’t help affiliates in the long run, and so a healthy discussion is undoubtedly what is required in order to bring about a successful outcome.

Tim Poole
The UK market, a leader in terms of revenue generation and market size, has in many ways become the yardstick for regulated gambling markets globally. Although it’s easier now to gain a Gambling Commission licence than it once was, it’s as difficult as ever to dosomething with it and make your mark in such a competitive marketplace. As such, ever-growing attention has been drawn to how UK gambling companies market their brands, what technology they innovate with and not least how the market is being regulated.

For years now, the latter point has dominated discussion as the Gambling Commission and the UK Government look further into the practices of gambling operators. Some think the Commission actually isn’t hard enough on operators, with some even questioning its fining process; fines are often paid straight to gambling charities, which work closely with said operators. Nevertheless, there is a strong anti-gambling lobby in the UK and it will come as no surprise to many that this lobby is pushing for maximum restrictions in the upcoming review of the Gambling Act 2005.

How will this affect affiliates? I would actually argue very marginally, if at all. Let’s assume the gambling review will be implemented in its most restrictive and least free market form, which is far from a given. This would likely mainly target VIP, high-value players and safer gambling practices among operators. In other words, anything operators were doing wrong – malpractice that on paper wouldn’t form part of their core business models anyway – will be clamped down on. That won’t necessarily mean anything for affiliates.

If VIP schemes are abolished, for example, and more scrutiny given to high-value players, yes affiliate revenues will be affected. But in the UK, for a large number of affiliates, it’s already about a mass-market approach. Millions will have a flutter on weekend sport and many will have a casual go on online casinos. This will still be as strong a revenue generator for affiliates as ever. What is being discussed most now is the introduction of affordability, whereby players have to prove they can afford what they are betting.

Naturally, this will have its biggest knock-on effect when it comes to larger-spending players. This may certainly cause some bumps in the road in terms of players switching off and thinking it’s not worth the hassle to go through a load of verification to place a simple bet. Players who can’t afford to spend huge sums will also be stopped from doing so, stripping both the operator and affiliate of that revenue. But that in itself is a good thing, encouraging a more sustainable business for both affiliates and operators.

Will agreements between affiliates and operator brands have to be tweaked if affordability plays a larger role in the gambling process? It’s a possibility but not one that would truly impact the heart of the operator-affiliate relationship. I’ll put it this way: if an affiliate brand is already licensed in the UK market, following all the rules it’s supposed to in terms of marketing and responsible gambling, the impending gambling review won’t affect it in any way. If an affiliate is already constantly in breach of regulations and is non-compliant, the review may simply bring this more into the spotlight.

So while the gambling review is a hot topic in the UK, which will be sure to dominate column inches over the next few months, its impact on affiliate and marketing practices should ultimately be minimal. Yes, depending on what measures are announced, the gambling model may have to switch somewhat away from high-value or VIP players. But again, this should arguably change very little for affiliates practices. If players have to prove their affordability, those who can afford to will still spend big. And if any affiliate model previously relied on player traffic including problem gamblers wagering more than they could afford, congratulations, you made hay while the sun shone – but that’s on your conscience and those times were never going to last.
"Players who can’t afford to spend huge sums will also be stopped from doing so, stripping both the operator and affiliate ofthat revenue. But that in itself is a good thing ” – Tim Poole

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