FOBTs – A Complete Guide to Fixed Odds Betting Terminals
For a period of time, you wouldn’t have been able to turn on news without reading about Fixed Odds Betting Terminals. These machines, commonly referred to as FOBTs, allow people to place bets on things that have, as the name suggests, fixed odds. They were introduced to betting shops in the United Kingdom in 1999, with the terminals allowing people to place bets on the likes of roulette. Any game in which the ‘House’ has a set return built into it can feature on an FOBT, up to and including the likes of virtual sports, such as horse racing or football.
Fixed Odds Betting Terminals are required by law to have the Return to Player percentage displayed clearly, which tells people how much they can expect to get back over an extended period of time. An RTP of 95%, for example, would mean that the player would effectively lose five pence for everyone one pound they gambled. They hit the news when campaigners began asking the government to reduce the maximum stake playing on such machines, wanting it reduced from £100 to £2. That is exactly what happened eventually, reportedly costing bookmakers millions.
What Exactly Is a Fixed Odds Betting Terminal?
It is entirely reasonable for you to have no idea what a Fixed Odds Betting Terminal actually is, either because you haven’t used before or because you’ve never actually been into a bookmaker’s shop and therefore wouldn’t have seen one. In essence, these terminals are like big computers with touch screens, allowing people to select games to play and then place bets accordingly. Imagine a machine like the quiz machines that you might have seen in your local pub and you’ll be on the right track. The big difference is the sort of games that you can play on them.
In many ways, a quiz machine does not offer ‘fixed’ odds, on account of the fact that someone could reasonably stand a chance of having all necessary knowledge to be able to play on one and answer every single question, thereby winning the money. FOBTs offer games that can be fixed to ensure that they make a regular profit over a prolonged period of time. There is nothing that anyone can do to ‘beat the odds’ of the machine. You might come out on top over a short period, but that is only because someone else has lost for even longer than they expected.
Eventually, your luck will change and you will lose enough to make up for how much you won, such is the nature of fixed odds. Games, such as roulette and blackjack, are offered on FOBTs, as well as the sorts of games that you’d more commonly expect to find with slot machines. A virtual game like football or horse racing can also often be found on an FOBT, but it doesn’t play out according to the usual rules and regulations of such sports, where a competent athlete can do something special or a horse can outrun its opponents. Instead, the result is decided according to an algorithm and a Random Number Generator.
A Brief History of FOBTs
Originally, gambling was only allowed legally by people at racecourses. This mostly limited it to the upper classes, given the fact that a day at the races was an expensive way to spent time. In 1960, the Betting and Gaming Act legalised betting shops on the high street, giving working class people the chance to place bets and wagers in a legal capacity.
The Act that dictated how betting shops were allowed to operate soon became antiquated, but it was the main thing to decide how things would work for many decades. In 1999, the Fixed Odds Betting Terminal first appeared in some of these betting shops.
In 2001, a new way of taxing betting was brought in in the United Kingdom, with lower margin, higher turnover being the dream for the gambling companies as a result. At this point, the machines began to proliferate, if for no other reason than the fact that they were not classed as gaming machines and therefore had no limit on the prizes they could give out – nor on the stakes that they could accept. They were intentionally developed to be treated as an ‘off-course’ product, with one of the creators, Steve Frator, saying that they were ‘developed through the concept of taking the regulations and pushing the boundaries to the limit’.
Limitation Placed on Machine Numbers & Stake Limit
When a new gambling law was being introduced in the United Kingdom, the machines were included in discussions and a decision was taken that they would have a limit of £100 introduced as the stake limit, £15 chips being the largest ones that could be used and a limit of £500 in prize money. Not only that, but each betting shop would be limited to a maximum of four of the machines per shop. This was something of a ‘behind closed doors’ agreement, with what followed being an explosion of the machines across the country, with more 30,000 eventually being in place.
The problem with the decision to limit each betting shop to four machines each was that gambling companies didn’t stop when they reached four. Instead, they got around it by simply opening another betting shop nearly and being able to have another four in place there. The reason betting shops loved them was that they allowed punters to bet huge sums on them, allowing for impressive gains for the shops. As an example of this, the machines made £1.05 billion in 2009, which had grown to £1.83 billion by 2017 – a rise of around 74%.
FOBTs Become a Problem for Punters
In 2017, betting shops made £3.2 billion from the combination of traditional bets and FOBTs, but the Fixed Odds Betting Terminals made up 57% of the total. That had been 38% in 2008-2009, showing how important the machines had become to bookmakers. It wasn’t just in the UK where they were introduced, either. The machines were soon causing issue for punters in Australia, for example. It isn’t that they allow people to gamble that’s the problem, given the fact that people would do that anyway, but rather the manner in which they allowed people to bet and lose quite so much.
Stop the FOBTs – A Campaign Groups Against Fixed Odds Betting Terminals
Fixed Odds Betting Terminals gradually became a big issue in the United Kingdom. For critics, the £100 maximum stake meant that large amounts of money could be lost on the machines. There was also a suggestion from some quarters that they were addictive, being linked to problem gambling. Indeed, one critic referred to them as the ‘crack cocaine’ of gambling, giving an insight into both their addictiveness and the likely cost to those that used them on a regular basis. One such example case was that of Sulayman Keita, who arrived in the UK from Gambia in 1995.
He began betting on horses not long after, but when FOBTs became popular, he shifted his focus to them. Roulette was the game that he enjoyed playing on them the most, with Newham, the area where he lived, boasting betting shops from all of the major chains that exist on the British high street. In fact, it was Newham Council that spearheaded a campaign from 93 councils to get the maximum stake playable on the machines cut from £100 to £2. The mayor of Newham, Rokhsana Fiaz, believed that bookies targeted the most deprived areas with the machines.
Newham was the country’s 25th most deprived area in 2018, yet it was home to 81 betting shops. Keita lost all of his money to the machines, needing the intervention of his sister to stop him from losing everything he had. His benefit money was given to her and she put it into a bank account for him, giving him £20 a week for cigarettes. That money, though, ended up going straight into the Fixed Odds Betting Terminals at any of the 14 betting shops that were open on High Street North. They had replaced more traditional shops in the area like Marks & Spencers and British Home Stores.
For critics of the machines, it wasn’t just the £100 maximum stake that was an issue. Part of the addiction was that you could place a bet every 20 seconds. That meant that you could potential lose £300 a minute. Little wonder, perhaps, that 13.6% of players on the machines were classed as problem gamblers, according to the government’s own research. It was the unemployed that were the most likely to place bets of £100 compared to other socio-economic groups. Across one year alone, there were more than 233,000 examples of a punter losing more than £1,000 on the machines.
The more that news of Fixed Odds Betting Terminals spread, the more that other groups joined the campaign against them. The Royal Society for Public Health announced that it was joining the fight to get the maximum stake reduced in March of 2017, for example. That put them in league with the likes of the Campaign for Fairer Gambling, with the RSPH being concerned that the machines were ‘fuelling financial problems’, damaging the health and wellbeing of those that used the FOBTs. It was seen as a boon for those against them and hoping for more regulation.
It wasn’t just specific campaign groups that were against the machines either. There were numerous politicians who believed that something needed to be done in order to curb their influence. Tom Watson was Labour’s Shadow Digital, Culture, Media and Sport Secretary and said that reducing the maximum stake playing on the machines was the ‘blindingly obvious‘ thing to do. Iain Duncan Smith, meanwhile, declared had long campaigned against FOBTs, saying that they had ’caused endless harm’ and ‘terrible damage to families’, with the then Prime Minister, Theresa May, saying that she recognised ‘the strength of feeling’ about the issue.
The All Party Parliamentary Group was created in order to investigate the impact of Fixed Odds Betting Terminals in the community, with oral evidence taken from experts and those concerned with the issue. Its Chair was Carolyn Harris MP, with David Lammy MP acting as the Vice-Chair alongside Stuart McDonald MP. Stephen Timms MP was the Treasurer and Sir Peter Bottomley MP was the groups Secretary, offering a true cross-party group to look at the nature of FOBTs in society. It was the APPG that helped to get the stake reduced eventually.
Reduction in Stake
There was huge pressure on the government to do something about the damage caused by Fixed Odds Betting Terminals. It was, many believed, crucial that the maximum stake be limited. Bookmakers were against this idea, as you might imagine, with many citing the fact that the existence of Fixed Odds Betting Terminals actually provided a social benefit. They created jobs, for example, thanks to the fact that so many betting shops were opening in order to house them. The hope from the industry was that it would be allowed to regulate itself around the matter.
In the end, though, a decision was taken to cut the maximum stake from £100 to £2. Even that wasn’t straightforward, with the initial announcement in October of 2018 suggesting that it would come into effect from the following October. That led many to suggest that the government was delaying the decision unnecessarily, resulting in the decision of Tracey Crouch to resign from the Department for Digital, Culture, Media and Sports in protest. At the same time, a number of former ministers, such as Iain Duncan Smith, Justine Greening and Boris Johnson, tabled motions that were designed to force the government’s hand.
The result was that Jeremy Wright confirmed in November of 2018 that the stake limit would be introduced in April of the following year. In order to make up the shortfall that would come about as a result, the government planned to increase the Remote Gambling Duty, with that increase also being brought forward to April of 2019. Having been looking at FOBTs since October 2016, many felt that the decision to introduce the stake limit was a long time coming, whilst the government insisted it was right to take its time to come to the right conclusion.
Interestingly, the initial reaction of the markets wasn’t one of panic as you might expect. Shares in the biggest gambling firms, who all had a presence on the UK high street, climbed. GVC Holdings, the name of the parent company of Ladbrokes and Coral at the time, saw its shares go up by 8%, whilst William Hill’s shares rose by 2.23%. Some analysts believed that that was at least partially to do with the fact that the news meant that GVC Holdings was spared a major cash payment to the former shareholders of Ladbrokes thanks to the decision being made public.
What Happened After the Stake Reduction
In the lead up to the government’s decision to reduce the maximum stake playable on Fixed Odds Betting Terminals, many of the biggest bookmakers suggested that any reduction would result in high street shops having to close. There was a suggestion that as many as 2,100 shops would have to close of the maximum stake was reduced from £100 to £2. In July of 2019, it seemed as though the first tranche of these closures was occurring when William Hill announced that 700 shops would be shutting, with the new legislation being cited as the main reason for it.
Tracey Crouch put forward a counter argument to this suggestion, however. She noted that there had been a downward trend in revenue at physical betting shops well before the sanctions came into effect. This, she believed, was due to the proliferation of online betting. Indeed, part of the counter-argument to reducing the maximum stake from betting companies was that it would drive consumers to the ‘casino in their pocket’, given the fact that there was no such legislation in place to stop online casinos from offer similar games to those found on FOBTs and with no £2 limit in place.
Even so, the ‘big four’ of Ladbrokes Coral, Betfred, Paddy Power and William Hill continued to dominate the retail betting market, with 87% of the betting shops in Britain owned by one of them at the end of December 2018. By March of the following year, there was a general acceptance that the ‘bonfire of bookmakers’ predicted by the likes of the Association of British Bookmakers, who said as many as 4,500 shops might have to close, was exaggerated. It seemed likely that the figure was going to be closer to around 2,300, which still isn’t ideal in terms of job losses, of course.
By June of 2020, one aspect of the limit on the maximum stake for FOBTs was clear: fewer police callouts. Previously, bookmakers were having to call the police when customers became violent in the wake of losing money on the Fixed Odds Betting Machines, but that figure was reduced by 38% in the wake of the stake reduction. In 2016, there had been 4,060 police callouts, which was 2,907 in 2018 and 1,803 in 2019. The Gambling Commission did point out that the reduction in stake wasn’t the only reason behind the cut in police callouts, but it’s difficult to ignore the impact altogether.
For the companies that had made such vast sums of money via FOBTs, there was a somewhat understandable desire to find a way to carry on making such money. As a result, the United Kingdom Gambling Commission had to warn them not to try to circumvent the rules around the stake cut. Companies, such as Paddy Power and Betfred, launched a roulette-style game that they felt were not governed by the rules on Fixed Odds Betting Terminals, only for the UKGC to make clear that such attempts at getting around said rules would not be accepted.
There is little question that the reduction in stake of FOBTs changed the landscape for physical betting shops, but it is also true that the result was not at devastating as first predicted. When operators reported how they had performed in the wake of the stake cut, it emerged that they had done better than the gloomy forecasts had predicted. The likes of Ladbrokes and Coral saw a drop in Net Gaming Revenue, but the money that they took in over the counter bets increased during the same period. Fixed Odds Betting Terminals still exist, they just don’t have the same impact to punters as before.