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WHAT CAN BE EXPECTED IN THE U.K. WITH THE NEW GAMING ACT?
by William R. Eadington

WHAT CAN BE EXPECTED IN THE U.K. WITH THE NEW GAMING ACT?

William R. Eadington
October, 2003

Compared to their American cousins, the British are very careful and deliberate when it comes to revising laws that have the potential to significantly affect present and future generations. The current path to revise the Gaming Act 1968 provides an interesting illustration of such a process.

In the United States, gaming legislation has often been passed through state legislatures toward the end of a hectic legislative session, sometimes with the intent of “sneaking it through,” often without careful forethought as to the implications of what was being passed, and usually influenced primarily by the economic interest groups who would be most directly affected, positively or negatively, by the legislation. Though this is more a commentary on the American legislative process at the state level than on gaming, this is perhaps the only way to explain how we have ended up with such a mish-mash of eccentric casino gaming industries in our various states: casinos on riverboats that must sail, small stakes casinos located in rural mining towns that last boomed in the 19th century, a wide variety of casino types on tribal reservation lands scattered throughout the country, racinos (race track casinos) which offer hundreds or thousands of well-attended slot machines while nearly no one watches the racing taking place on the other side of the grandstands, and urban casinos in the downtowns of two of America’s more distressed major cities: Detroit and New Orleans.

Had we used a more careful and deliberate process in America, then we would have—should have—collectively asked ourselves:
• What do we hope to gain from permitted gambling?
• Where would be the best places to locate casinos?
• What kinds of casinos and casino-style gaming should be permitted?
• How do we mitigate the unintended negative consequences that are associated with casinos and other forms of legal gambling?

Had states in the United States pursued such an inquiring approach, they might have come closer to the process that Britain is presently following. However, this also suggests an intriguing fundamental question: Will the resulting gaming industries in the U.K. on balance be better or worse from a variety of perspectives than their American counterparts?

The British story is a lesson in deliberation. In December 1999, the Home Secretary announced formation of a commission to review gambling policy in the U.K. The subsequent Gambling Review Report (the Budd Commission Report) in 2001 laid out a variety of recommended principles for revising Britain’s gaming laws. The Government, in their response (“A Safe Bet for Success,” DCMS, 2002), largely agreed with the philosophy and the specific recommendations of the Budd Commission. To date, the pronouncements of the government regarding the specifics of the new bill have given it some shape and allow us to reasonably speculate what the new gaming industries and, indeed, the new casinos will look like.

The Budd Commission recommendations strongly adhered to the following principles:
• Gaming should be considered a normal commodity that adult consumers should be permitted to pursue if they so choose;
• Companies wanting to supply gaming services should not be inordinately constrained from doing so, nor should they be protected from competition in the marketplace;
• A single regulatory body should oversee all commercial gaming, with the exception of spread betting, which is regulated as part of the financial sector, and the National Lottery, which is given special status and a protected monopoly because of its role in raising revenues for good causes;
• The most important negative side-effect associated with widely available permitted gambling is problem or pathological gambling. However, this issue can be dealt with by requiring gaming industries to finance programs that address the education, treatment, and research needs of problem gambling in society.

Recent pronouncements have established a formula by which casinos can offer the most popular gaming products. Small casinos are required to have a minimum of 5,000 square feet of gaming space, and no more than three gaming devices per table game. (Existing casinos that are below the minimum square footage requirements are “grandfathered” in.)
Large casinos are defined as those with a minimum of 10,000 square feet of gaming space and at least 40 table games. Large casinos are not limited in the number of gaming devices they may have.

The types of gaming devices permitted in casinos will be unconstrained in design, insofar as they can offer any wager size and maximum payout prize that the market will accommodate. The only constraint is a limitation regarding linked progressive jackpot machines: casinos will not be permitted to link progressive jackpots among casinos, though they will be able to do so within the confines of a single casino.

Regional Planning Bodies and local authorities will have considerable discretion in determining whether casinos should be permitted in particular geographic areas, specifically where casinos can be located, and other conditions that will need to be met for their construction and operation. It is likely the planning process will be an important determining factor in the shape of the emerging casino industry. However, because the national planning laws are also under revision at present, there is some uncertainty regarding how this will ultimately work out regarding the dispersion of casinos throughout the U.K.

Finally, there will still be a substantial convenience gaming market with limited prize gaming machines permitted in a wide variety of non-casino outlets throughout the country. Types of such gaming machines permitted will range from small wager (30 p maximum)/low prize (£5 maximum) amusement with prize machines for children and others, to gaming machines that are permitted to offer moderate (£25) to reasonably large (£500) jackpot prizes. The latter two categories will only be permitted in age restricted locations, primarily to protect the Nation’s youth from exposure to such forms of gaming.

Finally, as of yet there has been no formal determination of the tax regime that will apply to the casino industry and gaming machines subsequent to enactment of the new Gaming Act. Interestingly, in many other jurisdictions throughout the world, this is often the first thing discussed, either because government’s primary motivation for legalizing casinos or gaming machines is to raise revenues for government coffers, or because the tax rate has such a significant impact on the profitability of investments in the “bricks and mortar” of modern casino complexes.

What are the implications of this legal structure based on the experiences of gaming jurisdictions elsewhere in the world? First, we should note some of the major economic trends and social forces around modern gaming that will have a bearing on developments in the U.K. Among the more important of these are:

1. Commercial gaming industries typically have much more substantial economic presence than casual observers would expect. In the United States, spending on all legal gaming products approaches about one percent of disposable income, a figure comparable to the current situation in the United Kingdom. It is higher in other countries; in Australia, for example, gaming spend represented about 3.4% of disposable income in 2002.
2. The size and shape of legal gaming industries is largely determined by political decisions, as is being demonstrated in the U.K. today. However, this suggests that gaming industries are particularly vulnerable to arbitrary political decisions and to substantial investments in lobbying activities, to influence or protect the terms under which the industry must operate. This is particularly important when

Date Posted: 20-Nov-2003

William R. Eadington
Professor of Economics
Director, Institute for the Study of Gambling and Commercial Gaming
University of Nevada, Reno

 
 
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