Memorandum submitted by the British Association
of Pool Table Operators (BAPTO)
REVIEW OF THE T&ISC REPORT INTO PUBCO
2004
BACTA is a long established (1975) trade association
representing suppliers of coin operated Pool tables, Juke boxes,
AWP machines etc.
We gave written evidence to the original Trade
& Industry Select Committee (TISC) in 2004.
We are making this submission on the assumption
the committees purpose is to look into what action has been taken
by the pubcos following the recommendations made by the TISC in
December 2004, we therefore feel there is no reason to re-run
the arguments that led to that committees recommendations, the
recommendation that concerns us is recommendation 19 (paragraph
129) that reads as follows:
The machine tie improves tenants' takings from
amusement with prizes machines (AWP). However, as free of machine
tie tenants retain 100% of these takings as income, while tied
tenants by pubcos own admission receive an average 50% of these
takings, it appears from the information the pubcos themselves
submitted that in many cases free of tie tenants make more money
from their second tier machines than tied tenants do from their
more up-to-date models. In our opinion, pubcos do not add sufficient
extra value from their deals to justify their claims to 50% of
the takings from AWP machines. We remain unconvinced that the
benefits of the AWP machine tie outweigh the income tenants forgo
and we recommend that the AWP machine tie be removed.
Our hope is to see this recommendation made
mandatory.
We are however alarmed that you state when announcing
the new inquiry "in 2004 the T&ISC published a report
in which most notably it concluded that" you then list five
points and do not even mention the removal of the "machine
tie" which was probably the strongest recommendation the
TISC made it was totally unambiguous. We recommend that the AWP
machine tie be removed. We hope in your deliberations you give
this subject the importance it deserves and do not sweep it under
the carpet.
We give the following examples to support our
case.
1. THE PUBCOS
HAVE ACTUALLY
INCREASED THE
ROYALTIES THEY
TAKE FROM
MACHINE SUPPLIERS
The pubcos as opposed to having removed royalty
payments have in actual fact increased the level of these payments
as follows:
|
| 2004 | 2008
|
|
| Punch Taverns | £11.00 per Week per Machine
| £16.00 per Week per Machine |
| Enterprise Inns | £22.00 per Week per Machine
| £24.00 per Week per Machine |
|
| |
|
2. THE PUBCOS
NOW TAKE
A BIGGER
% OF AWP TAKINGS
THAN THEY
DID IN
2004
2004
Machine taking £100.00 per week after outgoings is divided
as follows £22.00 Royalty (from machine supplier) to pubcos
and £50.00 each to the pubco and licensee. But then the licensee
share is put in to the rental calculation and the pubco takes
a further 50% cut.Total machine income £122.00 (Inc £22.00
Royalty) The pubco gets £97.00 (£22.00 royalty + £50.00
+ £25.00 in rent)
= £79.6% of takings to pubco
2008
But by 2008 the machine take has fallen by 30% but the royalty
has increased to £24.00 per week machine now taking £70.00
per week and is divided as follows £24.00 royalty (from machine
supplier) to pubco and £35.00 each to the pubco and licensee
but then the licensee share is put into the rental calculation
and the pubco takes a further 50% from the licensee share &
RPI, Total machine income £94.00 (Inc £24.00 royalty)
The pubcos gets £86.00 (£24.00 royalty + £35.00
+ £27.00 in rent after PRI)
= 91.4% of taking to pubco
3. MORE PUBCOS
THAN EVER
APPLY A
MACHINE TIE
The machine tie is now employed by almost all pubcos large
and small across the full range of amusement equipment to be found
in pubs. All these pubcos realise it is the easiest way to increase
the pubcos income at the expense of their tenants and the "approved
suppliers" are willing accomplices.
4. WHAT VALUE
IS ADDED
TO ANCILLARY
EQUIPMENT BY
THE PUBCOS
The pubcos defence for retaining the machine tie is they
"add value" to AWP machine takings. What value do they
add to Pool Tables, Juke Boxes, S.W.P's to which they still apply
the machine tie and take royalties and a share of the cash box.
The money they take from these machines is totally at the expense
of the tenants for no benefits at all to those tenants.
5. THE COST
OF MAINTAINING
MACHINE TIE
There is an whole tier of beaurocracy that has to be financed
to operate the machine tie, these include machine directors, MVM's
(machine vending managers) outside companies to whom the machine
suppliers returns are sent, amusement machine suppliers have to
employ staff to prepare the paperwork to be sent to the companies,
this whole raft of expense which would add up to millions of pounds
a year has come from cash boxes of the machines, a large proportion
of this money should be going to pubco tenants not into the profits
of the pubcos if this was not the case more tenants might be able
to survive in their pubs and maybe make a profit.
CONCLUSION
Publicans of all descriptions are feeling the effects of
the current financial climate and many are struggling to survive,
BAPTO members see many pubs closing most of them pubs owned by
pubcos. We are not suggesting that the ending of the machine tie
would prevent all these closures but it would certainly make a
big difference to many tenants.
The main beneficiaries of the present system are the pubcos
who by one means or another are taking up to 90% of AWP machine
takings (as shown in previous examples) and the small number of
machine operators who now supply the pubcos (approximately 15
% of all potential suppliers).
The main losers in the system are the pubco tenants and the
85% of amusement machine suppliers who are denied access to this
market. The people who would benefit most from the ending of the
machine tie would be the pubco tenants and they are the ones who
need to benefit most. For some tenants the removal of the machine
tie could make the difference between carrying on and "throwing
the keys in".
The only people in the amusement machine industry that support
the machine tie are people and companies that have historically
earned their living from the system as it is.
The issue of the machine supply to pubco tenants should be
conducted between two parties the machine supplier and the tenant
not involving a third party (the pubco) who's intent is to obtain
as much money from the transaction as is possible.
The pubco will do everything in their power to maintain the
machine tie no matter how many millions of pounds it would cost.
This fact alone illustrates the value of the machine tie to the
pubco.
There will undoubtedly be a temptation for the committee
to fudge the machine tie issue but if the committee fail to end
the machine tie they will be failing in their duty.
The final comment can be left to the TISC chairman Martin
O'Neill.
Committee chairman Martin O'Neill was sufficiently moved
to say "that the issue of machine income was the last blatant
example of the profiteering that had been common place amoung
pub landlord companies historically".
January 2009
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