Pub companies: follow-up - Business, Innovation and Skills Committee Contents


Supplementary memorandum submitted by BAPTO

  I am sorry to be writing to you at such a late stage in the pubco inquiry but I feel I am obliged too because I perceive that the pubcos are moving the argument on the machine tie from the removal of the tie to how the machine takings should be divided.

   The recommendation of the TISC in 2004 and your own report in 2009 was that the machine tie to be removed and for the BBPA to only offer not to rentalise the machine income is I feel an insult, and no more than a token gesture.

  If the machine tie remains the pubcos will still have control over their tenants in this issue and use this control to the pubcos advantage as they have always done.

  I attended the meeting on 8 December 2009 in which you took oral evidence, I would like to make some observations on replies given to questions posed my members of your Committee relating to gaming machines and the machine tie. I enclose the relevant questions and our observations.

  Once again I am sorry to be writing at such a late stage but I feel I would be failing in my duty if I did not.

Q145  Chairman: Observation

  If the AWP provider you visited was RECAF Equipment Ltd, I would ask you to bear in mind when making your judgement the major part of RECAF business is supplying pubcos so they are one of the 15% of potential suppliers who have a vested interest in seeing the machine tie retained.

Q146  Mrs Simmonds: Observation

  The operation of AWP machines is not a science but common sense, if a machine takings are good you keep it, if they are poor you change it. Thousands of free houses and social clubs have been doing this successfully for many years. Why do pubcos continue to peddle this fallacy?

Q147  Chairman: Observation

  AWP machines in pubco sites are changed every 12-13 weeks but so are those in many free houses to suggest that free houses receive second rate service, and that machines are on site much longer is incorrect.

Q147  Mr Darby: Observations

    (a) A gaming machine player will swap between pubs if the machine offered in one becomes jaded. There is no evidence to support this assertion.

    (b) Again, we apologise that this was one of the key recommendations of the previous Committee to which we did not respond. It is easy to imagine reading the same apology in five years time if the machine tie is not ended.

    (c) What the tie enables us to do as a pub company is use our buying and negotiating power with gaming machine companies and provide internal expertise to ensure that the machines in our pubs are as far as possible of the highest quality. We have given written evidence to your committee and to the TISC that proves that pubco tenants pay more rent for the same machines than do free of tie tenants.

    (d) Whereby we retain the machine tie, that is, we keep the relationship with the gaming machine manufacturers. The AWP are supplied by a Marstons "approved" supplier at a rent set by Marstons on their rent list. Not rents freely negotiated by the tenant.

    (e) There is now a divergence in average takings of about £40 a week between our company average and the tracker average; the tracker is taking less. Alistair Darby has been quoted as follows: "There is a performance gap of nearly 10 percentage points between the tracker pubs and the rest of our estate" This may well be true but what they are in fact saying is we will increase your AWP takings by 10% gross in return we want 50% of the net takings, Alistair Darby goes on to say we are discussing this drop in performance with the tracker tenants in question in order to improve things ideally by us taking back control of the AWP management and a share of the income in return.

    (f) The gaming machine companies now say to us that the takings of the machine are reaching a de minimis level and they do not want to service them any longer because they take too little. Let these tenants choose their own suppliers not from only those nominated by Marstons and they will have no difficulty finding a good supplier.

    (g) A tenant on average will seek to reduce the rent of the machine by agreeing to less frequent servicing and emptying, a lower quality machine and so on, the net effect being that the tenant and company are worse off. This age old argument has been shown to be false time and time again certainly the pubco will be worse off but the tenant will be much better off because 100% of the net take will be the tenants.

Q148  Mr Darby: Observation

  I enclose an article [not printed here] from What Machine an independent magazine which advises tenants on amusement machine issues, this gives a very different view on video and AWPs and is much nearer the truth, that the sole reason for the upturn AWP takings is the increase in payouts from £35 to £70.00, not the introduction of video AWP's.

Q209  Mrs Nicholls: Observation

  The OFT report says the lessee is £3,000 per year worse off. With my 35 years experience of operating machines taking into account royalties, pool tables, quizzes and Juke Boxes, I would think the average tenant would be between £4,500—£5,000 per year worse off and in busy sites this amount would be much higher.

Q209  Mr Mallen: Observation

  These are other names for royalties paid to pubcos these royalties are not only for AWP's but also pool tables, juke boxes, quizzes in the BBPA frame work code of practice, there is no mention of `royalties' why?

Q210  Mr Harrison: Observation

    (a) I listened carefully to what Mr Darby said, but his theory that one's income falls if one manages the machine oneself means that one needs a 200% increase in income once one has given him 50% split in order to stand still. This is basic arithmetic and is perfectly true has any pubco even suggested they can double the takings of an AWP machine? This point alone is enough reason to remove the machine tie and any fair minded person would acknowledge this.

    (b) On AWP terms, if the net take is insufficient to pay the rental this is deducted from the tenant's share. If the tenant's share reduces to zero any outstanding balance is paid by Enterprise Inns' Therefore, in that particular case the tenant has to lose all his money from the failure of the machine which is in the management of the pubco before the latter chips in and pays anything towards it. This is representative of the pubcos attitude towards machine income and sums up their attitude completely.

Q210  Ian Stewart: Observation

  The issue is not about the way machine income is divided it is about the mechanism of the machine tie itself while the machine tie exists the pubcos will still have the power to bully and take advantage of their tenants. Surgeons treat causes not symptoms their philosophy being "eliminate the cause and the effect ceases" in this case the sharing of the income is only the effect the real cause being the machine tie.

9 February 2010





 
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