Memorandum from Rank Group Gaming Division,
The Rank Group Plc (DGB 7)
EXECUTIVE SUMMARY
Rank remains fully supportive of the Government's
moves towards modernisation of gambling legislation, effected
in a controlled and balanced manner, with a single regulatory
body in the form of the Gambling Commission.
Rank believes that allowing unlimited numbers
of gaming machines in any casino, regardless of size, will lead
to the very proliferation that Government is seeking to avoid.
Rank believes that a two-tier structure, whereby
"large" casinos are given a substantial commercial advantage
over "small" casinos, will both restrict consumer choice
and impact on the ability of long standing, existing casinos to
compete fairly.
Rank proposes that the ratio of machines to
gaming tables should be kept at the level of 8:1, as set out in
the original Gambling Review, and this should apply to all casinos,
regardless of size. This would reduce machine proliferation, allow
smaller casinos to compete on equal terms, maintain a sensible
balance between players of machines and table games, and preserve
the current character and balance of UK casinos.
Rank strongly urges the Government to permit
linking of gaming machines across casinos, thereby expanding consumer
choice and allowing operators of smaller casinos an ability to
offer similar prizes to any large new developments.
Rank firmly believes that electronic casino
table games, where multiple players play together at a table within
a casino, should continue to be defined as casino table games.
Rank requests the Government to establish a
more robust definition of gaming machines, regardless of the level
of stake or prize. In addition, under the tiered licensing proposals,
Rank believes that there is a continuing need to distinguish between
machines offering casino games, or hard gaming, and other forms
of betting and that the Gambling Commission must have clear powers
to judge individual cases against these definitions.
INTRODUCTION
Rank Group Gaming Division ("Rank")
welcomes the opportunity to respond to the Joint Committee of
the Draft Gambling Bill's call for evidence. Rank is fully supportive
of the Government's desire for controlled change and modernisation
of gambling legislation which has served its purpose but which
is increasingly outpaced by technological advances. We look forward
to working closely with the Joint Committee over the next six
months on its important work in refining the Government's initial
proposals. In particular, as a major contributor to the Gambling
Industry Charitable Trust and a long-standing supporter of GamCare,
Rank is determined that deregulation must not undo the industry's
achievements in controlling the incidence of problem gambling
in the UK and protecting children and the vulnerable.
Whilst Rank remains fully supportive of the
Government's general approach, it has major concerns about specific
areas of the draft Gambling Bill, which depart substantially from
the recommendations of the Gambling Review Body.
ABOUT RANK
Rank is the largest division of The Rank Group
Plc ("Rank Group" or "Group"), one of the
UK's leading leisure groups. Employing over 20,000 employees world-wide,
of which 11,000 are engaged in gaming activities, Rank Group has
a current market capitalisation approaching £1.7 billion.
The Group is listed on both the London Stock Exchange as well
as NASDAQ in New York.
Rank is one of the UK's largest gaming businesses
and operates three core gaming activities. Mecca Bingo is the
second largest bingo business in the UK, operating 122 bingo clubs
across the country and Grosvenor Casinos is the second largest
casino operator in the UK with 36 licences (34 operating casinos).
Blue Square, which was acquired by the Group in January 2003,
is Rank's telephone sports-betting and internet gaming business.
Rank Group is the only major UK group with interests in casinos,
bingo and betting and since 1995, despite the restrictions imposed
by the regulatory regime, has invested over £500 million
in its UK gaming activities.
Rank is a leading member of all the main industry
bodies, including the Bingo Association, Business in Sport and
Leisure, and the British Casino Association.
THE PROPOSALS
FOR LARGE
AND SMALL
CASINOS: CLAUSE
10
The Government has retained the distinction
proposed by the Gaming Review Body between small and large casinos.
In a statement dated 7 August 2003 it confirmed the intention
to specify in regulations that in small casinos the maximum number
of gaming machines would be determined by a specified ratio of
machines to tables, while in large casinos there would be no limit
on the number of machines. However, it said it intended to reduce
sharply the threshold above which unlimited machines are permitted,
from the 80 tables recommended by the Review Body to 40 tables
(10,000 sq ft). We think this is a serious misjudgement because
a 10,000 sq ft casino is not a large casino by today's standards—it
is approximately the size of our Victoria Casino in the Edgware
Road.
We consider that the Government has set the
threshold much too low, and risks opening the way to the proliferation
of large, machine-dominated gambling sheds, of the kind that have
developed in Australia and certain parts of the US, and which
carry an increased risk of problem gambling. This is of course
exactly what the Government is rightly seeking to avoid. There
will inevitably be a strong incentive to develop casinos just
above the threshold, given the clear economic advantage from unlimited
gaming machines. This advantage would be compounded by the proposal
to allow linking of machines within casinos, but not across casinos.
This is discussed below.
We also believe that the proposed two-tier approach,
with larger casinos being allowed to operate an unlimited numbers
of machines, would produce a much greater increase in the total
number of gaming machines available in the UK than would a fixed
ratio of machines per table across all casinos. We believe strongly
that a much more preferable and even-handed approach would be
to maintain a fixed ratio of machines to tables, and maintain
that ratio irrespective of the size of casino.
NUMBER OF
MACHINES: CLAUSE
10
The Government also stated on 7 August 2003
that regulations under Clause 10 would set the ratio of machines
to tables in smaller casinos at 3:1, as opposed to the ratio of
8:1 recommended by the Gaming Review Body. No clear rationale
has been given for this quite dramatic reduction, which will further
disadvantage existing casino operators.
Rank does not believe that the Review Body recommendation
of eight machines per table would result in machines dominating
the gambling activities of a "small" casino. We believe
that the ratio is sufficiently low to retain the distinctive atmosphere
and character of British casinos. Nor do we believe that a ratio
of 8:1 would significantly increase the risks of problem gambling
when viewed against the Government's proposals for machines generally.
By limiting the number of machines per table
to just three, one of the key rationales for deregulation begins
to be called into question—consumer choice will not be broadened
sufficiently to cater for the widely anticipated increase in demand.
In order to meet the desires of an expanding customer base, UK
casinos will need to be able to offer a broad range of different
games, stakes and prizes. Three machines per table will not allow
smaller casinos the flexibility required to meet these demands.
In order to be consistent with the principal
objectives of the Bill, Rank believes that the ratio of machines
to tables of 8:1 proposed by the Gaming Review Body should be
implemented. As we said earlier, we believe that this ratio should
apply across all casinos. This would avoid the proliferation of
large machine-dominated casinos whilst providing a balanced mix
of table games and machines across all casinos.
It might help to put the figures in perspective.
If Rank's casino estate is typical of the UK market as a whole,
and based upon Gaming Board statistics as at March 2003, eight
machines per table would result in a maximum of approximately
11,100 gaming machines in UK casinos. Even allowing for a fifty
per cent increase in the number of "small" casinos,
the number of gaming machines increases to only 16,600. This would
still be small compared with what exists in other jurisdictions.
By comparison, just ten new "large" casinos with say
2,000 machines each, would result in a greater number of new gaming
machines.
LINKING OF
MACHINES: CLAUSE
201
The Gaming Review Body clearly envisaged that
there should be no restriction on the linking of casino gaming
machines. In contrast, the Government has set its face against
the linking of machines between casinos, and proposes to enshrine
this prohibition on the face of the Bill. We believe that the
proposal is illogical, unfair, and at odds with the objectives
of the Bill.
We believe that the proposal is illogical because
we can see no difference in practice between the linking of, say,
500 machines in one casino and the linking of 500 machines located
in a number of different casinos. Moreover, the number of machines
that can be linked between casinos will, de facto, be strictly
controlled by the limits imposed by the agreed ratio of machines
to gaming tables. The linking of casino machines between casinos
would therefore present no greater risk of problem gambling that
the linking of machines within a large casino.
Nor would the linking of machines between casinos
be an entirely novel development, because the linking of gambling
activities between casinos is already a popular feature of the
current casino environment in the UK. Most UK casinos, including
all of Rank's 34 operating casinos, already offer Progressive
Stud Poker to existing customers. This is a table game but with
an option to participate in a progressive jackpot, created by
linking games across each of Rank's UK casinos. Since its introduction
in September 2002, Rank's own Super Stud Poker version has proved
particularly popular with casino customers and to-date, total
winnings (excluding small prizes) of over £6 million have
been paid out to customers, with the highest individual win being
over £290,000.
Large progressive prizes are also a popular
part of UK bingo, where the National Game (played since 1986),
combines stakes from over 500 bingo clubs on a regular basis,
offering the potential to win large prizes—the largest being
£953,000 in December 2002.
We are not aware of any evidence to show that
the availability of the National Game in bingo, nor the introduction
of Super Stud Poker across UK casinos, have had any influence
on the level of problem gambling.
We consider that the proposal is unfair because
it further disadvantages operators of existing small casinos.
If they cannot link machines in different casinos they will not
be able to match the prizes offered by larger new casinos and
will therefore be unable to compete. The Gaming Review Body identified
this general issue when it stated (paragraph 23.66) "In fact,
linking with other small operators could be the most effective
way for small operators to compete with a big casino, which could
on its own offer very large prizes without linking with others."
The inability to link machines in different casinos would only
exacerbate the two-tier nature of the government's proposals.
At the same time, local customers will be deprived
of the customer choice, only being offered relatively small prizes,
despite playing for similar stakes as customers in large casinos.
We believe that offering progressive machines to casino customers
across an estate would serve to broaden the casino gaming on offer
and specifically allow all players an equal opportunity to play
for big prizes.
We consider that the proposal is at odds with
the aim of the Bill because putting the prohibition on the face
of the Bill defeats the aim of providing flexibility to respond
to changing circumstances. Other provisions relating to casinos
can be changed by secondary legislation, and there is no good
reason why this provision should not be dealt with in the same
manner.
PLANNING FOR
CASINOS
Rank supports the objective of allowing local
communities to determine the number, size and character of casinos,
and where they will be located, by giving to local authorities
the responsibility for issuing premises licenses. However, as
mentioned above, if the number of machines for large casinos is
uncapped, this could result in an uneven distribution of casino
developments with the availability of suitable property being
the driving factor rather than the needs and merits of one development
area over another.
By providing a common approach to casino development
in terms of numbers of machines, Rank believes that a more equitable
distribution of new investment across the UK could be expected
rather than a perhaps more concentrated programme of development.
However, as part of this process, it is vital that the Gambling
Commission has sufficient powers to control proliferation of casinos,
including statutory guidelines, which both Regional Planning Boards
and Local Planning Authorities must take into account when considering
new developments.
DEFINITION OF
MACHINES: CLAUSE
192
The definition of what constitutes a gaming
machine will be critical for the successful implementation of
the deregulation proposals, not just for casinos but also for
bingo clubs, licensed betting offices and internet and remote
gambling.
UK casinos already offer a number of electronic
games, many of which, whilst electronic in nature, nevertheless
replicate almost exactly the live casino game experience. The
most popular game of this type since its introduction in 2000
is electronic roulette. According to the latest report by the
Gaming Board for Great Britain 2002-03, these machines now represent
approximately nine per cent of total spend, equivalent to over
£330 million per annum. Their popularity amongst experienced
roulette players, as well as new players, is a testament to their
realism and acceptance alongside existing table games, regardless
of whether they involve any human interaction or not. It is also
important to highlight the fact that revenues from electronic
roulette are treated as table game revenue for the purpose of
calculating Casino Duty. Rank believes strongly that they should
continue to be considered as being table games and therefore excluded
from the definition of gaming machines.
Rank supports the desire to control the overall
number of gaming machines, as well as controls over which premises
will be able to offer certain types of gaming, including machines,
via the tiered licensing structure. However, there remain some
important outstanding issues including:
— the continuing need to refine the
definition of what constitutes a gaming machine, irrespective
of the level of stake or prize (including fixed odds betting terminals
("FOBTs"));
— the continuing need to define casino
games (hard gaming) as distinct from other forms of gaming or
betting; and
— the need to control the offering
of gaming products, by whatever means, including internet, in
a premises which is not appropriately licensed.
Once defined, Rank believes that the Gambling
Commission should then be given clear powers to review and judge
the compliance or otherwise of individual cases against these
definitions. As a minimum, the treatment of FOBTs, most of which
are currently offering large numbers of casino games on the high
street in an unregulated environment, needs to be addressed.
THE GAMBLING
COMMISSION GUIDELINES:
CLAUSE 125
Rank is concerned that once the Gambling Bill
becomes law, there should be joined up Government at all levels,
as far as gaming establishments are concerned. During the passage
of the Licensing Bill this year, it became clear that the majority
of local authorities were unaware of the primacy of gambling legislation,
in so far as it impacted on licensing issues. It is also clear
from our experience in Scotland, where new licensing laws are
already in force, that some local authorities are exceeding their
powers by ignoring the guidelines of the Gaming Board.
It will be vital that local authorities are
required to pay statutory regard to the codes of practice and
guidelines issued by the new Gambling Commission. This will ensure
consistent and reasonable decision making across the United Kingdom.
December 2003
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