The Affect Of Coronavirus On Betting and Gambling Companies In the Short & Long Term
The outbreak of the Coronavirus, or Covid-19, around the world has led to unprecedented changes in virtually every walk of life. Government advice has meant that most sporting events have been cancelled, postponed or put behind closed doors, with the latter of those three options being the best in terrible circumstances.
Many people will have little sympathy for the gambling industry, given it makes huge amounts of money most of the time and its critics feel that it doesn’t do enough to help those with addictions or gambling problems. Yet the reality is that the shutting down of sport will have a profound effect on gambling companies, which will in turn have knock-on effects elsewhere in society.
The Short-Term Impact
It seems likely that there will be two different issues for gambling companies, with the first being short-term problems. As soon as it became clear that sports would not be taking place, the owners of bookmakers such as Paddy Power, Betfair, William Hill and Ladbrokes wanted that their earnings were likely to take a big hit. That was seen immediately in the markets.
Flutter Entertainment, which is the parent company of Paddy Power and Betfair, suggested that it could lose as much as £110 million from its annual earnings if sports remain off the table until the end of August. That figure was based on the idea that horse racing would continue but take place behind closed doors, with losses likely to be higher now that horse racing is also cancelled.
The owners of Ladbrokes, meanwhile, GVC Holdings, believe that they will lose as much as £150 million and even that is dependent on the football season getting back underway by July. William Hill also suggested a loss of around £100 million, with the firms losing a huge amount of their stock value. Flutter Entertainment dropped 12%, GVC 20% and William Hill 34%.
There’s Nothing To Replace Worldwide Sport
The biggest issue that these firms face in the short-term is that there’s nothing out there to replace the sports that people usually bet on. Whilst there are some matches taking place in random things such as the Russian First Division or table tennis championships, the reality is that most sports people like to bet on aren’t random ones.
Indeed, Flutter Entertainment generated about 78% of its entire revenue last year through global sporting events and the associated bets placed on them. It was 53% of William Hill’s revenue and 45% of GVC’s during the same period. As well as Euro 2020 being delayed until 2021 at the earliest, elite football competitions like the Premier League and La Liga are in stasis.
There are some things that people are able to bet on during this crisis, but not everyone is keen to have a flutter on eSports or virtual sports. They are the sorts of things that will allow companies to claw back some lost revenue as they are discovered by new markets, but it won’t be enough to stop gambling companies from finding their financial situations somewhat dire rather quickly.
Casinos Are Closing Their Doors
The impact of the Coronavirus is also being felt by casinos, with Las Vegas seeing companies shut their doors up and down the strip. Wynn Resorts and MGM Resorts International both decided to shut up shop on the 17th of March. That means the likes of the Bellagio, The Mirage and the MGM Grand will not be open for visitors to the gambling Mecca.
Whilst that is obviously an American problem, the fact that it happened after resorts shut down in Macau is suggestive of an industry that knows it is going to have to endure some tough times ahead. Wynn was losing as much as $2.6 million a day after stopping business in the Chinese city. Though UK casinos are open at the time of writing, Nevada’s decision to shut all casinos means they probably won’t be for long.
Some Good News Thanks To The Online Industry
Whilst physical bookmakers and casinos are going to see a dramatic drop in revenue on account of the fact that fewer people will be attending them, there is likely to be a boom for online companies. Just because places like bingo parlours aren’t going to do much custom doesn’t mean that nobody will be playing bingo, with many customers likely to look to websites for their fill.
Online bookies will struggle to do a huge amount of business given there is very little to bet on, but most of them have casinos, bingo sites and other variations on the same theme attached to them. Given that it is not possible to catch the virus through your computer, it’s easy to see bettors moving their usual betting rituals onto those sorts of sites in the coming weeks.
Kevin Dale is an industry veteran with more than twenty years experience. He believes that the longevity of the situation will dictate its impact on the industry. He also points out that the ‘interest overlap’ between real sports and virtual sports is ‘only around 30%’, which means that financial losses are still likely to be crippling for the industry.
There’s also the fact that operations such as the National Lottery will almost certainly see a boom in customers. People who like to have a flutter but aren’t specifically wed to certain types of games will begin to look to the lotto as a chance to do what they enjoy. This will likely include both the lottery’s main games and the online scratch cards.
Some Sports Will Benefit
There is some good news for the sports and non-sports that are still continuing while major sports like football are off in that they have increased visibility and exposure that could help their short and long term popularity.
The likes of eSports that has been on the fringes for a while now threatens to make a break-through into the main stream. Minor sports such as Table Tennis, Water Polo, Volleyball and Aussie Rules may all see a boost from this.
One of the biggest areas to benefit may be virtual sports. Over the years these have become very realistic and now are available for a huge range of sports. In normal climates most people wouldn’t choose a virtual race or match over the real this but when there is no real thing it may be a viable alternative for many. There are also lots of offers floating around from the bookies right now to entice people into this area.
The Long-Term
The short-term might not look particularly great for the gambling industry, but is it any better over the longer term? The reality of the situation right now is that it’s difficult to predict just how big an impact the Coronavirus will have on gambling companies because we have no idea how long it will last for or which sections of the industry it will have the biggest impact on.
Job Losses Will Come
The biggest issue facing the betting industry in the short-term is the hit that physical bookmaker’s shops will take. The Prime Minister’s advice that people should avoid contact with others where possible will lead to people not doing what they used to do, including going to betting shops to place a wager or too. This will be massively problematic for that sector of the industry.
It’s easy to forget that the very existence of betting shops was already under threat because of the cut to the maximum stake on Fixed Odds Betting Machines introduced by the government. Now the industry will be hit with a new and entirely different loss of income, with sports betting making up such a huge amount of most firms’ income. Some also feel bookies, such as William Hill, who have been talking about more shop closures will use the Coronavirus outbreak as an excuse to advance those plans.
There will be plenty of sectors that will actually see a rise in income thanks to the virus and the associated need for people to stay indoors and self-isolate, but the key question is whether it will be enough to balance out the loss of sports. The unknown here is how many people bet because a specific event is on and how many bet simply because they want to and enjoy it.
On-Course Bookmakers Will Struggle
High street betting shops have been closed in Italy until the 3rd of April at the earliest, so it wouldn’t be a shock to see an enforced closure of them put in place in the UK sometime soon. Given that the majority of high street bookmakers have an online presence they should be fine, but the same cannot be said of bookies that are based at racecourses.
Keith Johnson is a leading on-course bookmaker and he has led calls for the stakeholders in racing to offer financial support to layers during the period that racing is suspended. He has had to endure some quiet months at his pitches at most of the big courses, thanks to the wet weather during the winter months. A change of fortune now looks extremely unlikely.
The suspension of racing means that the likes of Johnson will be completely unable to earn an income of any sort, whilst the fact that they’re self-employed means that they will get little help form the government. Johnson’s own costs exceed £20,000 per month, which simply cannot be sustained for an indefinite period.
Firms Likely To Close
Whilst Johnson believes that some of the more established bookmakers might have enough in their reserves to survive, there is a fear within the industry that plenty of on-course bookies exist in a hand-to-mouth capacity and therefore are unlikely to survive this period of no racing. The cancellation of big-earning meetings like the Grand National will be costly enough.
Robin Grossmith, one of the Directors of the Federation Of Racecourse Bookmakers, said, “For most on-course bookmakers it’s their sole source of income and I don’t know what the answer is…If it drags on it’s going to have a real impact on people’s lives – those with families and mortgages and all those things everyone has”.
Knock-On Effects
Those that don’t like betting companies for moral reasons might well be celebrating the likely difficulties that the industry is going to face over the coming months. The problem with that attitude is that it’s easy to forget how much of a knock-on effect it’s likely to have in other walks of life and how many people are employed by the betting industry.
If bookmaker’s shops close or pitches go out of business then the people employed by them will lose their jobs. Likewise if the limit to the amount of sport people are able to watch and bet on continues then it’s unlikely to be long before sponsorship starts to get pulled. It will only be the sports themselves that are harmed in that situation.
It’s also worth noting that bookmakers won’t be buying many adverts at the moment, given that the money they’d spend to put ads on TV would likely set them back a huge amount for very little return. That in turn will have an impact on the TV companies, missing out on the revenue from ad buys and therefore unable to afford to produce things in the same way.
Affiliate marketers are also likely to suffer. They make their money from people clicking links through to bookmakers and placing bets, so the sudden loss of major sports events for people to bet on will reduce the amount of money that they’re making. Whilst the big companies can survive, the smaller ones might not and that’s real people losing jobs.
There Could Be A Boom Later In The Year
Right now, virtually no sport is taking place and it doesn’t look like that is going to change in the foreseeable future. However there could come a point later in the calendar year when there is a bumper amount of sport taking place that punters will be keen to bet on. The likes of the Premier League, Serie A and La Liga may all resume, as may the Champions League.
There is also likely to be something of a boom for online casinos. That will be good news for affiliate marketers who are able to make money from a move over to casinos by bettors, as well as companies that have casino systems in place. This will hopefully allow those companies to allay fears of job losses across the industry, though that’s not guaranteed.
The Coronavirus is spreading around the world at an incredible rate and the negative impact on the economy is likely to be huge. The belief is that the virus is unlikely to peak in the United Kingdom until the summer, whilst some believe that the crisis will last until the spring of 2021. If that is the case then the impact that will have on the betting industry could be truly catastrophic.
