Playtech, the gambling software company behind thousands of gaming websites and fixed-odds betting machines, has issued a profit warning which has caused its shares to drop by 20%. The firm, based on the Isle of Man and founded by Israeli magnate Teddy Sagi, has stated that annual profits are set to be 5% lower than expected: this means an over $20m drop in profit forecasts, which has led to a dramatic decrease in share value.
The company has blamed several factors for the year’s low profits, including recent issues with UK gambling website Sun Bingo, associated with the newspaper The Sun, both owned by Rupert Murdoch’s News UK group. Sun Bingo uses Playtech software, but technical problems in a current re-launch of the website have led to the company spending more money than planned on the project.
However, one of the main reasons for Playtech’s financial troubles is believed to lie much farther from home: indeed, a slowing down of the Asian gambling market has also been stated as a factor. Particularly, a recent crackdown by the Malaysian government on the previously unregulated online gambling market has lead to a significant loss for Playtech. Experts estimate that Malaysia comprised approximately 5% of Playtech’s overall revenues, and that the government’s attempts to block online gaming is probably the key factor in the firm’s current predicament.
Meanwhile, back in the UK, a controversy surrounding fixed-odds betting terminals (FOBT) spells even more problems for Paytech. The government recently announced the intention to slash the maximum bets on the machines from £100 a spin to anywhere between £50 and £2. A 12-week consultation period will allow the government and the Gambling Commission to establish the dangers of FOBT, as well as the benefits to be reaped from lowering the maximum bets.
The machines are incredibly popular in betting shops across the UK, allowing players to gamble – and lose – up to £300 a minute in digital versions of casino games, most commonly roulette. The main controversy around them surrounds the fact that the machines – as well as the betting shops and bookmakers themselves – are concentrated in deprived neighbourhoods and are believed to target the most vulnerable in society. They have also been shown to be particularly addictive, both due to the lack of effort and complexity of the games and to the ubiquitousness of the machines: it is incredibly easy to play, and incredibly easy to lose. Players also tend to believe that they can easily recoup their losses on the next spin: one young man from Edinburgh recently claimed to have lost £5,000 in 48 hours on the machines.
The government’s decision to reduce the stakes could either have a huge impact on the industry, or very little at all, depending on how much they choose to cut. Whilst slashing stakes down to £2 would force several shops to close and would mean huge losses for both software companies like Playtech and shops such as William Hill, bringing bets down to £50 would still allow for huge gambles and would probably cause little impact. Detractors of the government’s push argue that in the first case, players would simply seek their thrills elsewhere, whilst in the second, nothing much changes.