The recklessness of responsible gambling

By Dan Waugh, Partner, Regulus Partners

Perhaps it’s the contrarian in me, but at a time when the gambling industry is keener than ever to demonstrate its CSR credentials, I find myself turning against responsible gambling.

To be clear, I fervently believe in the need to tackle problem gambling, based upon a combination of research, education, intervention and treatment. It’s just that I struggle with the increasingly common invitation to “gamble responsibly”.

I have four inter-related problems with the notion of ‘responsible gambling’ as a consumer message.

First, I suspect that very few people actually wish to gamble responsibly. Indeed, part of the thrill of gambling is that it feels in some way irresponsible. Gambling offers a recreational way to break taboo without breaking any laws or (in most cases) causing harm. It is a small act of rebellion against societal norms – and who ever heard of a responsible rebel?

If I’m right about this, then there’s a good chance that the invocation to “gamble responsibly” will fall upon deaf ears. This is a shame because others have already done a good deal of the legwork here. In 2009, Paul W. Smith, the director of corporate social responsibility at the British Columbia Lottery Corporation launched GameSense (gamesense.bclc.com) as a way of promoting healthy and informed attitudes towards gambling through engagement with the consumer on his terms rather than the operator’s (interestingly the campaign’s references to gambling were often oblique).

My second (related) point is that as words of advice go, “gamble responsibly” verges on the facile. It has a directness that harks back to a bygone age of advertising where consumers where instructed rather than influenced; but whereas we might be expected to know what to do with the motto “Drink Beer”, it’s not at all clear what we are meant to do or not do with “gamble responsibly”. One might suspect that the aim here is less about influencing positive behaviour and more about being seen to be responsible; but it’s just as likely to be down to lack of thought and insight.

Beef number three with “gamble responsibly” is the implication that it is the consumer rather than the operator who determines whether the gambling is responsible or not. The question of whether problem gambling arises from the gambling or the gambler is long contested – and the truth is likely to lie between the two. Clearly, adults need to take responsibility for their own actions but this certainly does not absolve the gambling industry of its own duty of care. The danger with “gamble responsibly” is that it lets the operator off the hook too easily.

My fourth and final issue with the notion of ‘responsible gambling’ is that it suggests that there is such a thing as irresponsible gambling, which we must assume is a proxy for problem gambling. The implication is that people who get into difficulties with gambling (often as a result of deep emotional distress) are behaving irresponsibly.

There are undoubtedly a large number of people (let’s take the readership of the Daily Mail as a yard-stick) who consider problem gambling to be a form of degeneracy rather than a mental health disorder. By promoting the idea that problem gamblers are irresponsible we may well reinforce these stigmas. This will not only make it harder for sufferers to seek help but may also make matters worse for them by inducing feelings of shame (which may in turn lead to harmful behaviour).

As someone who believes that the words we use reveal our intentions, I see this as being much more than a matter of semantics. We should applaud those who are trying to promote healthy attitudes towards gambling but good intentions need to be married to insight – and simply telling people to “gamble responsibly” seems unlikely to lead to harm reduction.

Perhaps it’s time that we reframed ‘responsible gambling’ in terms of the industry’s duty rather than the customer’s and allow gamblers the pleasure of being a little bit irresponsible again. 

Responsible gambling - compulsion or conscience?

By Dan Waugh, partner, Regulus Partners

A few months ago, I found myself discussing with one of Britain’s leading authorities on gambling, the recent flowering of harm minimisation initiatives. I asked her whether she thought it mattered that this appeared to have come about largely as a result of political sabre-rattling. She answered that it was progress that mattered rather than the path taken to get there.

While I understood her perspective, I wasn't sure at the time that I fully agreed with her – and the trumpeting of several more responsible gambling projects in the meantime has served only to deepen this doubt.

From where I stand, the question of whether the gambling industry is driven to tackle problem gambling through intrinsic or extrinsic motivation is critically important. I hold this view for two reasons: first, that intrinsic motivation leads to better solutions; and second that those solutions will be more sustainable.

If the problem of problem gambling is considered to be primarily a matter of perception then the solutions will be more about style than substance. Responsible gambling programmes founded on considerations of political necessity (whether this be defence against regulatory intervention or the pursuit of liberalisation) are likely to be characterised by highly visible, functional and tangible measures designed to demonstrate that ‘something is being done’.

This approach has a number of drawbacks. Hastily assembled solutions designed (whether by the industry or government) to ameliorate social concerns run the risk of being ineffectual or even damaging in terms of problem gambling (the law of unintended consequences). Even where the merits of a particular measure are clear, there is the question of trade-offs – could the time and money involved have been better spent on other, more effective interventions?

At last year’s Responsible Gambling Trust Harm Minimisation Conference, Professor David Forrest raised the question of whether more subtle, ambient measures (such as encouraging sociability) might be more effective in combating problem gambling than the development of technological interventions like pre-commitment. Yet amidst the debate that has enveloped the industry this year, this question has been ignored.

The key to more effective customer protection in gambling has to be greater understanding of the problem – and this means research. In 2003, Professor Peter Collins wrote: “We need research into all aspects of the causes and consequences of problem gambling, which will include careful monitoring of whatever regulatory, prophylactic, and therapeutic measures are adopted to combat problem gambling.”

More than a decade later, progress has been disappointing. We should acknowledge that the field of problem gambling studies is both relatively young and incredibly complex, involving a range of disciplines (including psychology, sociology, economics and neuro-science) which are just as likely to vie for precedence as work together towards holistic solutions. Efforts are also hamstrung by vested interest, where parties hope not so much to learn from research but rather to gain support for their respective positions. Lastly, research is often undertaken without the active support of the industry itself and so misses the insights that might be gained from close observation of customer behaviour. Once again, motivation is critical. Research entered into collaboratively and in a spirit of honest enquiry has to be the bedrock of effective harm minimisation.

The second reason why intrinsic motivation is so important is that it will drive longer-term and more sustainable solutions. Where the alleviation of political pressure is the aim, the energy behind responsible gambling programmes can be expected to dissipate as scrutiny subsides. This would not be so bad if political pressure declined in line with the incidence of harm. However, this is not the way that politics works.

It is not simply with gambling companies that we should be wary of motivation. Politicians, civil servants and regulators may be just as susceptible to favour expediency over effectiveness – and in such cases it is the vulnerable and damaged who lose out.

The difficulty with all of this is that it’s far more straight-forward to compel adherence to a set of rules than to hope that companies will care enough to address the issue without carrot or stick. Yet the examples of some companies (often owner-managed businesses, who benefit from long-term perspectives and proximity to the customer) who approach problem gambling as a matter of conscience rather than compliance should give us hope.

My solution is two-fold. The first part is to bring the human face of problem gambling into the boardroom by requiring the directors of our largest companies to spend time with front-line organisations like GamCare and the Gordon Moody Association. By shifting the issue from the abstract to the real, we may make responsible operation a way of doing business rather than a brake on commercialism.

The second is to establish a proper forum for the gambling industry to come together with the research community, the regulator and the treatment providers to take a long-term, informed and collective approach to dealing with harm. Gambling has a veritable alphabet soup of organisations (formed with the best of intentions) set up to promote responsibility but the linkages between them are often obscure and the areas of intersection contested. As yet there is nothing that is truly comprehensive.

Ironically, the dictates of conscience are likely to lead to a better future for the industry as public trust is more likely to be engendered by considered attempts to reduce harm than by knee-jerk and transparently cynical responses to political pressure. 

Dot com risk: grey markets and black swans

By Scott Longley, Editorial Director, Regulus Insights.

'To expect the unexpected shows a thoroughly modern intellect' - Oscar Wilde

The 9% share price fall that prompted Playtech to issue a stock exchange statement late last week was only the most recent example of how listed gambling companies suffer more than most from the financial market phenomenon of risk on/risk off.

This is the theory that in the wider market asset price movements are driven by the level of risk tolerance on the part of investors. The more dangerous or unstable the global political or market environment is perceived to be, the more investors are likely to gravitate towards safe haven investments. However, if the background mood music is tending towards the benign, the greater the likelihood that investors will chance their arm in an effort to generate greater returns.

With gambling companies, though, whether land-based or online it is specifically the decisions of legislatures and regulatory bodies that are more often the trigger for dramatic share price reactions.

In the online gaming sector the passing of UIGEA in 2006 by the US Congress was perhaps the most dramatic example of investors being caught out by a legislatory act of shock and awe. But the wider industry can point to other examples of business-defining government interventions, such as the Russian authorities moving to ban casinos back in 2009, or even the loss of S21 machines from land based gaming venues in the UK in 2007.

Rather like living on an earthquake fault line, regulatory tremors are a fact of life for all gambling companies. Playtech’s Malaysian troubles, and William Hill’s recent contretemps with the Philippines’ authorities, demonstrate that regulatory issues can strike anywhere at any time, and rarely with any direct warning.

Yet even to characterise reactions to regulatory developments, as shocks, is arguably an error in interpretation. The analogy de jour for unexpected legal or regulatory jolts is that they are somehow black swan events; something so out of kilter with the ordinary run of business, that it is hugely unpredictable. Yet there is an inevitability about legal proscription and regulatory limits when it comes to offering gambling services.

Whether it is the slow crawl of online regulation across Europe, the advent of the UK Point of Consumption (PoC) regime, the issues surrounding machine gaming in UK betting shops, the recent news from further flung jurisdictions such as South Africa, Singapore or Malaysia, the direction of travel is all too clear: more elements of gambling are being noticed and either regulated, or seeing bans tightened and enforced. This process also gives the lie to the oft misused term ‘market liberalisation’; while it is legally true that a ‘banned’ market which regulates ‘liberalises’, if grey market operators are already in the market the commercial outcome is not ‘liberalisation’ but restriction and tax.

The steady march of gambling regulation makes grey market cash flow seductive but dangerously unpredictable. Exposure to it can also limit regulated market opportunities. Companies and investors could be increasingly facing an impossible choice between regulated legal clarity but little profit. Or dot com cash flow with significant potential volatility.

Dot com volatility is made more acute because no enforcement action has taken place in any given jurisdiction, and the likelihood of action taking place in the future is somehow more unlikely. The history of online gambling consistently contrives to disprove such optimistic hypotheses.

According to industry lore there was no likelihood of enforcement of anti-gambling laws being applied to online operations directed into the US. That was until July 2006, when the Chief Executive of Betonsports was arrested on charges of violating the Wire Act.

Likewise, industry sages confidently predicted there was no prospect of European authorities resorting to similar such extreme measures. Then the French authorities arrested then co-chief executives at Bwin, Manfred Bodner and Norbert Teufelberger in Monaco in late 2006. The same Gallic plod persuaded the Dutch authorities to detain then Unibet boss, Petter Nylander, at their behest in Amsterdam’s Schiphol airport in 2007. And, of course, PokerStars and Full Tilt were untouchables as far as the US authorities were concerned – until Black Friday in April 2011 when suddenly they weren’t

In Europe the steady ratchet of the introduction of PoC regimes across the continent has been accompanied by the drip, drip, drip of operator market exits, the issuing of blacklists and the occasional prosecutorial threat. The approach of playing the regulated market game while also deriving revenues from grey markets, and hoping for ‘liberal’ interpretations of European law is becoming increasingly untenable.

Moreover, this process of the closing down of regulatory arbitrage opportunities is now global. The comfort blanket of Asia, has been promoted by some – including the odd City scribe – as an essentially riskless market where the likelihood of any crackdown by the authorities on offshore operators is supposedly very slim.

This is an example of applying inappropriate ideas about risk to a complex legal, regulatory and operating situation. There are few listed entities that knowingly take money out of China; but there are some, and there are a lot more private entities that ply their trade far and wide across Asia.

If it looks like a swan, hisses like a swan, and is black like a swan then it’s probably a black swan: Investors and operators alike should not be surprised if it turns round to bite.

Never mind bet now, what about act now? - Looking into the recent ASA review into gambling company advertising

By Scott Longley, Editorial Director, Regulus Insights

‘From those wonderful folks who gave you Pearl Harbor’ (Proposed advertising slogan for Panasonic that came from a brainstorming session and title of book on the heyday of Madison Avenue advertising by Jerry Della Femina)

If there is some good news for the UK’s gambling companies from the Advertising Standards Authority (ASA) review into gambling advertising published late last week, it is that the market research undertaken as part of the process did at least find some evidence of the success of advertising in persuading consumers to bet more often. Yet while this may provide some comfort to gambling’s marketing executives, the true significance of the report is the support it is likely to give to those calling for tougher advertising controls for the industry.

In conducting its review – the first since the restrictions on gambling advertising were relaxed in 2007 – the ASA commissioned its own qualitative research and also added some questions on gambling advertising to the most recent Gambling Commission data omnibus survey in order to obtain some quantitative insights.

The evidence from this second element of the research is illuminating. While an overwhelming majority (90% of respondents) claimed that gambling ads had not prompted them to gamble, the survey did find that there was a higher tendency (20%) among those who had placed an in-play bet to be prompted by a free bet or other promotional offer.

Moreover, there was a “notable spike” among the 24-34 age group where 44% said they had been prompted to gamble by a free bet or promotional offer.

So at least the industry has confirmation that free bet offers work, and is particularly efficacious among a certain age group and with a particular product.

But that’s as far as it goes for positives. Because unfortunately for the industry the evidence that is accumulating around free bets offers and promotional offers means that it has become an area which the ASA is now targeting for further scrutiny.

The review points out that no specific action will be taken as yet - but the industry is at now on a warning with regard to ads in this area.

The ASA review said it would be taking a more proactive approach to this area after the qualitative and quantitative research undertaken as part of the review found that free bet offers and promotions were “likely to appeal to younger people and prompt them to gamble”.

Of the 398 cases in the last year, complaints over free bet offers were the most prevalent. The review said the ASA and Committee of Advertising Practice (CAP) had already conducted a “large amount of work” on this issue and that it will “remain a key priority”. The review continued: “If we spot a problem we’ll be more likely to seek a published ruling so that gambling marketers know where the line is drawn and why.”

This isn’t the only area where the ASA will be more proactive. Specific in-play advertising also came under greater scrutiny in the review, and in particular ads where according to the market research carried out for the review there was perceived to be a link between betting and ‘toughness’.

We don’t need to be advertising gurus to know which ads might be being referenced here. The review goes on to relate one story from the market research of a ‘male, family-stager from the 24-44 age group’ who said of a Ray Winstone ad for bet365: “Ray Winstone is your archetypal geezer – he has respect, he’s no nonsense, strong, firm, direct.”

Such testimony is great news for Winstone’s agent when it comes to negotiating future endorsement and advertising deals but not much good for anyone else. Though the review noted that research participants could “mostly only speculate about the potential effects of bet now advertising”, it went on to say that there was evidence that these ads did have an impact on the group of male gamblers who “confirmed they were motivated by this type of ad”.

As part of its next steps, the ASA said: “We’ll be more proactive on issues relating to social responsibility, especially around ‘toughness’ in ads and particular appeal to children, finding ways to continue to source data to inform our decision-making.”

The focus will now move to the CAP review that is due presumably in a matter of weeks. This will be looking into the rules and regulations that already apply to gambling to see whether they need to be amended or updated.

But with the ASA signalling more intense oversight, it is now more likely than not that industry practice on advertising will have to change. Prior to the publishing of this review, the main operators were already well aware of the disquiet among advertising and gambling regulators over free bet and promotional offer advertising.

The newly-formed Senet Group has already instigated a voluntary code which stops its members from conducting this type of advertising before the 9pm watershed. But at present only William Hill, Ladbrokes, Coral and Paddy Power have signed up to it, and of course this code does nothing about the ‘toughness’ complaint.

It should also be noted that the ASA review included data on the amount of complaints notched up by the individual firms which prove that the four companies mentioned were together the biggest offenders as far as cases of complaints were concerned.

In fact, it is worth commenting that while William Hill (190), Ladbrokes (184) and Coral (82) all feature in the top 10 of most complaints, Paddy Power tops the lot with a whopping 243 complaints since 2006, a total which outgunned even the 206 complaints received by the ASA about gambling ads generally. The old maxim that “All publicity is good publicity” often invoked in defence of advertising controversy, may be coming back to bite.

Department of mischief or not, this is not the best advertising accolade that we’ve ever seen. If the Senet Group is going to have more impact, it should perhaps look to its own members to follow the ASA lead and look more proactively at stoppering the flow of complaints about gambling advertising at source. It might well come to be seen as the best piece of advice that their respective marketing departments have ever received.