Nearing a decade since Celtic Bookmakers fell asunder, Ivan Yates has seen this before.

One of a small number in the media to robustly challenge the government on its Covid-19 restrictions, Yates needs little reminding of riches making rags – and his forecast for the Irish bookmaking industry is bleak.

“Covid-19,” says Celtic’s former owner, “will accelerate the demise of the betting shop.” For the racing industry, this is not good. For the punter, this and the merger of Paddy Power with Skybet render the quest to make money gambling on horses ever more exhausting – if one can still be bothered. British racing resumed Monday, betting shops still locked away.

What happens when they reopen? How many will still trade in a year’s time and what does all this mess for retail entail?

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In late March, approaching the heat of the pandemic in Europe, a £10 billion mega-merger to create the world’s largest betting company was rather quietly waved through by the competition authorities. Flutter – which owns Paddy Power Betfair – and the Stars Group – which owns Sky Bet – ought to have combined annual turnover of more than £4.4 billion. It will, remarkably, coast past Bet365, the behemoth which turns over nearly £3 billion.

For the punter this is worrying, which I will get to later. Meanwhile, as the employees of Paddy Power got their heads around another merger, one which boosted its ailing share price by 50 per cent, betting shops sat idle. 

A total of 841 in the Republic are locked up, due to reopen on June 29, Paddy Power’s growing broadcasting team back at work in Power Tower in Clonskeagh two weeks earlier. BoyleSports opted to pay all staff full wages during the crisis, despite being locked into tenancy agreements in the vast majority of its shops, some in the most affluent areas of Dublin, says chief executive of the family owned business, Conor Gray.

“It has been a massive blow for the sector; the revenue of smaller operators without an online presence has dropped to zero,” says Sharon Byrne of the Irish Bookmakers Association. “Our sector provides over 6,000 jobs and contributes over €85 million in taxes,” she added.

Those taxes having doubled in 2019, leaving Ireland with, says Davy Stockbrokers, “one of the more penal regulatory backdrops for gaming in the world”.

Maintaining margins and relevance

Betting shops are a bit like newspapers, locked in a battle to maintain relevance against the hegemony of the internet and smartphones. There were 1,365 of them in the Republic in 2008. With Ladbrokes going into receivership (now with just 135 outlets) and most independents gone or gobbled up, this figure declined dramatically until stability of sorts in 2017. Paddy Power put 14 of its shops on the market last September.

In Budget 2019, Paschal Donohoe heeded lobbying from Horse Racing Ireland to double betting tax from one to two per cent for both retail and remote bets placed by customers. Taxing turnover is problematic for bookmakers, given the erratic outcome of major sporting events in a calendar year. 

Betting shops in Ireland, unlike in Britain, do not have the luxury of Fixed Odds Betting Terminals, which run to a consistent margin and provide no shocks to the bookmaker who simply has to plug them in to generate a three or four per cent return. Racing is still the staple of the Irish betting public and accounts for approximately half of a typical shop’s revenue. So, Frankie Dettori having four winners can cause a great deal of damage to the bottom line.

“Retail was difficult enough without the doubling of the tax,” Gray says, and those who only have a passing interest in the industry might be surprised at how little the average betting shop makes in Ireland.

“An average shop with €2.5 million annual turnover will have weekly expenses before betting tax of €4,250 and after betting tax of €5,200,” Byrne says. Paddy Power declined to be interviewed for this piece. Whilst its spokesperson of the same name has emphasised the value of the free advertising of the shop front, you need to turn over a lot of money to return a profit in betting shops. 

If the punter usually keeps about 90 per cent of his or her stake in the shop, perhaps between 88 and 90 per cent according to Gray, that means in order to break even each shop needs to be taking in around €60,000 per week in bets.

The economics of social distancing

There are those who see a future without betting shops, or at least without manned betting shops. Colm Finlay opened his first shop, BetXS, beside Dublin’s iconic Poitin Stil pub in late 2017. He now has two other shops. The company, Finlay says, was profitable in both 2018 and 2019. 

“The lockdown for me has been relatively simple with no staff except for my brother, who helps me out on a part-time basis, and I. The two latest shops have full IoT (Internet of Things) building management systems so closing them from my home was simply a case of opening up my laptop and telling them to do so. 

“Retail bookmaking in its traditional manned guise is becoming the exclusive reserve of large urban centres. The monthly operating costs for a betting shop is coming in at around €20,000 per month if fully adhering to labour laws in this country. The knock-on effect of this is towns like Ballivor and Kilbeggan where I operate are no longer viable for traditional betting shops.

“It’s going to be incredibly difficult for retail bookmakers to emerge from this and I would say more so than other forms of retail. Imagine a scenario where Joe from the pub is trying to get on before the 2.30 at Cheltenham is off but he has to wait in a queue until Mary has finished placing her 30 lines of lucky numbers on the Irish Lotto. It’s like telling a supermarket customer he can only buy toilet roll before 2.10pm at which point it’s gone.”

This gets to one of the most obvious problems for the shops reopening: social distancing. One of the few independents left, Paul Tully, envisages a 50 per cent drop in custom. IBA chief Byrne insists that observing what is asked by the government will not fail for want of preparation.

“This will probably be the most challenging issue, which we must all adhere to in order to ensure the safety of our staff and customers. However, we are developing a very specific and comprehensive set of  procedures to guide our members in preparing their shops for re-opening.”

Jackie Murphy, Ladbrokes Ireland’s operation manager, has been self-isolating with her daughter and mother in Dublin. “Sometimes an hour goes by of total silence; we get to the point where we’ve said everything that can be said,” she laughs.

“A lot of my staff are saying ‘the customer will never do that, the customer will never do this’ – but if you told me three months ago I’d spend an hour queuing for a supermarket, I’d have told you where to go.”

Gray envisages “some sort of limit” of bodies per shop. The Currency has seen one of those Dublin-based and the measures in place. In practise, they seem next to impossible to police, whatever about public adherence to social distancing having clearly waned in the past couple of weeks.

Picture it. A glass screen covers most but not all of the counter to place bets, with a large gap in the middle. The wall-mounted big screen with betting and results for all Irish and British meetings, a magnet for the gawk of the man who wants to back a winner or wishes he had earlier, is – customers are told – only for one person at a time.

Bookmakers love last-second bets, that frantic rush to the counter, the product of muddled judgement; they may pretty much be a thing of the past if social distancing guidelines are obeyed.

“Jimmy, Johnny and Mikey who potter in and out, the elderly lads who love the social aspect of it, they won’t be there,” Murphy adds.

Teaching old gamblers new tricks

Will habitual gamblers resume old ways? Having spent more than three months out of the practise of putting pen to slip in shop, many have taken stock. Without overstating the importance of a Twitter poll, it is nevertheless intriguing that nearly half of those partaking on May 19 from over 3,000 participants (45.7pc) said they envisaged gambling less post-lockdown.

In the autumn of 2007, Yates noted that while Celtic’s number of wagers was broadly maintained, the average slip value started to decline. He was told that regular customers from the construction and other sectors had reduced their betting stake. Betting shops have never really recovered from this. The hard hats disappeared and that was keenly felt by the industry. 

Horse Racing Ireland CEO Brian Kavanagh has had an exceptionally challenging couple of months, the government only belatedly allowing racing to return here on June 8

Over 23 years, Yates’ Celtic Bookmakers grew to 63 shops – a fanciful prospect for an independent nowadays. Yates recalls making Celtic a national brand and an “indestructible business on a full-time basis before the Celtic Tiger”. Then the recession hit.

“Leaving aside the last crash, disposable income was down 40 per cent and after you had to get food and clothes you didn’t have to have a bet. If money gets tight you pay for essentials, that’s it.

“The second problem, to my mind, is that I don’t think it is possible to make money in a betting shop with a two per cent charge on turnover.”

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The merger of Paddy Power Betfair and Skybet is unlikely to be good for punters. Were he still around, George Orwell might say: competition good, mergers bad. Whereas Paddy Power, Betfair and Skybet once offered three different prices on the one horse, that will presumably become one.

One insider at a UK firm, who did not want to be named, told The Currency: “The ramifications of these super mergers are potentially quite profound. For punters, it likely means that value gets squeezed. Player risk-management is another area where you could potentially expect these firms to share information if they are allowed to do so by regulators. 

“Another impact area will be on the wider industry and particularly on smaller firms trying to compete in these markets. Firms that operate at this scale can often dominate all available marketing channels and effectively price out smaller firms from competing for customer acquisition. 

“This creates barriers to entry that are becoming so great that you end up with just a small number of behemoth firms that have almost all of the revenue between them and then they just play the game of not rocking the boat.”

Former Sky Bet boss Richard Flint disagrees that there will be major drawbacks for the punter from the merger, but agrees that Covid-19 will exacerbate problems in retail. “I believe that there will continue to be a shift from offline to online, particularly where the retail experience doesn’t offer anything unique or better than online. Covid-19 will accelerate the shift, resulting in challenges on the high street, and this includes betting shops,” he told The Currency. 

Bailing out the bookie

Yates envisages the state needing another bailout. “So the state will need a bailout, yet we will have racing asking the state to give a bailout. For the Budget of 2021, there will be huge pressure to sustain the level of funding for Horse Racing Ireland in a scenario where there’s a lot of open hostility to the horse and especially greyhound industry. And how can you give nearly €70 million to racing and nothing to soccer in Ireland?”

In a trading statement last month, William Hill said it planned a staged reopening of shops in the second half of the year in the UK and it estimated that each additional month of shop closures would result in reduced earnings of £12 million to £15m, assuming the continuation of government support for furloughed workers. Bookmakers pay British and Irish media rights holders millions of pounds a year for the right to broadcast live pictures from racecourses, keeping the racecourses afloat. These bookmakers need to be open.

“We’ve let nobody off our payroll and have made up their wages with government subsidy,” added Gray, who replaced his father-in-law John Boyle as CEO in July 2017. 

Horse Racing Ireland CEO Brian Kavanagh has had an exceptionally challenging couple of months, the government only belatedly allowing racing to return here on June 8. He is downplaying fears about the budget for the sport in 2021, but admits that media-rights funding for racecourses depends on “how many betting shops actually reopen, especially in the UK”.

One thing in short supply when it comes to bookmakers is public sympathy. The industry has been chronically short of regulation here, the years-long Gambling Control Bill still not in place, and bookmakers’ exploitation of problem gamblers and high rollers has been exposed, if not entirely. In early January, an anti-laundering act came into force, and one insider revealed that it was having a markedly negative influence on turnover in his firm. 

The swing towards the left in the general election is neither good news for racing nor bookmakers, with Sinn Fein intent on taxing the industry. Smaller bookmakers did enjoy some reprieve from paying the two per-cent betting tax up to a limit of €50,000, announced in Budget 2020, but that seems a long time ago now.

The likelihood is that these firms will look to accelerate their “multi-channel programmes”, that is to say to continue to direct traffic from their retail estate to their online platforms. GVC (Ladbrokes and Coral), have been successful in achieving this to date but Paddy Power and BoyleSports have not quite cracked the bricks to clicks conundrum. That will no doubt change. 

“We’ve let nobody off our payroll and have made up their wages with government subsidy,” added Gray, who replaced his father-in-law John Boyle as CEO in July 2017. 

When others were getting out or consolidating, BoyleSports was expanding, It recently acquired 33 William Hill betting shops in Northern Ireland, rendering it Ireland’s biggest retail bookmaker. 

It now has 298 shops on the island, the vast majority rented. Ladbrokes also only owns a tiny number of properties. “I don’t want to sound like Michael Collins,” Gray adds, “but we’re going to have to come together as a nation like never before.

“We’re just trying to get through 2020 and we’re hoping for two things,” Gray adds. “When the rent reviews come up, we will be looking for some support, and we need the government to tax on profit not turnover.”

If the average shop costs roughly €5,000 a week to run, it follows that the bookmaker needs to be taking €5,000 in winnings every week just to break even, entailing the punters betting around €7,000 every day per shop. For many shops going forward, that seems fancifully optimistic.

“The shops,” said one insider who has worked for two of the leading high-street firms, “have no life long-term. They will continue to operate as a platform to migrate customers online. With the current tax in place in Ireland, the latest anti-laundering measures and now the prospect of a massively reduced footfall for an indefinite period the shops are going to struggle massively.”