Doomsday warning

Fixed-odds terminals in licensed betting shops are draining income from pubs with games machines. GRAHAM RIDOUT looks at the problem, and seeks industry advice on how to maximise profits Revenue from machines in pubs is big business. Last year, it is estimated the business was worth £500m as punters pumped their money into AWPs (amusement with prizes machines or fruit machines) and SWPs (skill with prizes machines, games such as "Who wants to be a Millionaire?"). However, the money flowing into the biggest earners, the AWPs, which account for around two-thirds of the revenue, is slowing down dramatically. A large majority of licensees entering the Morning Advertiser's Best Pub Awards reportlower machine income this year than last.For many, the percentage drop is in double digits. And the culprit in many people's eyes is the fixed-odds betting terminals in licensed betting offices. Reg Mayhew, machines and vending director at Punch, believes the situation has reached a critical point for the pub industry. He comments: "Fixed-odds betting terminals have robbed us of lots of money and endangered the survival of many small businesses. An AWP may only produce a profit of £2,000 to £3,000 per year, but that could be the margin between a small pub staying in business or going under." Mayhew speaks for many when he says prize money has to be raised for AWPs. "I don't think a maximum prize of £25 and a top stake of 30p is realistic in today's world." A recent MORI opinion poll supports Mayhew's argument. It revealed the public wanted prize money to be raised to at least £50, if not £100. Standing in the way of any increase is the Department of Culture Media & Sport. Everythree years, the Gaming Board reviews prize money levels and makes its recommendations to Government. In the past, the board's recommendations have usually been announced well before the tri-annual changes take effect in January. This time around, the announcement appears to have been stalled by the new Gambling Act that the Government wants to introduce. Glynn Mellor, chief executive of machine supplier Gamestec, and also a committee chairman of BACTA, the machines industry's trade body, says BACTA asked the Gaming Board to raise stake and prize money limits to £1 and £50 respectively. He comments: "Normally we would have expected to have heard by now what changes there will be in the tri-annual review, but there's only been a deafening silence from the DCMS. If we are to hit the January deadline, we need to hear now." Mellor adds: "Overall, there is no doubt that things have not been great over the past year and the impact of fixed-odds betting machines has made life difficult. Where we have maintained the same machine density in pubs, the income has been, at best, flat. "We do need to move the stake and prize money to a more reasonable level." If the levels aren't raised, Mayhew predicts a doomsday scenario. Punch's machines director warns: "I think there could be a 17% to 20% drop in machine income, if the present prize money continues for the next three years. We have already seen a 40% to 50% decline in machine usage over the past few years." And if the Government doesn't legislate on increased payouts, Mayhew says it will be "selling the small English pub down the road in favour of the large American corporations running giant Las Vegas-style casinos". If the prize money is raised, Mellor pledges: "This will enable us to develop a lot more entertaining games for customers." He adds: "Although AWPs are the most popular games machines, they attract a much narrower customer base. Therefore we need to continually develop new games to keep their interest." While the AWP side of the coin is looking a little tarnished, the SWP side is looking brighter. Gamestec expects to have 5,000 of its Gamesnet terminals installed in pubs by the end of this month. The latest version, Gamesnet FIVE (future in-venue entertainment), has a 17in, flat touch-screen and is compatible with all current networks including wireless and broadband connections. At present, more than 60 games are available and new games currently being developed by JPM, Bell-Fruit, Maygay Machines, and Channel 1 will be downloaded overnight to a terminal as soon as they are ready. The current top choice of customers using Gamesnet terminals is Monopoly, developed by Channel 1. The rising popularity in multi-choice games machines has hit revenue from machines that offer just one game such as golf or pool. Mellor says home entertainment games machines like PlayStation have also contributed to the fall in popularity of single-game machines. Over at Leisure Link, which is number one in the industry with 90,000 machines in 25,000 venues, the main focus over the past few years has been making the transition from analogue to digital products. The range includes a jukebox (The Music), an AWP (Pub Casino) and a multi-function games machine (itbox). Sales and marketing director David Purvis explains: "We believe that digital products have a much broader appeal, so we are designing our new products to attract more people to pay for out-of-home entertainment in a pub venue. So far, all our evidence substantiates that digital products can and do grow the player base and increase revenues; and that's got to be good news." Getting the optimum mix of machines is not an exact science, says Purvis. It is dependent on a number of elements, including the type of pub, be it community or city centre bar, and the type of trade the business attracts. The machines chosen should also attract people into a pub. Purvis explains: "In today's ultra-competitive leisure market, pub venues need to offer something much more compelling thanconsumers can get at home, or elsewhere for that matter." In spite of the current problems, Gamestec's chief executive is upbeat. "We are not despairing, neither is the rest of the industry," says Mellor. Jukebox set to raise fine tune While AWPs and single-choice games machines are feeling the pinch, there has been a revival in the fortunes of the jukebox. At the heart of the revival is computer technology that allows music, even pre-release records, to be downloaded to terminals, which can store millions of tracks and vary the music selection to suit the mood or time of day. Gamestec chief executive Glynn Mellor says it is currently developing a new music product that will be launched this autumn. "It will allow pubs to adapt the music to suit the occasion and even allow four different sections of a pub to play different kinds of music ­ all running from the same server." Leisure Link's music product is a jukebox (The Music) with two million tracks to choose from and the facility to play background music that changes during the day to suit different trading patterns. Customers can also listen to pre-release tracks, purchase CDs ­ there's a choice of 93,000 ­ and can even download ring tones to their mobile phones. Ban won't hit vend sales' Speculation over a smoking ban hasn't affected cigarette vending machine supplier CV Services, which reports visible sales growth in the on-trade last year. A company spokesman comments: "This is due, in the main, to an increasing number of publicans taking firmer control of their pub's vending set-up and realising the profits that can be generated." Although originally set up to sell just cigarette machines, the company is increasingly being asked to supply other vending equipment such as snack machines. CV's spokesman advises licensees: "Through buying your own machine, all the profit generated is yours, quickly complementing the pub's bottom line." Whether smoking is banned or not, the company says: "Cigarette vending will continue to be popular, after all, 13 million people still need to buy their cigarettes and the pub often proves the most convenient place." And having a machine in a pub in a less built-up area, can often entice smokers in to top up their supplies ­ and to have a drink while they are there.