COVID-19: Analysing its impact on the gambling sector By Richard Williams, Partner, Keystone Law March 17, 2020 at 3:09 pm It’s difficult to write an article assessing the potential impact of COVID-19 on the gambling sector when international events are moving at such a rapid pace. Only last week, 251,684 race goers attended Cheltenham Festival for the National Hunt Festival. The Festival was a commercial success, though attendance was down by 5.5% from the record attendance in 2019. The risk of contracting coronavirus clearly had only a marginal impact on spectator numbers. This may prove to be the last hurrah for racing and many other sports for some time to come. Even by the time the Cheltenham Gold Cup was run on Friday afternoon, Spain had already suspended its football league, the Australian Grand Prix had been thrown into chaos by COVID-19 and the Irish Prime Minister had announced the closure of all schools, colleges and childcare facilities in Ireland, together with a ban on gatherings of more than 500 people. Even the teetotal racegoers woke up on Saturday morning with a severe hangover! Coronavirus has now decimated the sporting calendar around the world. In football, the Premier League, Football League and European leagues are suspended until early April and the Champions and UEFA Leagues are off. Euro 2020 is likely to be postponed until the summer of 2021. Whilst some horseracing will continue behind closed doors in the UK with no spectators, the Grand National has been cancelled. Racing in Ireland has been suspended until the end of March. In golf, the Masters and the Players Championship have been postponed and other events are expected to follow. In motorsport, the Australian Grand Prix was cancelled and the start of the season has been pushed back to June. In cricket, England’s series with Sri Lanka has been postponed and the start of the IPL has been delayed until mid-April. The ATP Tour has suspended all tennis events for six weeks. In the US, soccer, hockey, baseball and basketball leagues have all been suspended. The Summer Olympics in Tokyo are also under threat. Given the lack of sporting events taking place for the foreseeable future, this will inevitably have an impact on the remote and land-based betting sectors. You only need to take a look at the websites of major online betting operators to see how the betting tab shows very few events left to bet on. This situation will only get worse, as coronavirus closes down more and more international sporting events, such as the South American football leagues. We are only at the start of the crisis in the West and worse is to come, as the virus takes hold in Europe, the USA and the rest of the world. Stock markets around the world have tanked. The FTSE 100 in London has sunk to its lowest level in more than eight years. Shares in major gambling operators are down and some companies have already assessed the potential impact on their revenues. William Hill, the London-listed land-based and remote operator, announced that 53% of its 2019 revenue was generated from sportsbook. It has assessed the impact of coronavirus on its business. It assumes that UK and international football will resume in August 2020, that the Euros will be postponed until 2021, that it will have to close its UK retail shops for one month, that the Grand National and Royal Ascot will be cancelled and that US sports will resume in September for the new NFL season. It projects a reduction in its EBITDA of £100m as a result. It also expects that each additional month of betting shop closures would result in a further £25-30m hit. Similarly, international remote and land-based operator, GVC (which owns Ladbrokes, Coral, BWIN and Sportingbet), announced that 45% of its group revenue was generated from sports last year. It envisages that its EBITDA will be reduced by £130-£150m due to coronavirus, with a further £45-£50m reduction per month during the closure of its UK betting shops. Paddy Power Betfair owner Flutter Entertainment, which generates approximately 78% of its revenues from sporting events, expects its earnings to be reduced by £90m-£110m. Before the mass cancellation of sporting events, some commentators suggested that periods of lockdown and self-isolation would benefit the remote gambling industry, whilst those bored at home resorted to online gambling to pass the time. However, cross selling casino gaming to sportsbook customers has never been an easy task and it remains to be seen whether gamblers will cross over to other forms of gambling when there are no sporting events to bet on. It’s possible that betting on virtual racing and football will fill the void, or that esports, lottery and novelty betting markets will grow. However, this is unlikely to replace the regularity of sporting events which drive sports betting markets. Betting on a virtual Manchester United game is unlikely to replace betting on the real thing. Some gamblers will simply stop betting altogether and this is clearly what the operators are anticipating. Land-based gambling operators will also be hit hard, but we do not yet know how different international restrictions on socialising will impact them. The UK Government has taken a laissez-faire approach so far and has discouraged, but has not banned, going out. However, fears about infection will bring all non-essential activity to a halt, even if gambling premises are not forcibly closed. Attending a casino is not going to be a priority when supermarket food supplies are running low. Other countries have announced much more strict restrictions on congregating and this will severely impact land-based betting, bingo and casino operators in those territories. Macau’s casinos, bars and restaurants have recently re-opened following a 15-day closure due to the coronavirus, which resulted in an 87.8% drop in revenue. In the USA, Las Vegas resorts and casinos are already closing, with all Wynn and MGM Resorts casinos due to close from 17th March. The Strip is likely to fall silent for the first time in history. So where does this leave the gambling industry? Clearly, it’s not going to be in great shape once the peak of COVID-19 has passed (whenever that might be), but it won’t be disastrous. Other hospitality and leisure sectors will fare far worse. People are only just starting to realise that COVID-19 is not just a bad flu, but that it will have far-reaching social and financial consequences and could well lead to a world recession. Governments will obviously be keen to avoid this outcome, but unless an effective anti-viral treatment can be found soon, or a vaccine produced before the virus returns next winter, a financial crash may be difficult to avoid. Airlines, holiday companies, hospitality businesses, banks and individuals may all require financial bail-outs and whilst people struggle to pay bills and mortgages, spending on discretionary items such as gambling will be impacted. It’s clear we are all in for a rough ride, but health and welfare must be the priority for now. Like airlines, gambling operators have been keen to publicise their financial resources and ability to weather the storm. Operators are not going to be ruined by COVID-19 but, with the exception of Gold Cup-winning jockey, Paul Townend, 2020 isn’t going to be a memorable year for anybody. Richard Williams is ranked by Chambers & Partners 2020 as a leading gaming lawyer. He advises both the land-based and remote gambling sectors on regulatory issues and his team is often brought in to advise on licensing due diligence and change of corporate control applications in corporate deals.