Raising their game
As new legislation introduces higher stakes and prizes on gaming machines, Jo Grobel meets some key players
The recent, long-awaited increase in stakes and prizes in gaming machines can only be positive news for pubs. Customers will be more tempted to play because of the prospect of larger pay-outs and licensees will see more money going into the slots.
Games supplier Buzztime's sales director, Jon Derbyshire, says that increases are exactly what is needed to bring pub fruit-machines back into growth. "Increasing machine prizes is a positive move for pubs and customers," he says. "The idea that you can walk out of a pub richer than when you went in will soon spread, bringing more people into pubs at a time when the smoking ban threatens to damage trade."
Tough years for the industry
It has been a tough few years for the coin-operated industry, suppliers have long pushed for increases. These were finally agreed when the Gambling Act 2005 came into force. The increased stakes and prizes were brought in at the end last month following DCMS agreement.
Gamestec Leisure managing director Rolf Nielsen says: "At last, the Amusement With Prizes (AWP) sector has been given a much-needed boost: stake and prize levels have increased from 30p to 50p and maximum payouts on AWP machines have risen from £25
to £35.
One drawback of the higher stakes and payouts is that licensees will have to pay a higher level of duty on the machines. This, however, will be rectified with the Chancellor's budget in March, when the taxes will be reduced. Suppliers are saying that it is at this point that pubs will fully reap the benefits.
Another change to come out of the Gambling Act are changes to how much profit
licensees take from machines. At the moment, the licensee takes all the revenue from a fruit machine, minus the rent, which the supplier takes. The amount of rent is determined by the age and model of a machine, and the contract agreed with the supplier. It has no relation to the amount of money the machine makes. Therefore, there is currently no incentive for the supplier to ensure that the machine makes as much money as possible.
Under the Act - which comes fully into force by September 2007 - licensees will be given greater flexibility to be able to work more closely with suppliers.
A licensee will be able to decide if he wants to pay the supplier a share of the revenue - which could be seen as an incentive for the supplier to maintain machines better and introduce new technology. Inspired Gaming chief executive Jim O'Halleran says a supplier might offer to split 10% of the revenue, and also marginally reduce the rent he pays.
Bill Knowles, Punch central operations director, agrees that the ability to split revenues could be a positive move for both the licensee and the supplier: "The licensee will have more freedom as to how he pays the supplier. At Punch, however, we will want to test whether offering the supplier a share of the revenue encourages him to perform better. Only then can we decide what will be best for our licensees - to continue paying a fixed rent, pay part-rent/part-revenue share, or just to split a percentage of the revenue."
More market innovation
Ultimately, the aim is that it will provide more innovation in the market as suppliers will have more of an incentive to create new and exciting games.
As well as obvious new customer incentives, suppliers believe that these changes will help bring fruit-machine profits into line with other gaming machines.
About four years ago, machines were bringing in 25% of a pub's bottom-line profit, but are currently unlikely to attract more than 20%. Lack of innovation in terms of fruit-machine design and content are largely to blame - for instance, many machines still display the infamous "nudge and hold" graphics.
The Gaming Act, as well as new technology, will enable machine manufacturers to provide more consumer choice through new games and dual-stake options.
Unlike most other machines, such as juke boxes, quiz and gaming machines, fruit-machine technology has not been available in digital, server-based formats until recently.
This month, Inspired Gaming launches what it claims is the first server-based fruit machine, enabling licensees to change the content as often as they wish.
Chief executive Jim O'Halleran explains that the new machines will bring an end to the lengthy operation currently required to alter the content of the traditional machines.
"Changing the content of a fruit machine is a cumbersome process: machines are wheeled out of the pub every 12 weeks and taken back to the depot to be cleaned up and different games installed," he says.
This already creates problems, according to O'Halleran, as consumers are likely to tire of playing the same game after 10 weeks, but changing the content more frequently would be unrealistic for operators.
"The digital route works for everyone - as a supplier we can use information sent via the telephone line to detect faults. For example, if a well-used machine hasn't taken a coin for a couple of hours we will come and sort out the problem immediately. With analogue machines it could take at least a day before the barman realises a machine isn't working."
While Inspired is able to digitalise its analogue machines to save licensees money, a new machine is also available which looks similar to the old analogue version but has two screens instead of one.
Increasing consumer choice
The new machines increase consumers' choice from the traditional single game to three. Depending on the model, O'Halleran says, digital machines will cost the same as, or marginally more than, traditional fruit
machines.
While the increased stakes and prizes are only relevant to Amusement With Prizes (AWP) machines, the new rulings are likely to have wider positive implications for the gaming industry as a whole.
Iain Reay, owner of Hampshire's County Arms in Winchester, says that his machines combine well with each other to bring in
more trade.
He says: "Since installing our Buzztime pub quiz system we have found that more customers want to play on the fruit machines and games machines too, because they develop a game-playing frame of mind."
Reay believes that as the new rulings add value for customers, he will see his takings increase from all his machines.
l Turn the page for the first of our monthly Technology Special features
How does the Gambling Act Affect your PUB?
Poppleston Allen licensing solicitors provide the
answers:
l Games machines are categorised into four groups: A, B, C and D. From September 2007 alcohol-licensed premises will have an automatic right to have two category C or D gaming machines.
l Category A are unlimited stake machines and are only allowed in regional casino halls
l Category B machines are allowed in bingo halls or clubs but not in pubs. They are split into four sections: B1 machines have a maximum stake of £2 and £4,000 maximum prize; B2 machines have a £100 maximum stake and £500 maximum prize; B3 have a £1 maximum stake and £500 maximum prize; B4 machines have a £1 maximum stake and £250 prize.
l Category C machines are all-cash AWP. They are allowed in pubs and now have a maximum stake of 50p and maximum prize of £35. Under 18s may not use these machines.
l Category D machines are also allowed in pubs. They are lower payout AWPs and now have a maximum stake of 10p cash or 30p non-monetary and maximum prize of £5 cash or £8 non-monetary. These machines can be played by children.
l To enjoy the right to have two category C and D machines, the licensed-premises holder should write to their local authority, stating their intention to have two machines of Category C and/or D and enclosing a fee (yet to be prescribed).
l For more than two machines, license
