Struggling bingo operators fear for future of the game

October 20, 2013 2:42 pm

Struggling bingo operators fear for future of the game

By Roger Blitz and Duncan Robinson

In the parlance familiar to its players, the health of bingo is 28 (in a state), to be a bingo operator is to be 43 (down on your knees) and the game’s prospects are looking rather 44 (droopy drawers). Even those with a rudimentary knowledge of the game may be starting to wonder whether its number is up. Bingo is in trouble. Gala Coral, the biggest operator, is packing up its bingo cards and looking at selling its clubs, a deal that a senior executive admitted would be hard pushed to attract interest.Its rival, Rank Group, owner of the other major operator, Mecca Bingo, last week reported grisly trading numbers and admitted the game was looking “mechanical” and in urgent need of new ideas.

The demise of the industry has been predicted before. Bingo took a sizeable blow with the introduction of the smoking ban in 2007, but it survived partly through a series of innovative measures that appealed to younger players.

Now, bingo is being revisited by a new and more sinister downward spiral, the causes of which go beyond the hot weather that kept customers away in July.

The industry’s unspoken fear is that it is fast running out of ideas to halt a seemingly inevitable descent into managed decline. The underlying problem is that bingo is a leisure pursuit whose players are predominantly women in their late 40s and early 50s on moderate incomes. It needs to broaden its appeal.

“Bingo undoubtedly has its problems and after stabilising post the smoking ban, recent trading has become more challenging,” said Nick Batram, an analyst at Peel Hunt, broker to Rank.

“What is difficult to get a feel for is exactly how much the weather and the squeeze on lower incomes is to blame and how much might be structural.”

Bingo’s moment of truth will come with the potential auction of Gala Bingo’s 138 clubs, as the parent group clears the decks way for a flotation of its Coral bookmaking business.

Ian Burke, Rank’s chief executive, said: “The industry would benefit from new thinking. I don’t mind if Gala comes up with a brilliant idea that benefits their customers. We can apply a similar idea to benefit ours.”

But in a frank admission, even Gala Bingo’s managing director is sanguine about finding a buyer, “unless [they] had a huge amount of capital and didn’t mind paying over the top”.

Those talked up as potential suitors have hardly got their eyes down on bingo.

“We have had a look – but I wouldn’t say that it would be top of my list,” said Hugh Osmond, the financier behind PizzaExpress and Punch Taverns who is planning to reinvest in the leisure sector.

Another, Luke Johnson, was coy on whether Risk Capital Partners, his private equity firm, was looking at Gala but concise about bingo’s ailing fortunes.

“Over the past eight years, it has gone from being an investor favourite to being deeply unloved by the financial community,” he said. “In many cases, companies have gone from being cash cows to much less consistently profitable businesses.”

When bingo starts to suffer, the industry redoubles its lobbying efforts with ministers on tax relief, as it will surely do now. The industry still employs 12,000 people, despite lay-offs and club closures.

Industry leaders are fond of the argument that bingo is the softest form of gambling but that its tax regime is the most punitive in the sector, partly because it cannot recover VAT on capital investment.

Bingo’s latest plea to the Treasury, to cut gaming duty from 20 per cent to 15 per cent, was rejected in the Budget. Such a tax regime stifles investment, said the Bingo Association, which has seen 30 per cent of clubs close since 2005. Only two new bingo clubs have opened in the past five years.

For bingo to survive, its uncoupling from parent groups with other leisure interests to pursue “might be helpful at this time”, said Miles Baron, of the Bingo Association.

Indeed, Mr Burke admitted last week that he had been too distracted in the past two years by his Grosvenor Casino business to attend to Mecca Bingo’s problems.

However, all is not lost. Mr Baron points out that an investor would be buying into a community product with a strong brand. While demographic and social issues make it difficult for bingo to expand, according to Mr Osmond, “it’s not impossible to revive”.

Mr Johnson insisted there were reasons to be less pessimistic. “There is a view that the downturn has flattened, that the declines have stopped,” he said.

“It is still seen as one of the most social forms of betting and millions still go every week. It’s not going to disappear. But it is mature.”