Totals reduce but gambling operators and venues getting bigger

27/1/2005

The Department of Internal Affairs’ has released quarterly statistics today showing that while fewer pubs and clubs are choosing to host gaming machines, those that do are getting more machines.

The Director of the Department’s Gaming and Censorship Regulation Group, Keith Manch, said that the trend is the same for pubs, clubs and the gambling sector overall. The total number of venues and machines is decreasing, while the average number of machines per venue is increasing.

Date	Sector total	Pubs	Clubs
2004	12.02	13.01	9.31
2003	11.19	12.24	8.49
2002	11.39	12.72	7.99
2001	9.87	10.92	7.45
2000	8.6	9.7	6.7
30 June 1999*	6.5	7.0	5.7
1998	6.05	6.52	5.36

* Figures for 31 December 1999 are not available.

Mr Manch said that the reasons for the change are not simple. They are probably based largely on gambling operators learning more about how gamblers behave and how to better organise their own operations.

“It could be that operators are concentrating machines in their most profitable venues,” he said. “When the Gambling Act was passed in September 2003 there was a bump in the line, but the trend to more machines on average in each venue goes back years before then and seems to have resumed.

“The stricter controls in the Act will tend to reinforce the trend to fewer machines and fewer but bigger venues. In particular, the caps on machine numbers and stricter rules about issuing licences could mean that existing venues become more valuable to operators, especially where those venues have proven to be more profitable.”

As expected, the Act brought about the first ever reductions in the total number of gaming machines. The number of machines has reduced each quarter since then (from 22,294 last quarter). However, for years now the number of venues has fluctuated, with the overall trend being a slow reduction.

Date	Societies(1)	Venues	Gaming machines
2004	584	1,850	22,231
2003	672	2,031	22,734
30 June 2003 (2)	699	2,122	25,221
2002	729	2,137	24,330
2001	785	2,129	21,012
2000	860	2,065	17,679
30 June 1999	947	2,137	13,812
1998	1,011	2,193	13,273

(1) The Act calls the organisations that operate gaming machines in pubs and clubs “corporate societies”.
(2) Machine numbers peaked in the quarter before the Gambling Act was passed.

Fewer machines more profit, bigger returns to the community

Another area that is not as simple as some have claimed is the link between the total amount of profit made from gaming machines and the number of machines. In reality, fewer machines does not necessarily mean less profit for operators’, and profits can increase while machine numbers reduce.

For example, from 30 June 2003 to 30 June 2004, the number of machines decreased by 11% while profits increased by 10%. In previous years profits increased at very different rates to the increases in machine numbers.

Under regulations in force from December last year, a minimum of at least one-third of profits must be returned to community purposes. As the efficiency of the sector increases, then it could return larger proportions of its profit to the community.

In 2002-03 societies returned more than $290 million to community purposes from profits of $941 million. The figure for 2003-04 is not yet available as not all licence renewals have been completed. Older figures are on paper files relating to individual societies and have not been collated into the Department’s database.

Financial year ended June 30	Operators’ profits $	Operators’ profits % change	Machines Number	Machines % change
2004	$1.035 billion	+10%	22,497	-11%
2003	$941 million	+21%	25,221	+14%
2002	$777 million	+30%	22,113	+14%
2001	$597 million	+32%	19,332	+18%
2000	$450 million	+25%	16,396	+19%

Summary of trends

fewer machines, fewer venues but on average more machines per venue

the number of societies operating gaming machines is reducing significantly

total profits are not directly related to the total number of machines

total profits can increase while total machine numbers reduce.

Possible conclusions
The combination of these trends suggests that the sector is becoming more efficient and is lowering its costs – it is producing more profit from fewer machines at fewer venues. This should allow societies to return a higher proportion of their profits to the community.

The statistics suggest two reasons for costs reducing:

Economies of scale. That is, there are fewer operators and fewer venues but on average both are getting bigger and, at the same time, profits have continued to increase.

Operators are deciding to stop operating machines at some venues and are putting more machines into other venues. As total profits have increased while total numbers of machines and venues have reduced, operators might have decided to focus on their more profitable venues.

Much more information on www.dia.govt.nz: http://www.dia.govt.nz/diawebsite.NSF/wpg_URL/Resource-material-Information-We-Provide-Gaming-Statistics?OpenDocument#one

One of the purposes of the Act is to “facilitate community involvement in decisions about the provision of gambling” (section 3(h)). To help achieve this the Department provides as much information as it can to the gambling sector and the New Zealand public overall. The Department’s website includes much information about gambling including funding for community groups, quarterly and annual statistics, legislation and regulation, etc.

Media contacts:

Keith Manch
Director Gaming and Censorship Regulation Phone 04 495 9449, Cellular 027 445 6420

Vincent Cholewa
Communications Advisor Phone 04 495 9350, Cellular 027 272 4270