The “Terminal” Decline of the AWP

What seems like a long time ago, nearly every pub in the UK had at least one friendly fruit machine in the corner, the so called Amusement with Prize machine (now Category C gaming machines). Flashing lights, encouraging noises and the chance of a modest prize proved to be an entertaining recipe. The combination of well thought out game themes, player interaction and regular small payouts provided a source of fun for many and supported a whole industry of designers, manufacturers, operators and pub companies.

Fast forward to the present, the AWP industry is facing multiple threats and has declined to unprecedented lows of fewer machine shipments, reducing incomes and a dwindling supplier base. This could be the beginning of the end of not only pub AWPs but gaming in pubs altogether.

So what happened and is the decline terminal?

The heyday for gaming in UK pubs was probably in the 70s and 80s. At that time the number of pubs had peaked at 75,000 and gaming revenues were maintained by a constant stream of new games borne out of competition from a variety of hungry games manufacturers. Tellingly, the revenue generated by Bell Fruit, a leading developer and manufacturer of AWPs (now owned by Novomatic), was £31m.

Over time the number of pubs declined to less than 52,000 today. Changes in social habits have meant many of the remaining pubs have moved over to different retail formats led by food and family which are not compatible with gaming. Pub operators are now less reliant on machine income and that income has declined in real terms. Wetherspoons cite their machine income has halved as a percentage of overall income since 2000, over at Punch Taverns, machine incomes have declined by 16% in the last three years alone. The smoking ban and introduction of Machine Gaming duty have also taken their toll. Bell Fruit’s reported revenue for 2015 was £32m: a real-terms decline of 54% over 25 years after adjusting for inflation – in a growing overall slots market.

This level of decline would be hard for most sectors to bear, but at the same time gaming habits are changing across all sectors.

Many operators and suppliers hark back to a time of regular Triennial Reviews, which would often give a double digit boost to AWP revenue through stakes and prize increases, as well as stimulating the replacement cycle. This pattern had been broken between 2005 and 2011, while the much anticipated 2016 TR is now both delayed and potentially politicised. However, it should be noted that Category C has seen particularly benign reform despite these headwinds, with prizes quadrupling in a decade and stakes growing from 30p in 2001 to £1 today: regulatory change might have become less predictable, it cannot be blamed for the levels of decline the AWP industry has seen.

Many in the AWP industry also blame the industry’s favourite whipping boy, the FOBT (now Cat. B2/3) for the decline. These can be found in significant numbers in every high street and are readily accessible, providing a more attractive player offer in terms of potential prize, RTP and wide range of game formats. It could be argued FOBTs are not as entertaining as AWPs, but player motivations are not driven by entertainment alone.

FOBTs provide serious competitive pressure for AWPs, but, this is dwarfed by the competition from online gaming. Online gaming, particularly mobile, provides ultimate choice and accessibility for the gambling inclined player. Mobile play is dominating the growing internet gaming sector, with overall growth rates currently at 15-20% year on year. UK online gambling is equally dominated by slots, which is a bigger market online than sports betting in the UK – and is not saddled with any stake, prize or unit restrictions as in the landbased sectors. Unsurprisingly therefore, this £1.5bn+ domestic market, with significant international content cross-sell, is also backed by large, multi-national content development. By comparison, and back to our worked example, Bell Fruit spun off its UK online content development business (which also works with LBOs and bingo), Mazooma, in 2010, and with it c. 35 (40%) of its developers were lost to AWPs (albeit still owned by its parent): AWP R&D was very much left to its own, dwindling, resources – by 2015, Bell Fruit’s in-house development team had fallen to just 22 people. Equally, a business which was UK owned and generating nearly 40% of its revenue through exports in 2000 is now Austrian-owned and generating less than 15% of revenue outside the UK.

With all the choice, immediacy, regulatory flexibility and games development concentrated in online / mobile, combined with the demise of the ‘wet-led boozer’ British pub, the drivers that kept punters returning to AWP’s have been systematically dismantled. The entertainment provided by recent AWP’s is no longer compelling in the face of better offers elsewhere.  Without the venues, machines can’t be sited and casual players with a few minutes to kill have to look to other forms of interest to occupy their time.  Those pub-goers with spare time, most likely turn to their mobile phones and utilise internet services and free games to be entertained or a myriad of gaming sites for gambling (ironically assisted by free pub wifi). The AWP industry failed to address these changing habits and relied almost solely on new game formats, unfortunately this has proven to be ineffectual in halting, let alone reversing the decline.

Providing boxes of (restricted) entertainment in (some) pubs is clearly no longer enough to build a thriving gaming business on –  but what can be done? The BACTA trade association would argue that an(other) increase in stake and prize would help to revive the sector. Only time will tell if this just prolongs a slow painful death or would be a real shot in the arm (history may already provide the answer though). Even then, when a Triennial finally happens, AWP’s are unlikely to be competitive with other forms of gaming on stake and prize: so the sector cannot rely on this as ‘the answer’.

In the Bingo Sector, the Cat C or AWP machine is in fine health, with server based gaming terminals providing choice and theatre alongside other higher stakes gaming.  The recent efforts of Greene King to obtain a bingo operator’s licence point to the licensed retail industry’s dissatisfaction with the current product; but also hints at a continued appetite for gaming and the potential for reinvention (were the matter is pursued as an industry wide initiative with greater regulatory sensitivity).

Equally, the social gaming phenomenon has demonstrated what can be done to engage a mass-market with entertainment-led ‘quasi gaming’: ironically what many AWP punters probably thought they were doing a generation ago.

It would be sad if the pub AWP disappeared from the gaming landscape. Over the years AWPs have provided a rich source of entertainment to many customers without attracting the high levels of public concern common with many strands of gambling today. The AWP has been very significant in helping to maintain the British pub landscape whilst supporting a number of rich and varied U-based gaming producers. Indeed, many innovative game concepts would not exist without the humble pub fruit machine, not in spite of but because developers did not have the luxury of large (or unlimited) stakes and prizes to keep punters spending.

This was never intended to be an obituary for the Pub AWP or for wider gaming in Pubs. The major players in the industry and trade bodies need to work together to find innovative solutions, that retain the essence of entertainment without resorting only to increases in stake or prize.

History shows that these increases have done little to stop the long term rot and risk taking the player further away from one of the founding cornerstones for gaming in pubs, which is to entertain. If the decline of the AWP is to be terminal, it will be self-fulfilling; if it is not to be, then it is time go back to the first principles of (still valid) mass entertainment through low-stakes gaming before it is too late…