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Gaming Machines - UK - January 2010

  • The gaming machines market grew by an estimated 19% between 2008 and 2009 to reach a total value of £2.42 billion. But this growth was entirely driven by the highly profitable B2 machines in betting shops, masking an estimated decline of around £100 million a year elsewhere in the market.
  • Four times as many people currently play or are interested in playing traditional, reel-based gaming machines as the new generation of digital/touch screen products that are expected to replace them.
  • Interest in digital machines is biased towards 20-24-year-olds, whereas it is over-35s who are attached to traditional reels. Tapping into the games console playing habits of the ‘screenage’ generation is one way in which operators could help to increase the consumer base at the younger end of the spectrum.
  • Primarily seaside-based Family Entertainment Centres (FECs) have been the hardest hit sector of the market, reporting a 21% decline in annual revenue in 2008.
  • With the lucrative B2/B3 sector reaching saturation point, innovation in lower-stake Category C product could benefit the market in 2010, helping out the struggling FECs that rely on these machines.
  • The ‘impulse’ factor is crucial in this market, with six in ten players saying they play as and when they see them, rather than planning in advance. Men, under-25s and ABs are the most likely impulse players, reflecting the latent potential for new digital products in venues such as pubs and bars where these consumers spend much of their leisure time.

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Table of contents

  1. Issues in the Market

      • Main issues
        • Definition
          • Abbreviations
          • Future Opportunities

            • Console content can help make a lasting first impression
              • Trend
                • Opportunity
                  • Random numbers calculated to appeal to women
                    • Trend
                      • Opportunity
                        • Platform neutrality can offer net benefits
                          • Trend
                            • Opportunity
                              • Pubs and AGCs to serve up FOBT-lite?
                                • Trend
                                  • Opportunity
                                  • Market in Brief

                                    • Market size masks underlying problems...
                                      • ... with LBO sector driving all growth
                                        • Caught in the fallout of pub, club and bingo bust
                                          • No relief in sight for recent legislative losers
                                            • Problem gambling linkage weakens – but players still wary of risks
                                              • Conservative consumers slow digital switchover
                                                • Lack of investment threatens vicious circle of R&D decline
                                                  • Manufacturers back the internet, leaving operators with most to lose
                                                    • Can Category C rescue FECs?
                                                      • Cost-cutting potential pushes AGC sector towards consolidation
                                                        • Future prospects: Drivers differ from sector to sector
                                                        • Internal Market Environment

                                                          • Key points
                                                            • Accessibility of machine gaming: More volume...
                                                              • Figure 1: Gaming machine venues, March 2009
                                                            • ... than value
                                                              • Figure 2: Permitted gaming machine numbers, by venue, November 2009
                                                            • Legislation: No more major change before next election
                                                              • Stakes and prizes: Jury still out on latest increase
                                                                • Figure 3: Proposals for gaming machine stakes and prizes, January 2009
                                                              • Tax questions extend uncertainty
                                                                • Figure 4: Amusement machine licence duty rates, 2006-09
                                                              • Problem gambling: Declining or de-camping?
                                                                • Figure 5: Gambling activities disclosed, by callers to GamCare, 2005-08
                                                              • More harm minimisation measures under consideration
                                                                • Safe to promote pub play?
                                                                  • Figure 6: Gambling facilities disclosed, by GamCare callers and counselling clients, 2007-08
                                                              • Broader Market Environment

                                                                • Key points
                                                                  • The recession: Reliance on others leaves machine play vulnerable
                                                                    • Figure 7: Impact of the recession on leisure activities, April 2009
                                                                  • Slow recovery even slower for secondary expenditure
                                                                    • Figure 8: GDP, PDI, consumer expenditure and savings at constant 2004 prices, 2004-14
                                                                  • Chasing older players could alienate the young
                                                                    • Technology: Online alternatives threaten core markets
                                                                      • Figure 9: British internet penetration at home/work/place of study or elsewhere, by gender, socio-economic group, age, region and working status, 2002-09
                                                                    • Manufacturers go in search of online jackpot
                                                                      • Could mobile present more of an opportunity for operators?
                                                                        • Figure 10: Participation in remote gambling, excluding National Lottery-only play, by platform, 2006-09
                                                                      • The pub market: Glass three-quarters empty becomes a quarter full
                                                                        • Other gambling sectors
                                                                          • LBOs target new players
                                                                            • Stalled casino growth a sure bet
                                                                              • Can bingo stave off bust?
                                                                                • Seaside holidaymaking better than the weather
                                                                                  • Figure 11: Domestic holidays, volume and expenditure, 2004-14
                                                                              • Competitive Context

                                                                                • Key points
                                                                                  • Only horserace betting is more popular...
                                                                                    • Figure 12: Participation in gambling activities among active gamblers, 2007
                                                                                  • ... but low stakes require more playing more often
                                                                                    • Online slots threaten value rather than volume...
                                                                                      • Figure 13: Participation in gambling activities taken part in remotely, 2006-09
                                                                                    • ... while cabinets still appeal to the bulk of participation base
                                                                                      • Figure 14: Gambling habits of UK adults, by level of education and occupational status, 2007
                                                                                    • The leisure market: An opportunity to expand
                                                                                      • Figure 15: Consumer expenditure on selected leisure goods and activities, 2003-08
                                                                                  • Strengths and Weaknesses in the Market

                                                                                      • Strengths
                                                                                        • Weaknesses
                                                                                        • Who’s Innovating?

                                                                                          • Key points
                                                                                            • Vicious circle sparks dangerous decline of R&D
                                                                                              • Manufacturers look to break testing logjam
                                                                                                • Promoting promotion
                                                                                                  • A different type of gaming machine
                                                                                                    • Better player knowledge enables better machine management
                                                                                                      • A helping handheld
                                                                                                        • Pooling resources
                                                                                                        • Market Size and Forecast

                                                                                                          • Key points
                                                                                                            • FOBT boom masks full extent of wider industry decline
                                                                                                              • Figure 16: UK gaming machines installed base and new injections, 2004-09
                                                                                                              • Figure 17: UK gaming machines consumer expenditure, 2004-14
                                                                                                            • Return of innovation crucial to sustained recovery
                                                                                                            • Segment Performance

                                                                                                              • Key points
                                                                                                                • Machine categories: Volume growth prospects increasingly limited
                                                                                                                  • Figure 18: UK gaming machine numbers, by category, 2008-09
                                                                                                                • B2 and B3 sectors dominate market value
                                                                                                                  • Machine locations: FEC revenues in steepest decline
                                                                                                                    • Figure 19: Estimated UK gaming machine numbers, by location, 2008
                                                                                                                  • Pubs need players
                                                                                                                    • AGC sector heads for consolidation
                                                                                                                      • Betting shops bank on B2s
                                                                                                                        • Bingo still holding valuable cards
                                                                                                                        • Companies and Products

                                                                                                                          • Key points
                                                                                                                            • Major manufacturers and suppliers
                                                                                                                              • Astra Games
                                                                                                                                  • Figure 20: Astra Games Ltd, selected financial data, 2007-08
                                                                                                                                • Danoptra
                                                                                                                                    • Figure 21: Danoptra Ltd, selected financial data, 2007-08
                                                                                                                                  • The Global Draw
                                                                                                                                      • Figure 22: Global Draw Ltd, selected financial data, 2007-08
                                                                                                                                    • IGT-UK Group
                                                                                                                                        • Figure 23: Barcrest Group Ltd, selected financial data, 2007-08
                                                                                                                                      • Inspired Gaming Group
                                                                                                                                          • Figure 24: INGG, selected financial data, 2006-08
                                                                                                                                      • Who Plays Where?

                                                                                                                                        • Key points
                                                                                                                                          • Players keep playing – but at reduced rates
                                                                                                                                            • Figure 25: Places where played on a fruit or quiz machine in the last 12 months, in the UK, February 2008-October 2009
                                                                                                                                          • March of technology leaves older players behind
                                                                                                                                            • FECs have strongest upmarket family appeal
                                                                                                                                              • Pubs and clubs must promote the social side
                                                                                                                                                • Betting shops’ big spenders attract regulators’ welfare eye
                                                                                                                                                  • Creatures of habit...
                                                                                                                                                    • Figure 26: Repertoire of places where played on a fruit or quiz machine in the last 12 months in the UK, October 2009
                                                                                                                                                  • ... with arcade players most likely to roam
                                                                                                                                                  • Who Plays What?

                                                                                                                                                    • Key points
                                                                                                                                                      • Only the tech-savvy are going digital
                                                                                                                                                        • Figure 27: Types of fruit or quiz machine games played/most interested in playing, October 2009
                                                                                                                                                      • Do we play what we’re given, or what we want?
                                                                                                                                                        • Winning theme is relevance
                                                                                                                                                          • Finding a way in to B2 play
                                                                                                                                                            • Appealing to women – a bit of a lottery...
                                                                                                                                                            • Attitudes Towards Gaming Machines

                                                                                                                                                              • Key points
                                                                                                                                                                • Concerns on addiction rooted in reality
                                                                                                                                                                  • Figure 28: Attitudes towards fruit machines and quiz machines, October 2009
                                                                                                                                                                • Young men ready to act on impulse
                                                                                                                                                                  • Ready to experiment – but only with what we know...
                                                                                                                                                                    • Very hard to get the social to mix
                                                                                                                                                                      • Virtual slots’ threat to prove a long-term reality
                                                                                                                                                                        • Remote play needs a piggy-back
                                                                                                                                                                        • Appendix – Broader Market Environment

                                                                                                                                                                            • Figure 29: Trends in the age structure of the UK population, by gender, 2004-14
                                                                                                                                                                            • Figure 30: Forecast adult population trends, by socio-economic group, 2004-14
                                                                                                                                                                            • Figure 31: Forecast adult population trends, by lifestage, 2004-14
                                                                                                                                                                        • Appendix – Who Plays Where?

                                                                                                                                                                            • Figure 32: Places where played on a fruit or quiz machine in the last 12 months, in the UK, by demographics, October 2009
                                                                                                                                                                            • Figure 33: Places where played on a fruit or quiz machine in the last 12 months, in the UK, by other places where played on a fruit or quiz machine in the last 12 months, in the UK, October 2009
                                                                                                                                                                            • Figure 34: Repertoire of places where played on a fruit or quiz machine in the last 12 months, in the UK, by demographics, October 2009
                                                                                                                                                                            • Figure 35: Places where played on a fruit or quiz machine in the last 12 months, in the UK, by repertoire of places where played on a fruit or quiz machine in the last 12 months, in the UK, October 2009
                                                                                                                                                                            • Figure 36: Types of fruit or quiz machine games played/most interested in playing, by repertoire of places where played on a fruit or quiz machine in the last 12 months, in the UK, October 2009
                                                                                                                                                                            • Figure 37: Repertoire of places where played on a fruit or quiz machine in the last 12 months, in the UK, by attitudes towards fruit machines and quiz machines, October 2009
                                                                                                                                                                        • Appendix – Who Plays What?

                                                                                                                                                                            • Figure 38: Types of fruit or quiz machine games played/most interested in playing, by demographics, October 2009
                                                                                                                                                                            • Figure 39: Types of fruit or quiz machine games played/most interested in playing, by places where played on a fruit or quiz machine in the last 12 months, in the UK, October 2009
                                                                                                                                                                            • Figure 40: Types of fruit or quiz machine games played/most interested in playing, by other types of fruit or quiz machine games played/most interested in playing, October 2009
                                                                                                                                                                        • Appendix – Attitudes Towards Gaming Machines

                                                                                                                                                                            • Figure 41: Attitudes towards fruit machines and quiz machines, by demographics, October 2009
                                                                                                                                                                            • Figure 42: Attitudes towards fruit machines and quiz machines, by places where played on a fruit or quiz machine in the last 12 months, in the UK, October 2009
                                                                                                                                                                            • Figure 43: Types of fruit or quiz machine games played/most interested in playing, by attitudes towards fruit machines and quiz machines, October 2009
                                                                                                                                                                            • Figure 44: Attitudes towards fruit machines and quiz machines, by other attitudes towards fruit machines and quiz machines, October 2009

                                                                                                                                                                        Companies Covered

                                                                                                                                                                        • Asda Group Ltd
                                                                                                                                                                        • Astra Games
                                                                                                                                                                        • Barcrest Group
                                                                                                                                                                        • British Beer and Pub Association
                                                                                                                                                                        • Co-operative Group
                                                                                                                                                                        • ELSPA
                                                                                                                                                                        • Gala Coral Group Ltd
                                                                                                                                                                        • Gambling Commission
                                                                                                                                                                        • Government Actuary's Department (GAD)
                                                                                                                                                                        • Inspired Gaming Group
                                                                                                                                                                        • J. Sainsbury
                                                                                                                                                                        • Marks & Spencer
                                                                                                                                                                        • Novomatic AG
                                                                                                                                                                        • Office for National Statistics
                                                                                                                                                                        • Tesco Plc
                                                                                                                                                                        • Waitrose
                                                                                                                                                                        • Wm Morrison Supermarkets

                                                                                                                                                                        Gaming Machines - UK - January 2010

                                                                                                                                                                        £1,995.00 (Excl.Tax)