Are SAPPs responsible for new pokie gains?

An increase in spending on pokies in New Zealand’s clubs and bars, despite a shrinking number of venues, has baffled industry regulators.

The government commissioned independent research to look into various factors that might be influencing the trend and though the results were far from clear cut, one takeout appears to be the introduction of Stand Alone Progressive Prize (SAPP) machines.

These were introduced into New Zealand from 2010 and now make up 40 percent of the gaming machines in the non-casino sector.

An SAPP gaming machine has games that contribute to incrementally increasing prizes, similar to a jackpot, which can only be won on that gaming machine.

Official data shows spending on non casino pokie machines in New Zealand pubs and clubs has been increasing slowly since 2013, and has now stabilized, after nearly a decade of decline.

Gaming machine proceeds (GMP) for the year ended 30 June 2017 rose 3.1 percent over the previous year from NZ$843.4 million (US$624.12 million) to NZ$869.9 million, (US$643.7 million) according to figures from the Department of Internal Affairs. This was the same rate of increase as the preceding year.

The recent increases occurred despite a continued decline in the number of gaming machines and venues. In the year to June 2017, the number of venues fell by 3 percent from 1,220 to 1,180, and the number of gaming machines also fell by 2.3 percent from 16,238 to 15,858.

Foreign bookie levy moves forward

Plans to levy foreign bookies taking bets on local sports and racing events in New Zealand are moving forward, with legislation introduced into Parliament which will require foreign bookies taking bets from New Zealanders to pay two levies: an information charge, and a consumption levy. The legislation follows a report from a government and racing industry working party which estimated up to NZ$45 million (US$33.4 million) in revenue was being lost by New Zealanders betting offshore.

SkyCity results hit by lower international business

SkyCity Ltd reported lacklustre results in the fiscal year 2017, marked by a 30 percent drop in turnover in its mainstay international business, and an even sharper drop of 42 percent in EBITDA. The company posted “modest growth’ in the New Zealand business, and lower net interest expense being offset by reduced turnover in international business and weak trading conditions in Australia. Normalized revenue for the year ending June 30 2017 was NZ$1.02 billion (US$750 million) – down 7.2 percent with NPAT down 1.3 percent to NZ$154.6 million.

Following the introduction in 2003 of stricter controls on venues and the number of machines allowed, GMP had been declining until 2013 when it started increasing again.

The Department of Internal Affairs, which monitors and regulates the gaming industry commissioned Business and Economic Research Ltd. (BERL) to analyze possible influences on expenditure between 2007 and 2016.

Some of BERL’s findings were surprising and perhaps counter-intuitive. For instance, it found that there was no evidence that macro-economic factors had any effect on GMP. “A number of variables that might be expected to have a positive relationship with expenditure actually have a negative relationship,” the report says.

“Expenditure might be expected to increase as GDP, population, employment, earnings, consumer confidence and the number of international visitors increase, but the opposite appears to be true.”

However, BERL concluded, “taking mid-2007 to the end of 2016 as a whole, GMP has decreased as GDP has increased. This is contrary to the expectation that, other things being equal, GMP would increase as GDP increased.”

The government commissioned independent research to look into various factors that might be influencing the trend and though the results were far from clear cut, one takeout appears to be the introduction of Stand Alone Progressive Prize (SAPP) machines.

These were introduced into New Zealand from 2010 and now make up 40 percent of the gaming machines in the non-casino sector.

An SAPP gaming machine has games that contribute to incrementally increasing prizes, similar to a jackpot, which can only be won on that gaming machine.

Official data shows spending on non casino pokie machines in New Zealand pubs and clubs has been increasing slowly since 2013, and has now stabilized, after nearly a decade of decline.

Gaming machine proceeds (GMP) for the year ended 30 June 2017 rose 3.1 percent over the previous year from NZ$843.4 million (US$624.12 million) to NZ$869.9 million, (US$643.7 million) according to figures from the Department of Internal Affairs. This was the same rate of increase as the preceding year.

The recent increases occurred despite a continued decline in the number of gaming machines and venues. In the year to June 2017, the number of venues fell by 3 percent from 1,220 to 1,180, and the number of gaming machines also fell by 2.3 percent from 16,238 to 15,858.

Following the introduction in 2003 of stricter controls on venues and the number of machines allowed, GMP had been declining until 2013 when it started increasing again.

The Department of Internal Affairs, which monitors and regulates the gaming industry commissioned Business and Economic Research Ltd. (BERL) to analyze possible influences on expenditure between 2007 and 2016.

Some of BERL’s findings were surprising and SkyCity results hit by lower international business SkyCity Ltd reported lacklustre results in the fiscal year 2017, marked by a 30 percent drop in turnover in its mainstay international business, and an even sharper drop of 42 percent in EBITDA.

The company posted “modest growth’ in the New Zealand business, and lower net interest expense being offset by reduced turnover in international business and weak trading conditions in Australia.

Normalized revenue for the year ending June 30 2017 was NZ$1.02 billion (US$750 million) – down 7.2 percent with NPAT down 1.3 percent to NZ$154.6 million.

Likewise, with population: GMP has decreased as population has increased. The same is true with employment, weekly earnings, and consumer confidence. As jobs, wages and consumer confidence have increased, GMP has fallen.

One positive correlation of the factors examined was between the number of venues and GMP. “This might imply that, for many people, playing (pokies) is a casual activity that is engaged in on an unplanned basis when the opportunity presents itself.”

While SAPPs were thought to be a driver for growth, the results from the analysis were not clear cut.

BERL’s analysis suggests “SAPPs appear to have lifted expenditure per machine in the majority of regions (of New Zealand).”

“When we looked at expenditure per machine and the SAPP machine, there was a strong relationship, but taking into account other factors, the relationship became “cloudy,” said Mark Cox, senior economist with BERL.

Cox said that there was no empirical evidence from gamers themselves that they found the SAPP machines more attractive or interesting to play, but this belief was “received wisdom” from the regulator and the gaming industry representatives on the working party, which supervised the research report.

Despite recent increases in GMP the report finds “there is a positive relationship between expenditure and the number of venues.

This means that, overall, the reduction in venues has contributed to reduced GMP. In 2007/08 there were 1552 venues which produced NZ$938.3 million in GMP, while in 2016/17 1180 venues produced NZ$869.9 million. This results in an increase in the average GMP per venue from NZ$604 574 per year to NZ$737 203 per year.