UK Indepdent bookmakers have come to expect that the 1st of January each year heralds another bout of cost increases from media rights suppliers as the already expensive service becomes ever more extortionate. Sadly 2019 is proving no different.
SIS announced an inflationary increase of 3.3% taking the cost of their service to £20,984 for 2019 while TRP applied an above inflation increase of 3.7% (CPI + 1.5%) to their charges taking the TRP service for 2019 to £10,312. There is VAT to add to these charges, at 20% in the UK which betting shops can not reclaim.
Hence, the combined cost of these two services for a UK independent betting shop inclusive of irrecoverable VAT is £37,555 in 2019.
How much income does a shop require to pay the media right charges?
In the UK there are two costs which apply to all gross gambling yield (GGY) generated from betting in retail shops;
Gross Profits Tax: Paid at a rate of 15% of all GGY
Horserace Betting Levy: Paid at a rate of 10% on UK horseracing GGY (for bookmakers the first £500,000 of GGY is at a zero rate)
A small UK indepdent bookmaker will therefore need to generate £44,183 of GGY per annum (£121 per day/£847 per week) to cover the cost of the SIS and TRP services. For a shop owned by a larger bookmaker which pays Horserace Betting Levy the GGY required will rise to approximately £46,080 per annum (£126 per day/£884 per week).
Why are independent bookmakers closing shops?
In 2008 the introduction of Turf TV led to an explosion in media rights costs. When compared to historical charges for media rights prior to that time the cost today has more than doubled. If costs had risen with inflation since 2007 then the VAT inclusive media rights charge for each shop would be around £17,081 per annum, £20,474 less than they presently are.
This massive increase in costs has led to over half the betting shops operated by independent bookmakers which were trading in 2007 closing.