[SCMP Column]Tip of the Iceberg

May 07, 2016

In the UK this week there was timely relief from the ridiculous debate over whether or not to stay in the European Union, and the surreal civil war in the opposition Labour Party over the eccentric leadership of Jeremy Corbin. It was called Leicester.

The Foxes – Leicester City football club – made football and betting history by winning the Premier League for the first time in their 132-year history. As 5000 to 1 outsiders, Leicester’s victory has created the most massive loss ever in Britain’s gambling industry – an estimated Pounds 50 million.

And across this midsized Midland city of 300,000, at the Crucible, the world Mecca for snooker, Leicester-born Mark Selby battled Jiangsu-born Ding Junhui to become World Snooker Champion. Ding was the first Asian ever to reach the World Snooker Championship final, and was being followed live, deep into the night, by an estimated 100 million snooker fans in China.

As the city of Leicester celebrated this sudden and unfamiliar world attention, a combination of elation and incredulity had locals turning to supernatural influences for the Foxes’ and Mark Selby’s victories: everything in the city has gone miraculously well since the remains of Richard III, King of England from 1483-85 were unearthed in 2012 after being lost for five centuries. Richard was the last British king to die in battle – at Bosworth Field in Leicestershire – and his defeat ended the Plantagenet dynasty, and brought Henry Tudor to the English throne.

Supernatural or not, Britain’s bookies were not amused, calling the Leicester victory “a black armband day”. British media talked of the biggest upset in British betting history. The betting industry has reported big losses before: in January and March 2014 the top 5 bookies lost Pounds 20-25 million, and in January 2015 they lost Pounds 40 million. But these losses were on big ‘accumulator” bets in which individuals managed to pick virtually all of the soccer match winners over a weekend. To lose so much on a single team is without precedent. In offering the 5000 to 1 odds on a Leicester victory, they had said it was as likely as Justin Bieber becoming US President, or Elvis Presley being found alive. They have agreed no longer to offer 5000 to 1 odds. The best odds will in future be 1000 to 1.

For me, as a temporary interloper through the UK, I felt no pity for the bookies. This is a massively profitable industry, and Pounds 50m lost here or there makes only a small dent in consistently huge profits.  Last year, the UK’s biggest bookie, the merged Ladbrokes Coral, earned profits of Pounds 392m on the back of revenues of Pounds 2bn. Number two, William Hill, earned Pounds190m on revenues of Pounds 1.6bn.

But there were two important reminders. First, gambling is a simply huge global addiction. And second, this addiction comes at a huge social cost. In Hong Kong, when we think of gambling, we tend to think of horse racing, but by far the biggest money-earners in the global gambling industry are soccer betting, casinos, lotteries, and mind-numbing slot-machines and pachinko parlours. Recent research by the Economist reveals that the world’s biggest gambling losers come from Australia – losses average over US$1000 per person per year, most of it lost on mindless slot-machines.

The next biggest losers are perhaps surprising. The Economist discovered that Singapore is home to the second biggest losers – losses average US$930 per man, woman and child, with Finland third, losing an average US$600 per capita. Americans lose a comparatively modest US$480 per person, but because of its larger population, it is still home to the world’s biggest gambling losses – estimated at US$119 bn last year. Japanese, with their thousands of pachinko parlours, lost around US$100 bn last year.

By comparison, Hong Kong’s gambling industry looks much more sedate, and much less socially damaging. Even though Hong Kong’s working class men are renowned for their addiction to gambling, with unknown billions spent over the internet on worldwide soccer betting, the vice at home inflicts much less social pain. With the Hong Kong Jockey Club’s monopoly, and gambling restricted to horse racing and the Mark Six lottery, much of what Hong Kong punters lose either goes directly into the Government’s pocket, or into charitable contributions. On record total bets last season of HK$108bn, the Government tax take was $12.3 billion, and charitable contributions amounted to HK$3.6 bn. And as the monopoly “bookie” in Hong Kong, the Jockey Club’s pool betting system means they never face the 5000-to-1 shock that Leicester City has just created. The size of payouts always depends on the amount bet on any given race, rather than on the intuition of a private sector book-maker. A now-profoundly embarrassed Loughborough bookie who last August scribbled “Pigs might fly” on the Pound 1 betting slip of a Leicester football fan who took 5000-to-1 odds on Leicester victory could not happen in Hong Kong.

But this morally awkward global industry, with revenues of an estimated US$420 billion a year, has a “sleeping dog” which few clearly know about, and which was aroused with news that 100 million Chinese stayed up all night in cities across the country to watch snooker hero Ding Junhui’s narrow defeat in Leicester in the World Snooker Championships. Gambling in China is a dark horse industry that is huge, but largely uncounted. China’s thousands of footloose millionaires and senior government officials who have slipped huge amounts out of the country to enrich the casinos of Macau, are surely but the tip of a gambling iceberg.

China’s gamblers are expected soon to make China the world’s largest gambling market, overtaking the US. But numbers are patchy, unreliable, and almost certainly massive underestimates. What impact they will have in future is literally anyone’s guess. Richard Scudamore, chief executive of Britain’s Premier League, was talking about Leicester’s shock victory, but he could have been talking about China, when he said: “We have all become completely hopeless at predicting anything.. No-one saw this coming.” In Leicester this week, at least the snooker industry saw China coming.
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