Industry sector: Leisure

Amusement arcade: Sector trends


What has been happening in the gaming and amusement machine sector

The gaming industry has for many years been strictly regulated. With the development of high-tech gaming machines, the introduction of the National Lottery and the growing popularity of online gambling, the government introduced new legislation - the Gambling Act 2005 - to regulate the gaming industry in Great Britain which came fully into effect in September 2007. The main aims of the Act are to protect children and other vulnerable people, to prevent gambling from being a source of crime and to make sure that gambling is conducted in a fair and open way. The Act introduced four main categories of amusement machines. These are:

  • category A - casino slot machines
  • category B - jackpot machines
  • category C - adult gaming machines
  • category D - amusement with prizes machines

The Act also created three types of amusement arcade:

  • adult gaming centres
  • licensed family entertainment centres
  • unlicensed family entertainment centres

Before the Act came into force, advertising gambling was heavily restricted. The majority of these restrictions have now been reformed, but advertisers must comply with three codes of practice.

Although the Act introduced new standards for gaming machines from 2007, most existing machines in arcades and entertainment centres could be kept. These legacy machines only need to comply with the new requirements if they are altered - for example to accept a mix of cash and non-cash payments.

When considering future prospects for your business remember that, although gambling is a billion pound business, not all sectors have done equally well. Because the seaside resort sector was so badly affected by the economic downturn at the end of the 2000s, the government brought forward its review of stakes and prizes and increased the maximum prize and stake of Category C machines in 2009 as a rescue measure. At the same time, two new Category D machines were introduced - these are Category D Pusher and Category D Crane grab. Although the difficult economic conditions continued for much of the first half of the 2010s, it seems that leisure business like arcades in many coastal resorts benefited from the trend for UK residents to take some or all of their holidays and more frequent short breaks in the UK rather than going abroad.

Ongoing research carried out by the Gambling Commission shows that, overall, gaming machine participation in arcades has stayed largely the same during the 2010s. In family entertainment centres, the average number of machines has steadily fallen and, not surprisingly, the gross gambling yield (total stakes less total paid out in winnings) has also reduced. In the early 2010s it was the same story in adult gaming centres, but the last couple of years have seen an increase in both the number of machines and the gross gambling yield.

In response to continuing economic difficulty for the amusement arcade sector, the government took the decision in 2011 to increase the maximum stake of Category B3 machines, and also allow adult gaming centres (the only arcades allowed to offer them) more freedom in the number of these machines they can have. The previous maximum was four but since 1 April 2014 it is a maximum of 20% of the total number of machines that they have. Stimulating demand for Category B3 machines was expected to increase demand for other machines, and gross gambling yield statistics indicate that this is what in fact happened.

Adult gaming centres in particular were hit hard by the huge rise in popularity of Category B2 machines (also known as Fixed Odds Betting Terminals or FOBTs) which offered high stakes (£100 maximum) and high prizes (£500 maximum) and could only be sited in betting shops and casinos, not arcades. In October 2011 the government reintroduced the triennial review of stakes and prizes and it was hoped that the results announced in 2013 would recommend that the stakes of these machines would be dramatically reduced to bring them more into line with the B3 machines that adult gaming centres are allowed to offer but in the event they were left unchanged. The 2013 review did introduce an uplift in just the maximum prize for Category C machines (from £70 to £100) and an uplift in both the maximum stake and the maximum prize for Category D coin pusher/penny falls machines (from 10p to 20p and from £15 to £20).

New controls were introduced in April 2015 that prevented a player from paying more than £50 to play a Category B2 machine unless each payment complied with certain new conditions - the 'identification', 'supervision' and 'proceeds' conditions.

After a further review carried out in 2017, the government announced in May 2018 that the maximum stake for Category B2 machines would be reduced from £100 to £2 in 2019. Although the move was designed to tackle problem gambling, the reduction of the stake will also benefit adult gaming centres, making them comparatively more attractive. All other stakes and prizes remained the same after the review.

From 1 February 2013, Machine Games Duty (MGD) replaced Amusement Machine Licence Duty (AMLD) and VAT as the main taxation system for the arcade sector. MGD is a tax on gross profits and applies to more machines than were caught by AMLD. The 2014 Budget introduced a new higher rate of MGD which applies to Category B2 machines from March 2015 but not to any machines that can be sited in an arcade.

The law that covers gaming machines in Northern Ireland is completely different to the rest of the UK and hasn't been changed for a number of years, although it seems likely that it will be reformed at some point in the near future to bring it closer into line with England, Scotland and Wales.

Keep up to date with developments

The British Amusement Catering Trades Association (BACTA) represents the interests of manufacturers, operators and owners of coin-operated gaming and amusement machines. Division 1 represents family entertainment centres, while Division 3 represents adult gaming centres. Members of BACTA must comply with a Code of Practice.

The main journal for the sector is Coinslot which covers the amusement, gaming and gambling sectors. Members of BACTA get a free subscription to Coinslot as part of their membership. You can find out more about Coinslot on the Totally Gaming website.

The Gambling Commission is the regulatory body for the gaming industry, including gaming machines. The Gambling Commission website includes regulatory guidance for the amusement sector.

The DCMS is responsible for the legislation regulating the gaming industry. You can find out more on the DCMS section of the Gov.uk website.

You can get a lot of useful information about the latest machine trends at exhibitions and trade fairs like ICE London. You will be able to meet with suppliers and attend seminars presented by industry experts.