Making a killing: (l-r) Alan Frame, Richard Sowerby and Richard Draycott get down to business.To say I was disappointed when I first met Gala's chief executive, Richard Sowerby, at the Riverboat Casino in Glasgow would be grossly unfair. Perhaps Hollywood blockbusters such as Casino and, more recently, Ocean's Eleven had given me a rather skewed idea of what casino owners are like. Prior to meeting Sowerby I had fully expected to be greeted by a dark and menacing Robert De Niro-esque figure, weighed down with gold and diamond jewellery and accompanied by an entourage of burly bruisers 'packing heat' down the back of their black slacks.
However, on greeting Gala's Mr Big, Sowerby turned out to be a tall, slender, grey-haired man, immaculately dressed, articulate, highly intelligent and not in the least bit menacing. In fact, during the card game Sowerby never once reminded me how many 'mistakes' were buried in the desert, nor for that matter under the M8, which put me at my ease and allowed me to scribble semi-decipherable notes on my notepad.
On the other hand, some parallels could be drawn between highly strung tough guy actor Joe Pesci and Frame Cunningham's passionate managing director Alan Frame, who accompanied his client Sowerby for a lesson in playing poker.
Sowerby, and his partner (not in crime might I add) John Kelly acquired Gala from Bass in December 1997 for £235m as part of a management buy-in. Through acquisitions such as Riva Bingo Clubs and Ladbroke Casinos in 2000 Sowerby and his board have built the Gala business into the fastest growing gaming organisation in the UK, now worth £1 billion, with 165 bingo clubs and 28 casinos spread right across the UK from Arbroath to Plymouth and from Cardiff to Ipswich. Sowerby also acquired the online gaming internet site Jamba from Carlton in 2001; this Gala is now developing into a free-to-play and pay-to-play gaming site.
That growth is expected to be accelerated, or certainly consolidated in the near future as later this month will see the publication of the findings of the Budd Report, a major governmental review of the 1968 Gaming Act, which puts tight constraints on the marketing of gaming in all its forms, from casinos to bingo to horse racing.
It is a review which Sowerby feels is long overdue for the good of the gaming industry: "Gambling is the only legal leisure pursuit that you cannot advertise at the moment. For instance, even if I put up a little card in a telephone box to advertise one of our casinos then I could be prosecuted under the 1968 Gaming Act. It is illegal to advertise casinos, because it is seen as an inducement to persuade people to come and gamble. I am not even allowed to say to someone 'you should come and join our casino'. A person can say to me that they would like to join a casino and then I can tell them how to go about joining, but I cannot actually suggest that someone joins. The Budd Review is expected to be a wholesale review of British gaming laws, which will include everything from horse racing to casinos and all the way through to the internet. It will review what we should be able to do and how we should be able to do it. We expect it to be very far reaching.
"The Government will make its initial announcement at the end of March as to how it is going to take the review forward and what elements it will look at. We hope the 24-hour rule will be removed. At the moment you have to wait 24 hours from joining to be able to play, so if that is removed people will be able to come straight off the street. We hope advertising will be allowed so that we can put casinos on television. That would be a huge opportunity for both us and advertising agencies."
It has been a contentious issue as to how casino and bingo hall owners go about advertising their businesses for many years. In 1997 legislation was changed allowing bingo halls to advertise for the first time in the UK. Since then bingo has flourished and is now the most popular female pastime in Britain. However, the marketing of casinos has been confined to members and beyond that has pretty much been word-of-mouth. A fact that probably accounts for only one per cent of people in the UK visiting a casino more than once a year. Amazingly, only three per cent of people in the UK have ever visited a casino in their life.
Sowerby says: "At the moment, to market our casinos we have to use the faÂ?ade of buildings such as this one to entice people in. You also have to use the database which you have within the casinos to market your business and you just hope that the people who have a good time in our casinos will then say to their friends to come along as their guest. The majority of our new membership comes from guests of members. It is word-of-mouth. On bingo it is the opposite. You can advertise on television or anywhere, but that has only been allowed since 1997. Before that you couldn't advertise bingo on television, press, posters or anything."
The positive thing for Gala in light of the imminent Budd Report, and perhaps, even more positively, for Glasgow-based advertising agency Frame Cunningham, which handles the lion's share of promotional work for Gala's casinos and bingo clubs, is that Sowerby hails from an advertising agency background. He only got into the gaming industry after a career in advertising spanning almost 20 years at agencies such as J Walter Thomson, Young & Rubicam and McCann-Erickson, working on brands as big as Coca-Cola and Burger King and as small as Roses Lime Juice.
"Marketing is right at the top of the Gala agenda," says Sowerby. "This may sound boastful, but I am one of the very few people, if not the only person, where there has been a management buyout or buyin, where marketing is the discipline of one of the executive directors. Marketing normally reports into the managing director or the finance director and they are normally one or two steps away from the main board. They are always fighting to justify their budget or fighting to justify the work. Because we believe marketing is one of the ways we can create clear blue water between us and our competitors it is much higher on the agenda here. Everybody is involved in it. Whilst marketing has to have an objective, a strategy and a plan to present to the main board, of which I am part of, it is not always trying to justify itself and its expenditure. Ultimately there is nobody here thinking 'how can I prove to my bosses that marketing works?' Marketing does work. Coca-Cola is nothing more than a sweet fizzy brown liquid, but marketing has made it a mega brand."
The overall marketing spend of Gala, across bingo and casinos, is £25m per year. Sowerby is a great believer in empowering the people at the business end of the company to decide where much of that budget is spent. He says: "Some of that £25m is spent by the clubs, the bingo and casino managers themselves, but we guard and guide how they spend that money because we have a clear brand vision for casinos, for bingo and for interactive. If what they want to do doesn't match that vision then they don't do it.
"The transformation from when John and I bought Gala is incredible; marketing didn't exist at Gala back then. Marketing was a dirty word. When we bought Ladbroke Casinos I did a presentation in Birmingham and a casino manager said to me 'Mr Sowerby, would you please find two new words because we don't like the words marketing or brand.' They had a very poor connotation."
Frame Cunningham was inherited by Sowerby when he acquired the Ladbroke Casino business for which the Glasgow-based agency had been working. Frame admits that he didn't expect to keep the business in Scotland after the acquisition.
Frame says: "They hated us at first", but Sowerby is a little kinder in his recollection of how and why a relatively small Scottish advertising agency ended up the lead agency for the UK's fastest growing gaming group.
He recalls: "What I said to Alan was that I didn't know whether we should be working together. So I suggested we work with them purely on casinos to see whether the relationship could be a good one or not. The work they did was outstanding. They rescued us in the middle of our casino rebranding as we had another agency that was unable to execute the job for us. Literally six weeks before we relaunched casinos last year we went to Alan and said 'Can you help?' and they did a superb job. Then, on the basis of the quality of work he was doing with his team, we got him involved in the bingo business as well, so he has a major role to play. The proof of the pudding is that when I met Alan in January 2001 I probably did not expect to be working with him three or four months later, yet here we are - Alan is a key member of the team which supports Gala. For me it is a demonstration of understanding the business, understanding what the client needs and wants and then working hard to deliver it. Alan's team does that and it makes the agency very buyable. I wish all agencies had that sort of passion and energy level for business because it is very attractive and it allows you to do much more with the budget than the traditional way agencies work.
Like most of today's business sectors, gaming is rapidly consolidating. In recent years Sowerby's Gala has been leading the way. But he believes that further consolidation is on the way, meaning increased competition, increased interest in marketing and ultimately an increase in the amount of business heading the way of Frame Cunningham.
"The gaming industry is a very dynamic sector and there is going to be further consolidation over the next two years. We have consolidated bingo. There are three main players in casinos, Grosvenor, Stanley and ourselves, with one-offs like Tower and LCI. The Budd review of gaming may bring more players in. That may consolidate the industry further. The whole racing industry is consolidating. In a few years' time there won't be William Hill, Coral, Ladbroke, Stanley. There will be just three out of four big racing companies in the future. Gaming companies will get bigger by bringing new arms on board. The whole internet gaming sector will grow and expand, so it is still a very dynamic sector. Bearing in mind that only one per cent of the British population visit a casino every year and that bingo, which is Britain's most popular female leisure pursuit, is only played by 13 per cent of the population, there is a huge amount of room for growth still to go.
So, does his understanding of what marketing can achieve give Gala a headstart on its rivals?
He says: "I can't really think of any marketing that Stanley do. I think Rank, which owns Mecca and Grosvenor, getting better at marketing itself. It has reorganised its marketing department recently. It reviewed its agency and kept the business with White Collins. I sense that marketing is going up the agenda there. I think one of the reasons is that for ever and a day Mecca was the number one bingo brand in the UK and Gala was a very poor second.
"Now Gala is the pre-eminent bingo brand in the UK. Our research shows that there is a huge distance between us and our nearest competitor. We outstrip the market in terms of admissions. If the market is flat we're plus five, plus four, plus six per cent. They have realised that they cannot let Gala continue pushing this gap further ahead. They realise that one of the things they need to look at is their marketing."
At this point in the conversation I won my first hand of poker and cleared the table of around £400. Sowerby's expression darkened, as did Frame's, and he called for a guy called Vinny. I decided to terminate the interview at this time for fear of being terminated myself by Vinny.