2012-2013 World Market Report By EuroSlot

Every month Euroslot updates you on the latest news affecting gaming policy and regulation around the world.

An industry as geographically dispersed and tightly regulated as gaming cannot change radically in the space of 12 months. Many of the trends that we commented on in last year’s Euroslot World Market Report are thus continuing to make themselves felt; the effects of the economic downturn, for example, and what we characterised in 2011 as “the relentless rise and legalisation of e-gaming”.

This year, however, that feels a little less relentless. While there is no doubt that Internet gaming has transformed parts of the market in those countries where it has been allowed, and while the U.S. – for so long holding out – appears finally to be accepting the inevitable, its progress has been far from consistent around the globe. South Africa and Germany, for instance, to name but two important territories, have not been very welcoming.

Sometimes this is down to legislative delays rather than actual opposition, of course. And indeed if there is one theme that runs through this year’s World Market Report for land-based gaming and amusements as well as online, it is the huge impact of regulation on all these sectors. There are good models (like Spain), there are bad ones (France), there are models where change may bring improvement but we’re not holding our collective breath (Greece), there are others where the direction of change is not yet clear but intentions seem to be positive (Portugal, Britain, Ireland, for example).

Often regulatory changes are prompted by the arrival of e-gaming but the smarter legislators seem to realise that it can’t be treated in isolation: the whole, diverse gaming and amusements business needs to be considered if its constituent parts–and their consumers–are all to be treated equitably. What is almost certain, then, is that new opportunities (and no doubt new disappointments) will emerge over the next year as more governments get to grips with the transformation of an industry that is not always clearly understood and that carries an unusual amount of cultural and, yes, moral baggage. E-gaming may prove to be much more than a threat to land-based operations: it may be the catalyst that encourages them, as well, to revolution.

ROMANIA - EASTERN EUROPE

The Romanian government regulates lottery, parimutuel betting, sports betting, slots, bingo halls, televised bingo – which is very popular – and online gaming. The last is not a functioning market as yet, with the gaming industry awaiting tweaks to the law before it comes to pass. Meanwhile, televised bingo is about to disappear from Romanian TV screens too, with a recent draft law likely to bring about its demise fairly rapidly, although there is only one licence in operation.

The country has both VLTs and AWP machines, with about 6500 VLTs and just under 50,000 AWPs.
The VLTs are operated by the state-owned National Lottery, while the type of venue a slot/AWP is in dictates the number of machines on-site. For example, if you’re running a slot arcade, you must have a minimum of 15 machines; for a site where there are economic activities other than gambling, such as a bar, you may have three to five machines; and sites authorised for betting or lotto activities are permitted two to five machines. The Romanian slot scene has been in decline since 2010, when there were 409 operators in the market, with 49,949 machines in operations of varying size, from less than 50 machines per site up to more than 1000 per site. In December 2011, the number of operators was down to 402, with a relatively large drop in the number of machines to 46,861. All operators are required to pay for a licence, which costs around €5500, plus an extra €1800 per machine. Tax levels were raised dramatically in 2009, with the tax per slot rising to more than four times its previous level. This enormous hike led to a dramatic fall in the number of operators in the country, from some 1200 operators in the first half of 2009, to around 400 by the following March.
Additionally, the end of 2010 saw Romslot and AOPJNR, the country’s main gaming associations, reach an agreement that would do away with a tax on players’ winnings in favour of an entrance fee for slot halls and casinos; the government, however, actually ended up using both, a move which has beleaguered an already-struggling industry.
The Romanian gaming industry is lobbying the government hard for change, as the market is barely clinging to existence, never mind growing. The 2012 Romanian Gambling Conference saw several measures proposed, including:

• Clearing the black market for gaming by introducing official plaques at entrances to licensed gaming areas, and notifying authorities of the movement of games, so the old location can be cancelled as a licensed area where appropriate.
• Removing the entry charge for venues.
• Establishing a slot regulatory body, including representatives
from the government.
• Preventing the misinterpretation of rules allowing for corruption at a localised level.

Unlike many countries where the industry has been injured by the introduction of a smoking ban, however, the Romanian gaming sector seems confident that a proposed ban will not come to fruition; the proposal came from a member of parliament, but the move was apparently blocked and is unlikely to see the light of day.
 

GREECE & CYPRUS

The future of the gaming sector Greece is as unclear and, to many, as disheartening as the country’s broader economic health. The Greek consumer has access to lottery and sports betting as well as eight casinos, but since the infamous law 3037 of 2002, electronic games in public places have been banned – an attempt to combat illegal gambling that effectively destroyed a large part of the gaming and amusements sector.

Meanwhile, lottery and sports betting are controlled by the partially state-owned monopoly OPAP, and although Internet gambling is at last to be allowed, the country has been widely criticised for e-gaming regulations which are seen as heavily protective of OPAP’s land-based operations. However, things may finally be changing. A new regulator, the Hellenic Gaming Commission (EEEP), has been created. Most of the government’s share in OPAP is being sold to help address the public deficit. And perhaps most importantly, the country is following Italy’s lead in introducing VLTs as a revenue-raising measure – although OPAP has already secured a significant chunk of that market too.Also welcome will be any clarity that EEEP can bring to a sector where regulatory confusion has been the norm for several years.

Altogether, it is estimated that once regulated e-gaming and machines (including VLTs as well as play-for-fun games such as Tetris and Pac-Man are in place), the legal Greek gaming market could be worth more than ¤6bn annually. What remains uncertain, however, is how much of the consumer spend – historically high, although the economic situation may be depressing it – will continue to flow into the grey market.

VLTs in operation
OPAP is expected to install 16,500 VLTs in 819 locations and to be the sole operator for around 18 months. Other operators will then be licensed to roll out a further 18,500 next year. The Hellenic Gaming Commission has issued detailed technical standards in an 84-page document which covers issues ranging from TITO and the random number generator to security, central server operations, and reporting requirements. Among the key rules are:
• “Each game shall theoretically payout a minimum of 80 percent
during the expected lifetime of the game (i.e. progressives, bonus systems, merchandise, etc. shall not be included in the percentage payout if they are external to the game).”
• “A player shall not be exposed to the risk of losing at any one time credits of a total value exceeding ¤2.”
• “A limit shall apply to the maximum amount that can be won in any game element for non-progressive games, which shall be ¤1000, and by any progressive prize for standalone progressive games, which shall be ¤4000.”
Players will be required to register for cards before they can use gaming devices. Provisions regarding these include:
• “The gaming provider may only register a player for a card if the
gaming provider or its agent at the venue is satisfied of the player’s identity, VAT number, place of residence, that the player is at least the legal gambling age of 21, and the person is not an excluded person.”
• However, “the gaming provider or its authorised agent at the gaming venue may register a player for a temporary/visitor card if satisfied that the player is not an excluded player and is at least the legal gambling age for the jurisdiction. Players issued with a temporary/visitor card are not permitted to participate in any player/loyalty reward scheme.”
The card system will also enable the maximum loss of each player to be capped at €500 in a 24-hour period. It appears that this will not be a voluntary limit (although players will also be able to set their own limits on the amount they spend, as in many jurisdictions) but will apply to everyone. Once a 24-hour period’s net loss has reached that figure, the individual will be prevented from playing for a day.

OPAP’s fate
OPAP, the gambling company currently part-owned by the Greek government, is not going away. It has extended its betting monopoly for ten years ending in 2030 (despite a complaint to the European Commission by two international gaming business organisations that the government acted non-transparently and stifled competition in awarding this extension), and obtained a licence to operate 35,000 VLTs. It will pay €375m for the monopoly extension, as well as five percent of gross profit over the decade, and €560m for the VLT licence. However, as we note above, it will be required to subcontract operation of 18,500 of the VLTs, in effect selling its licence rights on to other operators. The government owns 34 percent of OPAP, which is one of Europe’s biggest gaming companies. It plans to sell all but one percent.

E-gaming concerns EU and trade bodies have repeatedly raised concerns over Greece’s proposed regulatory framework for e- gaming. Measures they question include the limit on licence numbers, the requirement that servers must be located and transactions processed entirely within Greece’s borders, and the requirement for player ID cards. And the Remote Gambling Association (RGA) has questioned the favourable tax treatment given to the land-based gaming operations of OPAP compared with independent online operators. The e-gaming firms will have to pay a 30 percent tax on gross profits, and customers will have to pay ten percent on all online winnings. By contrast, OPAP will be exempt from the gross profits tax, and its customers will pay nothing on winnings of €100 or less. The RGA has also charged that Greece’s e-gaming rules will “place unnecessary and unjustified economic burdens on new operators, such as forcing them to have a permanent establishment in Greece and limiting financial transactions to Greek banks. The law also imposes a higher age limit for online than offline gambling with no justifiable evidence to support that restriction.” Other plans opposed by the e-gaming industry include the possibility of retroactive taxes on operators who have served Greek consumers in the past.

POLAND

Poland’s gaming industry is not a happy one. It is in freefall, with no new gaming licences issued since 2010 following the implementation of a law which prohibited the operation of gaming machines outside casinos, while also more than trebling the amount of tax operators had to pay. The last legal licence expires in 2014, but between now and then, expect most of the industry to either move underground – resulting in zero tax revenue – or disappear completely. Either way, the end result is the same: next to nothing for the government, unless it has a bold plan up its sleeve.

However, much of Europe has been eyeing the introduction of VLTs to Italy and the infrastructure and ease with which taxes are assessed and collected, not to mention the investment that comes with such a project. And it’s certainly not out of the question for this to happen in a country such as Poland, where the government and populace would clearly benefit from public spending alongside private investment. The 2010 law does not apply to redemption machines that do not use random-number generators, and Polish trade publication Interplay posits that these may fill the gap left by the disappearance of slot gaming – with the market able to absorb up to 150,000 such machines in the next couple of years.

ITALY

Italy is the largest gaming market in Europe. 2011 gross gaming revenue totalled €18.4bn, with total stakes just shy of €80bn. (These figures do not include casinos, which are regulated by municipalities rather than nationally.) This represents an increase of roughly 50 percent in gross gaming revenue, and more than 100 percent in players’ stake money, since pre-economic-crisis levels five years earlier. Market modernisation began in that year – 2006 – and has continued steadily since, with the so-called “Abruzzo decree” of 2009 particularly notable for the land-based gaming business in opening the doors to video lottery terminals (VLTs).

The VLTs have undoubtedly been the star performers in Italian gaming over the last couple of years and are likely to continue in that role for a while, though the issue of new licences for betting shops and poker clubs may provide a fillip to those types of land- based gaming as well, and older AWPs are holding up surprisingly well. Overall, machines represent roughly half of the total gaming market, with AWPs and VLTs generating €9.2bn in gross gaming revenue from total player stakes of €44.9bn during 2011.Older AWPs are generally known as Comma 6a machines or New Slots, while VLTs are often referred to as Comma 6b devices, the names in both cases referring to the legislation that enabled them.

Gaming machines: rise of the VLTs
By far the fastest-growing part of the gaming machines sector – albeit not (yet) the biggest – is the VLTs. With stakes of €0.50 to €10 and a maximum cash payout (excluding system-wide jackpots) of €5000, they deal in bigger money than AWPs, although the types of venues in which they can be installed are more limited, including gaming arcades, betting shops and bingo halls. The overall 85 percent return to players is also higher than the requirement for AWPs. The official figures illustrate their ascendancy. In the first five months of 2012, €20.6bn was spent on machine gaming in Italy, up from €16.9bn in the same period of 2011 – an increase of 22 percent. All of that increase came from VLTs, whose takings more than doubled from €4.2bn to €8.8bn; in fact, these numbers show that spend on non-VLT machines actually dropped by nearly €1bn. (As we discuss below, however, the  introduction of VLTs has not proven as disastrous for the older AWP market as some feared.) Gross gaming revenue from the VLTs also rose dramatically during that period, from €280bn in the first five months of 2011 to €1bn in 2012 (before tax). It thus seems likely that VLTs will account for about a quarter of all machine revenue in 2012. That figure is all the more impressive when the installed base of machines is taken into account. As at late August 2012, there were just 45,000 VLTs, against eight times as many AWPs. It is not surprising, then, that the Italian deployments are being taken as the role models for the introduction of VLTs in other European territories such as Greece and Hungary. And the VLT revolution is not over yet. A sharp growth trajectory is likely to continue until all the licences issued, allowing for a total of 58,000 machines, are in use. The sector is now, however, one for the faint-hearted or empty- walleted. Deploying VLTs is not just a matter of putting machines into venues. The infrastructure requires all of the following:
• A game server whose tasks include generating the random numbers at the heart of play, managing wins and payments, and remotely maintaining terminals.
• A library of games software.
• Individual gaming machines incorporating bank note readers
and TITO printers.
• Inspection units with touchscreens and barcode readers for
validating winning tickets.
• Management software for financial reporting, managing
loyalty programmes, monitoring possible problem gamblers, calculating tax due, and a host of other tasks.

Comma 6a: not finished yet
However, the Comma 6a/AWP/New Slot story is far from over. These machines, with €1 stakes and €100 cash prizes, can be installed in a far wider range of venues than VLTs, including bars and cafes, restaurants, swimming pools, hotels and private clubs as well as gaming halls. With 379,000 units in active service at the regulator’s last count, they far outnumber the VLTs. They remain a huge contributor to Italy’s tax revenues and anecdotal evidence suggests their takings have not been affected as badly as expected by the arrival of the newer technology. Indeed, where the two types of gaming machine are co-located, the typical pattern has been a drop-off in Comma 6a revenue for a few months after the installation of VLTs, followed by recovery.
It is also believed that there is little player crossover, with AWP die-hards sticking to Comma 6a machines while VLTs attract consumers who previously gambled at casinos (including those outside Italy’s borders). A massive upgrade programme is now in progress following the introduction of new regulations, known as Comma 6a+ or Comma 6aS, to enhance machine security. Measures include limited access to units, recording of such access, extra protection for hoppers, and card readers to verify player ID. Machines pre-dating 2010 must be modified by the end of this year; newer ones, by the end of 2014. It had been hoped that this revision of the Comma 6a rules would allow higher stakes and prizes as well as the use of bank notes, all in order to compete with VLTs, but those hopes were unmet – although, as we have noted, these AWPs do seem to be competing with VLTs quite effectively anyway. So from an operator’s perspective, the new regulations are all cost and no revenue, albeit that the costs will have been mitigated slightly by a brief reduction in taxation (which starts rising again this year), and a drop in the overall payout requirement from 75 percent to 74 percent.

Licence renewals
AWP and VLT licences will be renewed in March 2013, with nine of the existing ten operators remaining licensed and three new firms obtaining authorisation. One existing operator which has been denied a licence renewal is challenging that decision in court.

Lotteries
Outside the gaming machine market, the news for land-based gaming was not so good. Lotteries of various kinds including Superenalotto saw spend drop to €7.7bn in the first five months of 2012, from €8.4bn in the previous year.

Online Bingo
Bingo experienced a decline in January-May 2012, too, from €804m in the same period of 2011 to €747m.

Casinos
There are five casinos in Italy: Casino Municipale di Campione d’Italia, Casino Municipale di Sanrem, Casino de la Vallee, and two in Venice.

Betting shops
The market for betting shops in Italy is growing, with the award of 2000 new licences authorised for 2012.

Poker
A thousand licences for land-based poker clubs will be issued in Italy in 2012, and valid for nine years.
Italy was a pioneer in developing a comprehensive regulatory framework for e-gaming, and innovation continues. Gross gaming revenue from online casinos, poker and bingo is expected to reach €1.6bn in 2012, up from €400m in 2008. The country is the largest online gaming market in Europe and is expected to hold that position to at least 2014, albeit with the UK and France closing the gap. Online gaming licences have been available to international operators since 2010. Currently they include poker, casino games, horse and sports betting, pools, skill games, scratch-cards and bingo. Online slots were launched in Italy in December of 2012 after many delays. The remote bingo market in Italy has suffered from the growth of online casino and poker gaming, but new regulations may remedy that situation by allowing operators to offer a wider choice of game variations. They are expected to come into force toward the end of the year and could correct a precipitous turnover decline of nearly 30 percent in 2011-12.

Virtual betting
The regulator has recently approved betting on virtual sports events for the first time.

Regulator
The Italian regulator has long been the Autonomous Administration of State Monopolies (AAMS). However, as part of the government’s austerity measures, it is planned to dismantle this organisation and transfer its responsibilities to the Customs Authority, which will be renamed the Customs and Monopolies Agency. However, operators are expected to experience little impact from this, with the same personnel likely to be enacting much the same policies under the new structure. The only caveat is that liberalisation and the issue of licences could temporarily slow down while the bureaucracy settles.

Problem gambling
There is evidence to suggest a high number of problem gamblers in Italy, possibly as many as 800,000, and a public debate is developing concerning this. Certainly the 20-fold increase in total consumer spending on gaming over the last decade must be having some social impact. For example, individual saving is now down to less than half the annual level of ten years ago.

SPAIN & PORTUGAL

In 2011, Spanish consumers spent €26.6bn on gaming, excluding sports betting. Of this, 37 percent went to Loterías y Apuestas de Estado (LAE), the national lottery operator, and 35 percent to Type B gaming machine establishments (see below). Eight percent went to bingo, and around six/seven percent apiece to casino, online and ONCE, a charity lottery operator. The breakdown of net revenue shows a similar pattern although lotteries performed markedly better in net than in gross terms. Of ¤8.1bn total net revenue, 41 percent went to LAE, 33 percent to Type B venues, 11 percent to ONCE, eight percent to bingo, and about three percent to each of the casino and online sectors.The overall picture appears to be one of a very substantial, but slightly declining, offline gaming market, with some evidence that the situation is worsening more rapidly in Madrid than elsewhere. Nationally, the decline of the land-based sector may be speeded by the arrival of significant new legislation for online gaming.

Regulation
Spain’s regulatory structure has been bifurcated for decades. There has been a national legal framework for gambling in place since 1977, and there is a national regulator in the shape of the Dirección General de Ordenación del Juego (DGoJ), but the bulk of regulatory decision-making has been devolved to the 17 territories into which is the country is divided (known as the autonomous communities) since 1985. But the 1977 framework did not, of course, envisage the arrival of online gaming, and that has led to some anomalous situations – for example, the autonomous community of Madrid went ahead with legalising Internet gambling before the national government, ironically based in the same city, had done so. To address this, a new supervisory body, the Comisión Nacional del Juego (National Gaming Commission), has been created with nationwide oversight of licensing.A further new body, the Consejo de Políticas de Juego (Gaming Policies Board), will advise on regulatory and enforcement policy, and include representatives from the regions.

Gaming machines
Gaming machines are divided into three types: A, B and C. Type C are casino slots, so the amusements market in arcades, gaming halls and bars is therefore dominated by Type A and B machines. Type A are purely for entertainment, and offer no prizes. Type B are AWPs, typically returning about €0.70 in the euro to the customer. There are 2670 establishments offering Type B machines; but a decade ago there were nearly 4000, and more than 300 closed in the year 2010-11. The number of Type B machines, however, has remained remarkably consistent: in 2011 there were 227,000, against 245,000 a decade earlier. It is Type A machines that are disappearing, with numbers sliding from 155,000 in 2001, to 100,000 in 2006, to just 41,000 in 2011.As in many other sectors of Spanish gaming, the decline in the machines market has been especially pronounced in Madrid.

Casinos
Spain had 39 casinos in 2011; two closed during the preceding year. In revenue terms, by far the lion’s share comes from Catalonia, Madrid (although it also experienced the steepest drop in 2010-11), Valencia, Andalucia and the Canary Islands. Spain’s casino industry association has called for a lighter tax regime to help it cope with the country’s financial crisis. Chairman Angel Maria Escolan has described taxes, which can eat up as much as 60 percent of gross gaming revenue, as “asphyxiating”. The trade body is also calling for advertising and marketing restrictions to be lifted.

Bingo
There are 388 bingo halls, a number that has been declining steadily since at least 1997, when there were 539. Revenue peaked around 2007 and is now back to 1997 levels. Geographical distribution of revenue is more even than for casinos, although again Madrid and Catalonia dominate – and once again Madrid was the worst loser in 2010-11, with net revenue down about 40 percent.

Sports betting
Spanish consumers were only able to legally bet on state- controlled pools-type products until 2008, when the first private sports betting shops opened. They are regulated independently by the 17 autonomous communities. Spain’s sports betting market emphasises live betting, which accounts for about half the market.

Liberalisation
Revenue-raising imperatives have led many of the autonomous communities to allow new forms of gaming. For example, Valencia was a pioneer in permitting sports betting in bars, and Madrid led the way in allowing video slots in 2009, a policy since adopted elsewhere. The most important recent developments, however, relate to e-gaming.

Online gaming
Historically, the online gaming market in Spain to date was small, with about ¤45m spent annually on lotteries and some sports betting. However, it was estimated that a far greater figure – as much as €1.6bn – might be spent with foreign operators illegally taking Spaniards’ bets. This, and of course the pressing need for the fiscally-strapped country to raise new revenue, led to the biggest change in the Spanish market for some time – the introduction in May last year of a new gambling law originally announced in 2007, permitting full-blown e-gaming. The DGoJ has since named 53 licensees; around 60 firms had applied. Taxation for the majority of games has been set at 25 percent of gross gaming revenue, after the government – following protests from the likes of the Remote Gambling Association – did a U-turn on earlier plans to levy taxes as a percentage of total stakes. The DGoJ has also discussed the possibility of international liquidity with its counterparts in Italy and France, the AAMS and ARJEL. If that is implemented it would allow Spanish online gamblers to use the same sites as the Italians and French. Sharing liquidity with the UK could also occur, the DGoJ’s director general has said, but it is unlikely to happen with Germany.

FRANCE

The legal gaming (as opposed to amusements) market in France is worth €9.5bn annually, and by many measures is in rude health: indeed, 2010 was a record year for consumer spend on gambling. However, the market is highly concentrated. La Francaise des Jeux (FDJ), the state-owned lottery, accounts for 42 percent of its  value. The provider of horse-race betting games Pari Mutual Urbain (PMU), also state-owned, accounts for a further 26 percent. Casinos — also largely concentrated in the hands of just four companies — take 24 percent and online eight percent. This, combined with high taxation thanks to a turnover tax model (see below), along with the perception of excessive regulation, has made France an unpopular destination for inward investment in gaming. Indeed, it has been described as an example of how not to regulate. Amusement machines are widespread in the country’s ubiquitous cafes and bars but frequently antiquated, and again, although the market is theoretically large it is not generally seen as a priority for international suppliers.

Regulation
The Ministry of the Interior’s Sous Direction des Courses et des Jeux is the principal gaming regulator, while the Autorite de Regulation des Jeux en Ligne (ARJEL) supervises online gambling.

Casinos
There are about 190 casinos in France, and 2010 gross gaming revenue (GGR) of €2.3bn made it Europe’s largest casino market. Since 1988, legislation has been in place making it possible to open new casinos in urban areas with more than 500,000 inhabitants. However, there are concerns that the sector is threatened by the country’s smoking ban and by declining spend per client, as well as by the arrival of online gaming. Ownership of the French casino market is highly concentrated, with 60 percent of gross gaming revenue going to two companies, Groupe Lucien Barriere and Partouche. Two others, Tranchant and Joa Groupe, account for much of the remainder. Of that €2.3bn figure, about 90 percent came from slots, and almost all of the balance from roulette, blackjack and poker.

Online
Since 2010, private companies have been permitted to offer online sports betting, betting on horse races, and poker, with five-year licences.
However, their fortunes have been mixed. Indeed, of around 35 companies originally licensed, only 26 remain in the market and that number is expected to reduce to fewer than ten by 2015. A GamblingData report has suggested that the state-owned firms PMU and FDJ, which also have land-based monopolies in racing betting and lottery respectively, have been the principal winners in revenue terms from regulated online gaming in France. Private operators, particularly those offering sports betting, have fared considerably worse. An unnamed lobbyist was quoted as saying: “The situation in France today is pretty clear: the online gaming and betting sector is a loss-making exercise, penalised by punitive levels of taxation for the players and unfair – but legal – competition from the incumbent ex-monopolies that rely on their huge competitive advantages. We have gone from a monopoly that had no legal basis to an oligopoly that has been legally signed and sealed by the government.” Online should achieve GGR of €7-800m this year, but is unlikely to reach the €1.4bn figure for 2013 that forecasts in more optimistic days had suggested.

Poker appears to be suffering particularly badly, with stake levels for cash games dropping five percent year-on-year in the first quarter of 2012, although tournament entry fees increased. However, ARJEL tries to characterise online poker in France as a dynamic market subject to frequent change, rather than necessarily one in decline. It also says that online betting on horse races is continuing to rise and that online sports betting is regaining ground.
Poker does remain by far the biggest of the online activities, though. In the first quarter, €1.7bn was bet on the game (and €370m spent on tournament entry fees), and there were 330,000 customer accounts used weekly. By contrast, horse racing attracted wagers of only €290m from 154,000 accounts, while sports betting stakes totalled €175m, from 110,000 accounts. France has held preliminary talks with authorities in Italy and Spain about pooling gambling liquidity. If that is implemented it would allow French online gamblers to use the same sites as the Italians and Spanish. About 15 percent of online activity is conducted via smartphones.

Taxation
Betting in France is taxed at a number of different levels, but what makes it unusual — and vexatious for operators, despite reductions in 2009 — is that it is taxation on turnover rather than on profit. This differs from taxation in many territories, and is effectively higher, because it is levied on the entire amount bet by consumers; the alternative approach is to tax only the gross gaming revenue, or stakes less payouts. How turnover tax relates to taxation on GGR depends on the typical return to the player of a specific game. Thus the 8.8 percent turnover tax on sports betting is considered equivalent to a 50 percent tax on GGR, and the two percent turnover tax on online poker is also considered equivalent to 50 percent on GGR. The French online regulator ARJEL has proposed GGR tax rates of 38 percent on sports betting, 25 percent on poker, and 55 percent on horse-racing bets.

GERMANY

There are large casino and amusement sectors in Germany, and the sports betting segment is expected to grow following the introduction of new regulation. There is, however, considerable industry disquiet over the country’s approach to e-gaming, which is severely limited.
 

Amusements
The story of Germany’s amusements industry over the last half- decade is the resurgence of the AWP. The number of installed AWPs declined between 1995 and 2005 from 245,000 to 183,000. But a new gaming ordinance then came into effect, prohibiting the so-called fun games that paid out tokens and which it was feared could be used for illegal gambling. About 80,000 of these had to be removed, freeing up space for more AWPs. This greatly revitalised the AWP market and by the end of 2010 their number was back up to 235,000. Growth has largely been in amusement arcades, with the number of AWPs in bars and restaurants remaining static, although new locations including airports, railway stations, and roadside service areas form a growing if still small market, to some extent compensating for the sluggishness of the bar/restaurant sector.

Amusements manufacturers, distributors and operators together reached a turnover of €5.1bn in 2010, up by 5.8 percent on the previous year. Operators took the lion’s share of revenue at just over €4bn. Nearly all of that was derived from AWPs, with amounts under €100m coming from around 38,000 amusements without prizes and 22,300 sport-games machines such as table hockey.

Casinos
Casinos have lost share of the overall gaming market because of admission controls. There are both land-based and cruise ship casinos. The land-based part of the sector comprises around 55 venues, with the biggest concentration in Hamburg. Casinos typically have 80-150 slots as well as table games.

Sports betting
German states have enacted the new Interstate Treaty on Gambling, which will liberalises the sports betting market. It could be worth €1.5bn by 2015, according to consultant MECN. The key growth driver, predicts the company, will be the land-based retail sports betting segment, where around 2500 new betting shops as well as many new shop-in-shops and terminals are expected to open in the next few years. However, the industry has complained vociferously about the small number of online sports betting licences issued – just 20 – and is also concerned about the five percent tax on wagers. There are fears that, as in France, this will depress the market. Immune from these complaints, however, is the state of Schleswig-Holstein, the only one not part of the new treaty. In its own regional law, it has applied no limit on online licences, and based the betting tax regime on gross gaming revenue rather than turnover.

Online
While Internet sports betting is permitted under the new regime, online casinos and poker are still prohibited.

AUSTRIA

Austrians enjoy high incomes and suffered only a brief recession; the country was among the eurozone nations least affected by the downturn, and unemployment is dropping again after a brief rise. Ties to Germany are strong. There are monopolies on casinos and lotteries, held by Casinos Austria and Austrian Lotteries respectively. However, this may change, as the finance ministry has initiated a new licensing process for the rights to operate 15 land-based casinos and one poker parlour. Additionally, Austria is not acting legally under EU law by excluding foreign casino companies from the licensing process, the European Court of Justice has ruled.

As for amusements, in four of the nine Austrian federal states (Carinthia, Lower Austria, Styria and Vienna), other businesses are allowed to offer gaming machines with a maximum stake of €0.50 and payout of €20. This makes small-scale amusements operations possible. As well as adhering to the national stake and payout regulations, operators must comply with each of the four states’ own rules. In other Austrian federal states, Internet terminals can provide some playing opportunities to consumers.

NORDIC NATIONS - DENMARK, SWEDEN & NORWAY

Denmark’s gaming machines earned €239m in 2011, of which the government got €84.1m in taxes. A further €16m was donated to charitable causes, favouring sports clubs and youth clubs, and €2.4m went into the research and treatment of problem gambling. The rest of the pie was shared by operators and venues. 2011’s revenues saw a fairly large drop of 4.8 percent compared to 2010, but this is still a smaller decline than in the previous three years. Larger venues have struggled to maintain revenues, but as the country’s trade association DAB says, only four of its 75 members operate more than 1000 machines; so this struggle by no means affects the whole industry.
Denmark’s new Gambling Act came into force in January 2012, a move which opened up the online gaming market. Sports betting and poker are now legal online, but controversially, online operators only have to pay a tax levy of 20 percent; the tax on gaming machines, meanwhile, is a whopping 44 percent. DAB says, perhaps with some justification, that this is unlawful state aid to the online gaming industry, and a case is currently being pursued at EU level.

Most of Sweden’s gaming – in terms of slots, VLTs and casino gaming, plus a large chunk of online – is operated by the state- owned Svenska Spel. Recent licences give it the monopoly on VLTs in Sweden until December 2013, plus casino gaming and Internet poker to the same date. In 2011, the Vegas arm of the business (VLTs) grew 2.2 percent, and Casino Cosmopol (a four-strong casino group with properties in Gothenburg, Malmo, Sundsvall and Stockholm) marked a 1.1 percent rise. However, even a state monopoly faces competition from somewhere and other online gaming companies are competitive, with offshore operators taking 45 percent of the Swedish online market, while Svenska Spel claims just 25 percent; another government gaming project, ATG, has the balance. Of course, offshore providers are not subject to Sweden’s gaming laws and so offer games that Svenska Spel cannot, like table gaming, strictly reserved for restaurant casinos and Svenska Spel’s casinos and Vegas VLTs.
The Swedish authorities are far from toothless, though – one case saw the country’s supreme court rule that gaming machines connected to servers outside Sweden were illegal as the gaming was viewed as being arranged in Sweden, and as there had been no licence issued, the machines were shut down. However, the Swedish Gaming Board says there remain thousands of illegal gaming machines nationwide. Perhaps partly because of this, despite revenues rising, Svenska Spel’s market share of Sweden’s gaming has shrunk to 50 percent. The company says this is also partly a result of responsible gaming programmes. As in its northern European neighbours, Sweden’s gaming system pulls money in for redistribution to good causes.

Gaming in Norway is very popular, with one of the country’s main lottery game providers, state-run Norsk Tipping, claiming close to 2m customers via its various channels at the end of 2010, an extraordinary number for a country of less than 5m people. Norsk Tipping’s offering includes Double Jackpot, 20 Million Dollar Lottery, Keno games, Lotto, Viking Lotto and Joker games, plus some sportsbook activity, and a popular game called Flax, which is an instant lottery game. 2010 saw the company sell 4000km of Flax scratch-cards. Norsk Tipping accounts for nearly 60 percent of gaming in Norway, and plans are afoot to bring slots under its not inconsiderable wing, reducing an estimated 21,000 units in the country to just 10,000. The main reason for this is that under Norsk Tipping, a massive chunk of profits goes into community causes: some 27 percent of profits in 2010.

UK & IRELAND

In the year ending September 2011, according to regulator the Gambling Commission, total gross gambling revenue (GGR) in the UK was £5.6bn. This was up marginally on the previous year but still about £200m below the 2008-09 mark. The land-based sector accounted for £4.8bn and of this the lion’s share came from betting shops, at £2.95bn – although much of their revenue derives from fixed odds betting terminals (FOBTs), reform of which is discussed below, rather than from traditional sports betting. Casinos accounted for £836m, bingo £614m and amusement arcades £376m. Remote betting, bingo and casino gaming contributed £680m, while lotteries (excluding the National Lottery, which the Gambling Commission does not regulate) both remote and non- remote contributed £168m.

Gaming machines in Britain
There were 154,500 gaming machines as of September 2011, split across the following regulatory categories, including those in venues such as pubs, betting shops, casinos and bingo halls as well as amusement arcades:
B1 2700
B2 34,000 (nearly all of them in betting shops)
B3 13,000
B4 400
C 49,000
D 55,500
Well over half of GGR from gaming machines came from the Category B2 machines, which accounted for £1.37bn of the £2.08bn total. Categories B1, B2 and C were all between £100m and £200m, while Category D contributed £87m. GGR from the few Category B4 machines was negligible.

Employment in gaming
114,000 people were employed in gaming (including both full-time and part-time employees) at the Gambling Commission’s last count. About half of these, or 56,000, were in the betting sector. Bingo accounted for 16,000, casinos for 14,000 and arcades for 12,500. A further 7000 were employed in gaming machine technology. The balance came from lotteries and remote gaming.

Participation in gaming
57 percent of Britons surveyed in September 2011 said they had participated in some form of gambling over the previous four weeks, a figure that appears to have been rising slightly in recent years. However, overwhelmingly the most popular activity was the National Lottery, participated in by 47 percent of respondents, and other lotteries. The next most popular activity, betting on horse races, was indicated by only 4.6 percent, while playing on slot machines was acknowledged by 3.5 percent.

Arcades
Arcade revenue has fallen precipitously in recent years. In the year ending April 2009, it stood at £480m; in the two subsequent years it fell to £458m and then £396m, before dipping to £376m in the year ending September 2011. This means that about 20 percent of the arcade market’s value has been lost in three and a half years. The Gambling Commission has noted that “a significant number” of premises have been converted to bingo. At March 2012, there were 2250 adult gaming centres (AGCs) and 300 family entertainment entres (FECs). AGCs held about 80 percent of the arcade market by GGR.  AGCs employed 9800 people and FECs 2750.

Machines in arcades
Of the 56,000 machines in AGCs, more than half (30,000) were Category C. A further 17,500 were Category D, and 8500 were Category B3. There was a negligible number of Category B4 devices. However, Category B3 provided the biggest share of revenue, contributing £95m of the £309m total GGR for AGCs. Category C machines, despite their greater numbers, contributed £82m. In FECs, meanwhile, there were 2800 Category C machines and 28,000 Category D. Revenue in FECs was roughly in proportion to the installed base: total GGR was £74m, of which £61m came from Category D devices.
Altogether, FECs and AGCs account for roughly half of all gaming machines in the UK.

Bingo and betting
At March 2012, there were 9100 betting shops of which about 7500 were operated by the four main players: William Hill, Ladbrokes, Gala Coral and Betfred/Tote. In bingo, by contrast, nearly half of the 650 premises in March 2012 were operated by independents rather than the major names.

Casinos
At September 2011, there were 146 casinos which had attracted around 17.5m visits in the previous year. All but six were in England, and 25 were in London. Roulette was by far the most popular table game, accounting for nearly 5000 of the total 6200 tables. Casinos also had 2700 gaming machines, nearly all of them in Category B1.

Remote gaming
Remote gambling was worth £2bn in calendar 2011, up five percent on the previous year (and thus dragging behind global growth of ten percent). However, this includes money spent with offshore operators. Onshore GGR was £680m, the vast majority (£664m) of which came from betting. Only £14m came from onshore casino operations.

Regulatory outlook: Machine Games Duty
A major change in the licensing of machines awaits the British amusements sector in early 2013. The government plans to replace the existing Amusement Machine Licence Duty (AMLD) fee paid for each device with a new levy on profits called Machine Games Duty (MGD). It has not been well-received by operators, who anticipate that it will lead to some having to pay far more tax than at present, despite the government’s intention that the overall effect across the sector should be neutral. There is also concern about the burden of compliance. A study for trade body BACTA by Ernst & Young found that “the losers from these changes will face large, crippling new tax bills of £400,000 on average”, with some liable for as much as £1m, according to the association’s president.

Regulatory outlook: e-gaming taxation
The UK is soon to regulate online gambling at the point of consumption, in line with other European states such as France and Italy, meaning that operators will have to hold a Gambling Commission licence if they are to serve British players or advertise within the country. The current “white list” of territories whose online gambling operators are permitted to conduct transactions with Britons – Alderney, Antigua and Barbuda, the Isle of Man, and Tasmania – is expected to disappear at the end of 2014, although it is likely that firms in those jurisdictions will continue to be treated favourably.
Operators currently licensed in the “white list” territories or European Economic Area countries will be able to obtain transitional licences so that they can continue operating while full licences are sought. The intention is to counter the loss of tax revenue caused by nearly all British e-gaming operators moving offshore, and also to remove the incentive to locate outside the UK. It is expected that online operators will be taxed 15 percent of gross gambling revenue, while those offering bets on horse racing will have to pay 10.75 percent of gross profits for the sport’s levy.

Regulatory outlook: FOBTs
The British government is planning a review of the fixed odds betting terminal (FOBT) market including stakes, maximum prizes and machine numbers.
The reconsideration of the machines typically found in betting shops, which currently have £100 maximum stakes and £500 maximum prizes, comes after the cross-party House of Commons Culture, Media and Sport Select Committee recommended an increase in the number of FOBTs allowed in betting shops and casinos, as well as their extension to other venues. (Other politicians, however, have called for a dramatic reduction of stakes to £2.). The committee found that the Gambling Act 2005, introduced by the current government’s Labour predecessors, has “resulted in numerous inconsistencies and is not sufficiently evidence-based”. Among its recommendations was a revamp of the rules for Category B2 games, the official term for FOBTs. Currently, bookmakers and casinos are both allowed up to four of the machines. But the committee wants to loosen that restriction. It says that limiting the number in betting shops “has encouraged [the shops] to cluster in some high streets in order to satisfy customer demand”, and that “local authorities should have the power to allow betting shops to have more than the current maximum of four B2 machines per shop if they believe it will help to deal with the issue of clustering”.
Casinos, meanwhile, should be permitted to offer up to 20 FOBTs each, the committee proposed – and AGCs should be given the same entitlement as betting shops, in recognition of their equally tight controls on under-age entry. However, the FOBT recommendations have provoked concern in organisations addressing problem gambling. A GamCare statement said: “Problem gamblers gamble in many different ways, but FOBTs are increasingly cited by our callers and clients as a part of their problematic gambling pattern, and they certainly have some of the features associated with the potential to encourage excessive play.”

Regulatory outlook: casinos
As with FOBTs, the parliamentary committee also recommended giving more power over casino licensing to local authorities, saying that they have the appropriate knowledge to assess the impact of gaming in their communities. One problem that it addressed was the portability of licences. At present, of the 186 licences created under Britain’s 1968 Gaming Act and the further 16 created by 2005 legislation, all are location-specific and 41 are currently unused. At the same time, however, some places that were too small in 1968 to justify a casino now have sufficiently large populations and could benefit from those unused licences. Said the committee: “As a step towards this, existing 1968 Act casino licences should be made portable, allowing operators to relocate to any local authority provided that they have the consent of that local authority. The portability of these licences would be constrained by the existing ‘triple lock’ contained in the [2005] Gambling Act: that is, the need to obtain local authority approval, a premises licence and planning permission.” It also considered the restrictions placed by the 2005 Act on so-called small casinos, which are seen as having made them financially unviable. It suggested that local authorities should have the discretion to increase the ratio of gaming machines to tables to 5:1, much higher than the current 2:1.

USA

FEC and IAAPA
Family Entertainment Centers (FEC) operators who responded to recent surveys claim to have averaged $2.67M in gross revenues in 2011; outdoor only facilities totaled $467,571. An average of more than half-57%-said that 2011 was more profitable than 2010, but the larger facilities enjoyed greater revenues and profits. Customers spent an average $14 per person, per visit. Larger, combination indoor/outdoor facilities hit $16 and locations with greater than 50,000 attendees averaged $17. FECs in Europe and Latin America regions earned significantly less in the US/Canada and Asia Pacific/Middle East regions. However, statistically, the survey received a small response from Europe and Latin America. FECs and theme parks will have arcade games, but often rely on the redemption counter as key to their marketing and operation strategies. Legislation and regulations within their specific jurisdictions impact what they can do.

As for amusements and vending, nothing has changed to really help business conditions. The 2012 election, with more than $2 billion spent on the campaigns, resulted in a status quo in Washington D.C. The Republicans control the House, the Democrats control the Senate and Barack Obama will remain in the White House for another four years. For both smaller and larger amusement industry members, the issues facing them also remain the same heading into 2013. Taxes, banking and energy regulations are troublesome. Obamacare, the term used to describe the national Affordable Care Act of 2010, remains a primary concern due to American businesses because of its expected and unanticipated costs. Last June, The U.S. Supreme Court upheld a key component of Obamacare. The majority of the American public has consistently opposed Obamacare for three years, but to no avail, especially since Obama has been reelected.Health coverage regulations will directly affect those AMOA and AAMA companies with 50-plus employees. Companies with fewer than 50 employees could forego hiring to remain under the threshold and not face mandated expenditures.

AAMA President John Schultz is certain that those smaller businesses employing between 35-45 employees will be reluctant to expand and fall under the new regulations. In fact, he says there is a shrinking climate within the industry. Manufacturer/distributor numbers have decreased due to consolidations and closures while the number of suppliers has grown. With new taxes and regulations, these numbers could dramatically change even more.
More public smoking bans and difficulty in borrowing money, plus growing competition for leisure dollars, will compel operators to diversify and become more creative and innovative.
As of December 2012, there are no clear future tax policies that will be anything more than a time-limited patchwork of temporary fixes. AMOA Executive Director Jack Kelleher states, “The coin machine industry has long operated in an uncertain environment. Washington’s gridlock has trickled down to state and local governments. Our members do their best, given the situation.” Agreeing that 2012 ends with a lack of direction, Schultz says, “Small businesses need structure and cannot budget without knowing their taxes. Congress continually kicks the can down the road to postpone decisions. These temporary fixes in Washington won’t do it...we need a two to three-year vision.”

Amusement breakdown
No longer recession-proof, the American amusement industry continues its struggle against the economic downturn and technological competition. The street operators’ core customer, the tavern, has confronted increased municipal/state smoking bans, higher costs of living expenses and smaller entertainment budgets among its key blue-collar demographic group. Savvy operators must prioritize equipment placement. To counteract built-in servicing and collection expenses, operators must maximize revenues at every location.

Jukeboxes
Since 1999, downloaded music on smaller digital jukeboxes has salvaged the operator’s music business. Fewer taverns, unlicensed jukeboxes and increasing personalized music and iPod play, have limited expansion opportunities beyond the current 90,000 nationwide locations. Unlicensed jukeboxes have also eroded the revenues of legitimate operators.

Videogames
Videogames peaked in 1982, but have steadily declined as the home market overtook their strength by the mid-1990s. Primarily in arcades now, large simulators that replicate driving or dancing comprise a significant percentage of the current video game market. The larger upright format still dominates taverns and other public venues, while touchscreen games use bar tops for their main placement. Many bar locations support games with online, tournament capabilities. Competition through off-site administration sustains revenues and promotes repeat business.

Pinball machines
Historically the pinball machine is among the earliest type of coin- operated amusement machine. Its original installations in taverns, candy stores, and local restaurants associated it with the “street” operator. For years, Stern Pinball has been the sole company to produce flipper games, but a new organization has recently entered the market. Jersey Jack Pinball has debuted its “The Wizard of Oz” machine, and already has pre-sold 1,500 units.
However, pinball remains a specialty game that traditionally has attracted a player base from the over-40 customer base. Younger audiences who grew up in a video-only environment are slowly beginning to learn about flipper games via arcades, FECs, parks and even comic book conventions around the country. The home market has become a key sales market since so many collectors, hobbyists and homeowners want a pinball machine as part of their home entertainment collection.

Prize merchandiser – Skill cranes
As traditional locations have replaced pinball machines and videogames with other attractions, the prize merchandiser category, comprised mostly of skill cranes in some form, has grown. While skill cranes remain the dominant type of amusement merchandiser, many other redemption games have gained in popularity. Several redemption games have self- contained redemption “counters” within another machine.

Pool tables
Pool tables are stable pieces of equipment, but rely on steady tavern customer traffic for league and tournament play. Pool tables have endured with minimal maintenance needs, sustaining their popularity since the 1950s. Recently, electronically-controlled tables have replaced many tables, increasing revenues. Much of the play is league oriented, as at least 25% of all pool table operators offer league play.

Electronic dart games
Electronic soft-tip darts were the first online coin-op games, premiering in 1991, and remain a staple, particularly in the Midwest. Like in many locations with a more blue-collar clientele, revenues have been tied in to their economic hardships since 2008. The AMOA’s National Dart Association (NDA) is the official international sanctioning organization that promotes, recognizes and standardizes league play. The NDA sanctions more than 56,000 players annually from eight countries. These players compete in charter holder leagues in over 10,000 locations worldwide. The NDA hosts the world’s largest international soft- tip dart competition each year in the U.S.

Kiddie rides
A smaller population of children between three and seven continues to erode the market. While only a category within few street operations, kiddie rides have evolved into an adjunct product line of bulk vendors and cranes within a location. Also, companies specializing in children’s entertainment, or the locations themselves, operate most kiddie rides.

Larger amusement games

Large soccer, or “foosball” games, plus shuffle alley machines, were popular on college campuses and in taverns 40 years ago. The post-WWII U.S. military in Europe loved foosball, and formed most of the player base when these games came to the U.S. during the 1950s and 1960s. Shuffle alleys were standard equipment in taverns during the late 1950s and early 1960s, creating profits and popularity of street location amusements. Their oversized dimensions gave way to replacement with the smaller video games during the 1970s and 1980s.

Future laws, trends and opportunities
With a new Congress in Washington D.C. in January 2013, the industry must remain vigilant. Kelleher says, “A new Congress always requires some outreach. We typically target new members where we have a higher concentration of AMOA members. Our positive message educates them to understand we are job creators, generally small businesses and often politically active.” Both the AMOA and AAMA have fostered personal contact with federal legislators since the 1980s. They regularly interact with congressional representatives by traveling to Washington. During the 1990s, the AMOA and AAMA joined a coalition of like-minded businesses to introduce a functional new coin with public appeal. While coins have appeared, none have successfully taken hold.
The issue has now resurfaced because of the federal government’s dire need to cut spending costs. “It is vital for the government to address this as a way to save $800 million over the next 10 years. We have a better opportunity for this concept in 2013,” Schultz says. He believes that if passed, it can grow the amusement market because consumers dislike change in their pockets and will want to spend the coins.
Schultz says, “We had four Congressional visits last year, with different members representing specific geography and constituencies. The AAMA package of documents explains our industry and its needs. Our attention must be constant. Without consistent interaction, it will be too late to find that person when we need a friend in Washington. We don’t want a band-aid approach.” As home to both AMOA and AAMA, one positive for Illinois operators, manufacturers and distributors is the launch of the statewide video gaming program. Legalized in the 2009 Video Gaming Act (VGA), the law allows operators to run VLTs in taverns.
Following years of delays, many individuals and companies have received their licensing approvals. Schultz confirms that the central system is in place. Live slot products went into operation in the first group of approved sites in September.

MIDDLE EAST & AFRICA

Gambling (apart from betting on horse races) was long banned in South Africa but the proliferation of illegal casinos led to a reversal of that policy in the late 1990s and the market has grown rapidly since. According to a 2006 study, 87 percent of the population participated in the national lottery; 28 percent played slots; 23 percent bought scratch-cards; and 12 percent wagered on horse races. Only eight percent of South Africans said they never gambled. In the 2010-11 financial year, total gaming turnover was ZAR233bn (€21bn). Nearly 90 percent of this was from casinos, and just 3.7 percent from limited payout machines (LPMs), as slots are known in South Africa.
Amusements without cash prizes are permitted, although they may not be based on gambling games other than bingo.
South Africa has the largest casino sector on the continent, with some 40 venues, equalled only by Egypt’s.

Online ban
South Africa has banned online gaming. Not only operators, but also players, Internet service providers, media that advertise gaming Websites, and firms that handle gambling-related transactions can be punished with fines and prison sentences. There is frustration over the slow development of a regulatory framework for online.

Taxation and regulation
2012’s South African budget included for the first time a proposal to tax gambling at a national level, effective from April 2013. The new regime may involve a one percent national tax on top of harmonised state taxes. Separately, the fate of South Africa’s gaming regulators was at press time unclear following accusations of corruption.

Original Source: EuroSlot