Peeling the layers of FDJ’s opposition to iCasino regulation
FDJ opposition to iCasino regulation explained and loads more in today's Gaming&Co
Good morning, on Gaming&Co today:
Breaking: French Senate says oui to higher taxes on some gambling stakeholders.
Lottery giant Française des Jeux is opposed to iCasino regulation, but peeling its product layers it is possible to see why.
UK grim: LiveScore redundancies make for tough year-end in group’s London office.
Sturm und Drang: German iGaming execs’ fury at Google.
News shorts: Betclic’s non to M&A rumours, OPAP, JDigital, Montenegro.
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Breaking - French Senators vote through tax hikes on gambling
Tax up: French Senators have voted in favour of the government’s "comportmental" tax raises targeting soft drinks, tobacco and gambling. The tax hikes on wagering had been rejected by MPs but the Senators approved the measures yesterday, with lottery GGR set to be taxed at 10%, all retail sports bets at 10% from 7% and online bets at 15% from 10.5% currently.
Opening this week’s annual conference of the country's igaming trade body AFJEL, Nicolas Béraud, CEO of Betlic and AFJEL President, said higher taxes will make it even more difficult for operators to generate profits and put at risk many sports federations, leagues and grassroots organisations.
The government was “at best underestimating and at worst ignoring” their concerns, he said.
Jean-François Vilotte, former President of the French gambling regulator AFJEL (as was), and now CEO of the French Football Federation (FFF), told French media the plans would jeopardise the financial footing of many sporting bodies and even sporting ethics.
French casinos and online operators already pay GGR taxes of around 55% and the new measures would push the taxes to close to 60%. The reforms are part of the government’s plan to raise €500m to boost its social security budget and address its national debt.
Peeling the layers of FDJ’s opposition to iCasino regulation
The French lottery giant’s opposition to regulation in its home country is not that surprising when assessing its online gaming portfolio.
FDJ’s buffalo stance: The attitude of Francaise des Jeux towards the potential regulation of online casino in France and its apparent opposition to the vertical being legalised has left industry observers surprised and suspicious as to the possible motives behind the lottery giant’s stance. However, peeling through the company’s product layers it is possible to glean some potential explanations for its position.
Lottery and co: As exclusive operator of one of Europe’s largest lotteries, FDJ is also in the unique position of being the only company allowed to operate online bingo, scratchcard and instant games in France.
Instant karma: Among those scratchcard and instant products is where a likely explanation for its position can be found. One industry source explains that under the current system, “FDJ’s scratchcards and instants are very similar to online slot machines, the only thing that differs is the pay out ratio”.
The ratio for online slots is around 96%, while FDJ’s scratchcards and instants pay out between 65% and 72% on average. There is therefore a major difference in the profits and margins it can generate from those products.
Home patch all to itself: In addition, it has an exclusive monopoly on those products and benefits from, in effect, having the French mass market to itself at the moment. “Should iCasino become regulated,” adds Gaming&Co’s contact, “players are not going to be interested in games with pay out ratios of just 70%” and “FDJ would have to compete against all the other online casinos for players” (depending on the type of regulation that is agreed).
Digital instants: A quick scan of FDJ’s H1 results shows group revenues of €1.4bn, with lottery revenues up 5% YoY to €1bn, “thanks to a good performance from instant games”. The group added that “digital momentum remains very strong, up 24.4%”, revenue from instant games was up 6.7% and digital penetration was 13.8% in H1 vs. 11.6% in H123.
While online casino games may produce high margins, the prospect of regulation would mean FDJ would not have the mass of French players that it has at its disposal currently.
Ready for all scenarios: While some sources describe the group’s position as "hypocritical", others say FDJ is adopting a defensive position and simply prefers the “status quo and keeping its exclusive status” rather than having to compete in an open market. And if iCasino does become regulated, “FDJ would be ready with Kindred” and its 32Red and Maria Casino brands.
In response to G&C enquiries, FDJ said legalising online casino “would not meet the arguments put forward by its advocates, in terms of combating illegal (and) excessive gambling, contributing to public revenue and balancing the gambling sector in France”.
It added that impact assessments needed to be carried out, and “in the absence of a precise framework taking into account all the ins and outs of such a measure” it was logical “to question the objectives put forward by its defenders”.
Look back and wonder: FDJ’s €2.6bn acquisition of Kindred Group this year enabled it to acquire a major pan-European betting and casino operator. It closed that deal in early October and the French government introduced its online casino amendment on 22 October, leading industry observers to wonder if the events were connected.
Following major pushback from the country's casinos and mayors, the government withdrew the amendment, held an industry roundtable, during which FDJ expressed doubts about iCasino regulation, and in January the government will establish working groups to evaluate the issue.
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LiveScore counts cost of UK market
LiveScore Group’s London office is set to bear the brunt of the operator’s restructuring with around 100 of its 250 staff likely to lose their jobs.
UK too tough to compete: While the company referenced its exit from the Netherlands in its press release announcing the restructuring, it is understood that the core reason for the restructuring is the high cost base of the London team and the UK operation.
“If they were to do it again, I don’t think they would greenfield a gambling operator and choose the UK as their first market,” said a source close to the company. “It’s very tough to make money here.”
“They had ambitions to be much bigger than they are today. They are not as profitable as they should be given the cost base they have.”
UK grim: The mood in London is understood to be grim as the consultation process on 100 roles takes place in the run-up to Christmas. Some departments are set to be cut entirely and outsourced.
Gibraltar will become LiveScore’s largest office, when the London cuts are completed. It has other offices in Galway in Ireland, Cape Town in South Africa, Nigeria and Malta.
Just two years ago, Swiss media group Ringier made a £50m investment in LiveScore, which valued it at £500m with the company hailed as having succeeded at getting the media-sports betting combination right.
It is understood that LiveScore’s media group has continued to thrive, but its betting business has struggled in the face of heavy competition and increased compliance costs in the UK.
GGL repot sparks fury over Google black market advertising
Under pressure: Gaming&Co’s story on Germany’s regulator claiming partial victory in the fight against unlicensed operators has heaped pressure on Google to up its game, with Tipico iGaming Director Christian Heins saying that the trumpeted new policies “have had little to no impact”.
“The decrease in paid traffic to black-market sites is offset by an increase in traffic from organic searches,” said Heins in a post on Linked In. “Immediate action is needed. Google must adjust its organic search algorithm to distinguish between legal and illegal offers, as it does in other areas.”
Tax drop: Heins’ Tipico colleague Johannes Brecher pointed to fresh figures from the Federal Ministry of Finance, which reveal tax revenues for lottery and betting in Germany dropped 17% YoY.
iGaming.com CEO Andreas Ditsche responded: “The numbers indicate that the regulated market is falling behind the black market. Player protection only works when players are in the regulated market.”
Big G frustrations: Sygnisoft CEO Tomas Szymanski echoed the feelings of many when he expressed his frustration with Google: “The discussion should start with the fact that it is a commercial company that makes billions from its products and should take responsibility for them.
“No other media company can afford to promote illegal initiatives (...). Not only does it make money on them, but also has a negative impact on legal companies, and because it is a monopolist this impact is even greater. Instead of making excuses for Google, regulators should force it to change thoroughly.”
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News shorts
Betclic CEO Nicolas Béraud told G&C that contrary to recent press reports, France’s OSB market leader had not been approached by gambling giants such as MGM or Flutter with a view to potential M&A deals. “I don’t know anything about that, it would have been nice,” he commented during AFJEL’s conference on Tuesday.
Online casino powers OPAP growth: Greek lottery and gaming operator OPAP has released its Q3 results with gross gaming revenue up 17.6 per cent to €565.8m, and EBITDA up 46.6 per cent to €213.2m. Its online casino segment was the star performer with quarterly revenue up up 48 per cent to €92.7m.
Gaming lawyer Santiago Asensi has called on Spain’s government to introduce balanced regulation of the sector. Speaking at an event hosted by the country’s trade body JDigital, Asensi said the authorities should not try “to reinvent" iGaming and that “high taxes don’t work” and “without advertising there is no access” for players to reach regulated sites.
Montenegro’s licensing regime: The Montenegro Ministry of Finance has begun consultations with stakeholders over “a new legal situation for gambling”, according to SBC News.
Contact
Get in touch with Jake Pollard to find out more about Gaming and Co: jake@gamingandco.info