Global Betting and Gaming Consultants (GBGC) forecasts that the entire European gambling market’s revenues will grow by just 1.7% in 2013 to US$ 120.3 billion (EUR 90.0 billion). Within that total figure some sectors perform better than others, as do certain countries. For example, revenues from gaming machines (outside casinos) will fall by just over 0.5% in 2013 but lottery revenues will grow by 0.5%.
GREECE - These pan-European figures, however, do disguise the fact that some countries are performing a lot better than others. The dire economic performance in Greece has seen the country’s total land-based gambling revenues fall from a peak of EUR 2.15 billion in 2008 to an estimated EUR 1.26 billion in 2013. That represents a precipitous fall of 41% in the space of six years. Greece’s casinos have suffered particularly badly in 2013 and could bring in only around EUR 315 million this year. That would be a decline of 60% from the 2008 peak as tourists stay away and local consumers have less to spend.
SPAIN - Spain is another country that finds itself in a similar sinking gambling boat to Greece in 2013 but on a much larger scale. Spanish gambling revenues peaked at EUR 10.2 billion in 2008 but were only EUR 8.7 billion in 2012 and could fall below the EUR 8 billion mark in 2013.
Spain’s domestically licensed internet gambling sector is a good indicator of the state of the market. Prior to the new licensing regime being introduced in 2012 many online gambling companies opted to pay back taxes on activities in Spain to ensure they could continue to participate in Spanish e-gaming. Bwin announced that it would pay EUR 25.6 million of taxes. Sportingbet declared that it was in discussion with the Spanish tax authorities and will pay EUR 14 million in retrospective taxes. 888 announced that following discussion with Spanish authorities it would make a one off payment of EUR 7.4 million. Some of those companies will be wishing they had not been so eager to pay those taxes, given the performance of the market in 2013. No sector of the newly regulated e-gaming market has shown the sort of growth in 2013 – the first full year of operations – that many of the licence holders would have wanted. In addition, the high taxes the licensees are paying on the revenues they do make are also hurting their profitability.
Looking across Europe as a whole, GBGC forecasts the internet gambling market will grow by 6% in 2013. This growth seems quite healthy when set against the economic performance of some European countries in 2013. But in GBGC’s opinion e-gaming growth should have been higher given the extent of local regulation that has taken place in jurisdictions like Denmark, Spain, and Germany in 2012 and 2013. GBGC estimates that 57% of European e-gaming revenues will come from locally licensed operations in 2013, up from 55% in 2012. Again, the fact that 43% of revenues are still coming from offshore jurisdictions suggests that the new regulatory models have not worked.
THE ONLINE POKER - The online poker sector in Europe has had a difficult 2013. Many of the regulated markets have performed below expectations, particularly France and Spain. But offshore poker operators have also seen negligible growth overall. GBGC forecasts that the total online poker market in Europe will fall by 4% to 5% in 2013, with a GGY of US$ 2.7 billion (EUR 2.0 billion). In 2014 the market will grow by 2% and then be static for subsequent years.
The crisis in the Eurozone has bought mixed blessings for internet gambling operators. The governments in Europe have turned to gambling as a way to raise tax revenues and have been forced to consider regulation of e-gaming, whereas previously they were strongly opposed to it. But the governments’ need for cash has meant they have set the gambling tax rates too high, so the newly regulated markets have not been a great (profitable) success for many licensees. It does not seem as though 2013 will bring an end to this trend. In 2014 Portugal is planning to introduce regulation for internet gambling and it will almost certainly follow the likes of Spain and set a gambling tax rate of 20% - 25% of GGY. 2014 is also the year when the point of consumption tax at 15% of GGY is introduced in the UK, reducing the profitability for many operators in one of the largest and most competitive European e-gaming markets.
Certain individual companies have had what they would call “transitional” years in 2013 and 2014 will have to see them start delivering on their new strategies and technology. Ladbrokes is a prime example of this. 2014 will have to bring about a change of fortune in its digital division after several investor warnings about its poor performance. A crucial part of the recovery will down to Ladbrokes’ deal with Playtech and, to a lesser extent, what advantage it can gain through the Betdaq betting exchange it acquired. Betfair, meanwhile, is going in the opposite direction and in 2013 has been expanding it fixed-odds betting service, as it diversifies away from its betting exchange. Bwin.party is another company that began implementing a new strategy in 2013 with a new “volume to value” plan. It also unveiled its new Party Poker software in late 2013. A consequence of these changes has been a poor financial performance for the three companies. Ladbrokes’ profit before tax fell 28% to GB£ 10.8 million (EUR 13.0 million) in the first half of 2013. Betfair and Bwin.party both posted pre-tax losses. So the new year will be an important one for all of the companies because their plans will have to bring about substantial improvement.
THE 2014 - But GBGC does believe that 2014 will be an improvement upon 2013, if only for the fact that 2014 is a World Cup year. The football tournament in Brazil will provide a marketing boost for sports betting companies and will help increase the number of new accounts that are opened. Some surprise results in the tournament would also help gross win margins. 2014 will also present new opportunities in both the land-based and online sectors. Several regulators in Eastern Europe are bringing in legislation for internet gambling, which continues the process of domestic licensing seen in Western Europe. Elsewhere, Cyprus is planning to issue a licence for a large casino resort and Ireland has legislation to allow a number of smaller gaming venues. But only a sustained recovery in the Eurozone will help bring growth back to the struggling gambling markets. Gambling is a discretionary spending activity and is underpinned by consumer confidence. The best, but least practical, option for certain operators might be to go into hibernation for a few years, emerging again in 2018 when the Eurozone problems might have lessened, if not been resolved, and also just in time for the next World Cup.