italy gaming market report

• ItaliangamingmarketdominatedbymachinesandboostedbytheintroductionofVLTs: Machines continued to be dominant with over 54 percent of the €4.54bn wagered by Italians in July 2010 coming from this sector. The machine total of €2.45bn in the month was helped by the introduction within the past two months of the first swathe of VLTs, also introduced under the Abruzzo legis-lation.

• Sportsbettingincumbentsgrapplewithonline: In the land-based sphere SNAI, Lottomatica and Sisal controled a combined market share of over 72 percent in the first half of 2010 but their combined total in online only comes to just over 46 percent. A greater challenge to the established operators looks to be coming from Bwin Italia/Gioco Digitale which between them had an online market share of 11.8 percent in the first half or a combined turno-ver of €89m. Total betting on this year’s World Cup rose 70 percent to €344.9m. Meanwhile a margin of just a shade under 29 percent meant they got to share a gross gaming revenue pot of around €97.8m.

• PokerStarsarechasingthetoppokeroperator,astourna-mentsshowstrangetrends: Microgame achieved a turnover in July of €63.7m, down 9.4 percent on June and though it is still comfortably Italy’s number one with a 27.5 percent market share it has fallen back slightly from the 29 percent share from the previous month. Coming up on the rails is PokerStars which has been grab-bing share in the Italian poker market since its late entry in early 2009. In July, over 12.6 million separate tournaments were held online, attracting 36.6 million participants at an average entry size point of €6.45, suggesting that the average number of players per tournament is less than three.

• Companieswaitforcasinogames:Mor Weizer, chief executive at Playtech, refused to put a percentage against the size of the grey market in Italy, but suggested it was “quite significant”, adding that he believed that many of these operators might well consider tak-ing licences once casino gaming was allowable. Companies such as William Hill and 888 have stated recently that they are either in the process of or already have gained a licence for Italian operations.

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ItalyGamingMarketReportSeptember2010

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Italy Gaming Market Report | September 2010 Font: Palatino RomanBlue: From gamblingdata.com, current live websiteRed: from gamblingcompliance.com, current live website



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Contents Font: Palatino RomanBlue: From gamblingdata.com, current live websiteRed: from gamblingcompliance.com, current live website



Background

The 2009 Market Performance

TheLatestPicture

TheOnlineSportsBettingMarket

The World Cup

The Bellwether - Lottomatica

ThePokerMarket

AnAvalancheOfTournaments

OtherGames

TheGrey/IllegalMarket

NewEntrants

MarketParticipants-LeadingPlayers

AboutGamblingData

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Background

With the passing of the Bersani Law in 2006 the Italian government began issuing more than 16,000 sports-betting shops and corners licences and also opened up the online sports-betting market to more liberalisation. In September 2008, tournament-only poker was launched. Latterly, the Abru-zzo legislation opened up the way for cash poker, online casino and online bingo operations, though to date only the last of these has gone live.

As the first major market in continental Europe to liberalise its online gam-ing market, Italy has unsurprisingly been the subject of intense interest and conjecture. The monthly publication of turnover figures by the Italian regulator Amministrazione Autonoma Dei Monopoli Di Stato (AAMS) offers for the first time the opportunity to online operators to truly benchmark performances in a given territory and gain an insight as to how newly-regu-lated markets perform and mature.

The2009MarketPerformance

The Italian gaming market was worth a total of over €54.4bn in 2009 by turnover. Slot machines were by far the largest segment at €25.6bn with scratchcards and other lotteries next largest at €9.4bn. Sports-betting was worth a total of €4.03bn for the year, both online and offline, while online poker was worth €2.35bn.




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TheLatestPicture

The July 2010 statistics released by the regulator for the whole of the gambling market show that the Italian gaming market continues to be dominated by machine play with over 54 percent of the €4.54bn wagered by Italians over the month coming from this sector. (See Figure 2: The Italian Gaming Market, July 2010)

The total amount was down from the €4.7bn in June, itself the lowest monthly total since September 2009, but was still 7 percent higher than in July 2009. The figure brought total gaming spend for the first seven months of the year to €34.5bn, up 13.1 percent on the €30.5bn registered in January to July 2009.

The machine total of €2.45bn in July was helped by the introduction within the past two months of the first swathe of VLTs, also introduced under the Abruzzo legislation. Scratchcards and minor lotteries contributed €670m of the total, or 14.8 percent, while the numbers games Superenalotto and Win For Life grabbed a 5.5 percent share of the market or a spend of €251m. The Lotto games – the equivalent of the National Lottery - rose to €445m in July, or a 9.8 percent share of the market. Bingo stood at €135m, or 3 percent, skill games (tournament poker) – got a 5.5 percent share or a turnover of €236m. Sports betting suffered from Italy’s early exit from the World Cup (see World Cup analysis below) and fell to €216m from €346m in June, or a 4.8 percent share of the market.









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TheOnlineSportsBettingMarket

Analysis of the online sports-betting market shows that the established Italian betting and gaming names dominate the space, but not quite to the degree that they have a lock on the retail betting space.

According to figures obtained by iGaming Consultancy, in the first six months of the year, while in the land-based sphere Snai, Lottomatica and Sisal dominated the landscape with a combined market share of over 72 percent in the first half of 2010, their combined total in online only comes to just over 46 percent. (See Figure 3: ‘Total sports-betting market share, 2010H1’)

But none of the big three are the biggest online, at least in the first half of 2010. This title goes to the Microgame network, which comprises over 130 sports-betting and online poker providers and which in the first half had over a 26 percent market share and a turnover of €198.8m. Next up comes the Lottomatica and Totosí pairing which had a combined turnover of €182.5m. Behind that comes SNAI with a market share of 13 percent and a turnover of €98.6m and Sisal/Match Point which grabbed a first-half market share of just over 9 percent and a turnover of €68.7m.

A greater challenge to the established operators looks to be coming from Bwin Italia/Gioco Digitale which between them had an online market share of 11.8 percent in the first half or a combined turnover of €89m. But the combo has been growing its share of the market from around 10.9 percent in January to 16.5 percent in June. Still, it should be noted that this figure would represent less than 5 percent of the total offline and online market in June.

The figures from July, moreover, show Bwin/Gioco Digitale falling back again slightly in market share to 14.6 percent and a turnover of €9m, though the recently announced deal which will see Italian football’s second division, Serie B renamed Serie Bwin for the next two seasons might boost these figures once more once the new football season gets underway.









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Lottomatica and Totosí took top spot in July at 22 percent share of the market and a turnover of €13.5m. Microgame’s network fell back to sec-ond with €12.8m while Sisal’s Matchpoint was fourth with 11.1 percent or €6.8m and SNAI was fifth with 8.9 percent and a turnover of €5.5m. The total market was worth €61.5m in the month.

With the figures obtained by iGaming Consultancy, we also can see sta-tistics for the payout ratio for the sports-betting operators and hence get a clearer idea of the gross gaming revenues. So, given an average payout ratio of 84.3 percent in online sports-betting, it means that the turnover figure of €754.4m in the first-half of 2010 translated to a total gross gam-ing revenue of approximately €118.5m across the sector. In comparison, the gross gaming revenue for the retail sector hit around €334.9m or a pay-out ratio of 79.5 percent. (Figure 4, ‘Turnover/Gross Gaming Revenue for Online and Offline Betting, Jan-Jun 2010’)

Margins across operators differed significantly. The total market leader SNAI achieved online margins of a shade under 18 percent in the first half, leading to gross gaming revenues of €17.6m, compared with just under 13 percent for Lottomatica and gross gaming revenues of €11.9m. (See Figure 5, ‘Online Margins by Operator, 2010H1’)

However, its Totosí brand – aimed at more hardened gamblers – saw it mar-gins come in just over 7 percent for the first six months of the year leading to gross gaming revenues of €5.58m. The next most punter-friendly opera-tor was Gioco Digitale which returned over 92 percent of revenues to its players leaving it with a gross gaming revenue of €1.8m for the half-year.

Parent company Bwin, meanwhile, achieved margins of just over 12.5 per-cent and gross gaming revenues of €8.28m.

It should be noted that the rise of sports-betting online has spelled bad news for pool or tote betting which has seen turnover fall significantly year-on-year for every months of 2010. In the year-to-date pool betting revenues stood at €1.59m in the year to July, down over 24 percent on the first seven months of 2009.





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Also worse off in 2010 to date is online horserace betting where total yearly revenues to date are also down on 2009 at €16.7m, albeit only a 4.6 percent decline on the first seven months of 2009. A recent report from GamblingCompliance suggested the horseracing sector generally was suf-fering the most from the rise of other forms of sports-betting and online gaming. The story pointed out that as recently as the middle of the past decade, the Italian national tote processed nearly €3bn of bets per year. But by 2009 it had fallen to below €2bn and in the first five months of 2010 the total was just €800m.

TheWorldCup

he bare figures for sports-betting in Italy during the recent World Cup held in South Africa point to the growing popularity of a big soccer tournament with punters and its value to the operators.

Compared with four years’ previous - when Italy won the World Cup in Germany - total betting turnover on the tournament as a whole rose 70 percent to €344.9m. Meanwhile a margin of just a shade under 29 percent meant they got to share a gross gaming revenue pot of around €97.8m. (See Figure 7, ‘Turnover and Gross Gaming Revenues for World Cup 2010’)

Of the total gambled, just under 74 percent was gambled in land-based establishments while just over 26 percent was gambled online. If Italy had gone further in this year’s version, that rise might have been even higher. In the group stages turnover was up 82 percent over the same period in Ger-many 2006 to €191.5m while the most popular betting matches of the 48 group stage games in betting turnover terms were Italy’s three ties against Paraguay (€8.92m), Slovakia (€7.64m) and New Zealand (€7.61m).

But the biggest turnover on individual matches came in the knock-out and stages with the final between the Netherlands and Spain being the largest betting match of the tournament at €18m staked with Germany v Spain the next biggest betting heat with a total turnover of €13.7m.





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Of particular interest to the operators will be the amount of in-play bet-ting or live betting that took place during the World Cup. In total about 20 percent of the total came from in-play betting. During the final, of the €18m total, €2.22m was bet in-running and AAMS noted that there were 69 markets open on the final, with the most popular being the name of the winner (€5.98m) and the least popular being Fabregas to score with only €5 wagered.

One operator who spoke to GamblingData suggested that when it came to in-play betting there was “something of a regional split” evident from the degree of take up. “In the north they are more sophisticated bettors and are very much into in-running betting. But in the south it’s a different culture. There they go to the cafe to chat with friends while they have a drink and a bet.”

TheBellwether–Lottomatica

As the biggest Italian gaming operator Lottomatica is due more attention. In the first half, the company’s Italian operations achieved revenues of €591.9m, a 3.4 percent decrease on the first half 2009. The company said its lottery operations garnered revenues of €327.2m, down from €360.9m in the first six months of last year. Instant-ticket/scratchcard wagers also fell back to €4.83bn from €4.96bn in the same period 2009 while Lotto wagers for the first half came in at €2.4bn, down from €2.9bn. The sports-betting operations combined saw a 12.2 percent increase for the half-year to €560m, up from €499.2m in the first half of 2009. Gaming machine wa-gers rose to €2.2bn from €2.1bn. The company pointed out in its accompa-nying statement that it remains the largest gaming machine/AWP operator in Italy, and that it became the first company to install a tranche of VLTs in mid-July, after period close. The company hopes to have 1,000 machines installed by the end of 2010.

Marco Sala, chief executive and managing director, said in the earnings call accompanying the results that the VLT installation was a “great demonstra-tion of the value of the group”. “When we created the Lottomatica group of companies, we envisioned a time when we would be able to integrate and leverage the core competencies of the combined organisations to address an opportunity. That is what is occurring in Italy with our machine gaming and interactive businesses as Spielo and G2 help our Italian opera-tions to differentiate themselves from their competitors.”





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ThePokerMarket

The statistics produced by AAMS for the Italian poker market, opened up in September 2008 and until very recently producing hugely impressive month-on-month growth figures, have caught the headlines as far as the liberalisation of the Italian online market is concerned. Despite the seasonal slowdown witnessed this past summer, the figures are still impressive. The total market in terms of turnover was worth €1.89bn in the first seven months of the year compared with €2.35bn in the whole of 2009. July represented something of a slowdown from the peak monthly turnover of €290.8m seen in March this year, but at €236m it was still 28.1 percent up on the monthly figure from the previous year and if the rebound from the tail end of 2009 is replicated this year, then the poker market can be expected to far exceed the total turnover figure for last year.

The leading operator remains Microgame which despite its problems with regard to possible action against ‘totems’ on the part of the regulator con-tinues to hold its position at the top of the table with its network of white-label operators based largely in the centre and south of Italy. (See Figure 8: ‘Italian Poker Market by Operator, Sept 08 – Jun 2010) Microgame achieved a turnover in July of €63.7m, down 9.4 percent on June and though it is still comfortably Italy’s number one with a 27.5 percent market share it has fallen back slightly from the 29 percent share from the previous month.

But coming up on the rails is PokerStars which has been grabbing share in the Italian poker market since its late entry in early 2009. According to Ital-ian gambling market information provider Agipronews, PokerStars contin-ued to cement its second place in Italy with a turnover of €49.1m in July or over 21 percent of the market, albeit the turnover total was down slightly on its peaks in March and May of €53.8m.

Lower down, it will be interesting to see what happens to the combined Gioco Digitale/Bwin and PartyPoker market share once the PartyGaming/Bwin merger goes through early next year. As it stands, in July the Bwin/Gioco Digitale combo managed a share of 15.3 percent of the market or a turnover of €35.5m in July. PartyPoker meanwhile, an avowed late starter in Italy, had a market share of 2.2 percent in July but it is thought that the combination of the merger with Bwin and the launch of cash games could dramatically alter the picture in the next six months or more.




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AnAvalancheOfTournaments

Interesting statistics are produced by AAMS on the sheer volume of tour-naments that take place online in Italy per day. In July, over 12.6 million separate tournaments were held online, attracting 36.6 million participants at an average entry size point of €6.45. As the regulator points out, the participation rates can vary from between two people and several thou-sand, but a basic calculation suggests that the average number of players per tournament is less than three. (See Figure 10, ‘Number of Poker Tour-naments/Number of Tournament Entries, Jan-Jul 2010’)

The figures suggest that the tournament poker scene is much more akin to cash poker in the rest of Europe with players getting involved in a prolifera-tion of micro-tournaments with small entry fees. This was confirmed by Mor Weizer, chief executive at Playtech, who admitted that in the Italian marketplace, his network’s offering was “trying to replicate cash games”. He added: “It’s the way Italians play poker. Cash games are still more popu-lar than tournaments.”

Noting that “a lot of players still play with sites like Full Tilt”, Weizer sug-gested that Italian poker players were still attracted to the local brands and hence the tournament offering had been designed to resemble some of the feel of cash games in terms of game turnover and speed of play.

Bearing this in mind, Weizer admits to the obvious thought that when cash games are introduced at some point either later this year or early next some cannibalisation is likely to take place. But at the same time, it is likely that cash games – and the new online casino market which is also waiting for





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regulatory clearance before opening later this year or early next – will grab more of the grey or offshore market and so should see the legal Italian mar-ket grow once again in absolute terms.

This was confirmed by analysts who pointed out that the lift being hoped for by many operators by the introduction of cash games might be less than hoped. One analyst suggested that the rise in turnover when tourna-ment poker becomes cash poker will be “muted”. “It won’t be a huge uplift,” he suggested. Nick Batram from KBC Peel Hunt, meanwhile, added that while there would be something of a positive movement, “it’s not going to be like suddenly switching the lights on”. “It will be more like turning the dimmer switch up a few notches.”




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OtherGames

Bingo

Bingo is the new kid on the block in online terms having only been first licensed in December of last year. Growth has been steady with total revenues since launch standing at €67.6m. In July, total market revenue hit €11.1m up from €10.1m in June.

Grattaevinciandsuperenalotto(WinforLife)

The online scratch and win numbers for the first seven months of 2010 show the product to be declining severely in popularity with monthly dou-ble-digit declines in 2010 culminating in a 38 percent fall in July to €2.91m. The year-to-date total is off by 19 percent in the first seven months at €36.3m. Superenalotto/Win for Life, however, has taken a small share of the online market with monthly sales in July of €1.68m. Total sales in the first seven months of the year hit €10m.







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TheGrey/IllegalMarket

Though it is hard to divine who exactly is operating in the ‘grey’ market in Italy, there are some names which have become public in recent months. London-listed Gaming VC has recently entered into a spat with provider G2, part of the Lottomatica empire, with regard to its Italian-facing opera-tions. While once having a licence under the brand name Betpro, Gaming VC recently sold the licence, but it continues to take Italian bets under its CasinoClub and Betaland brands.

Meanwhile, though an Italian language site is by no means an absolute proof that the site in question is taking bets in Italy, it can be noted that many of the leading European-facing offshore operators also have Italian language offerings. Notably, many of these operators make a feature of online casino offerings. Mor Weizer, chief executive at Playtech, refused to put a percentage against the size of the grey market in Italy, but suggested it was “quite significant”, adding that he believed that many of these operators might well consider taking licences once casino gaming was allowable. Presumably these new entrants might include leading Playtech licensee Titan which currently offers Italian-language sports-betting and poker – as well as casino – but does not appear to be a part of the Playtech Italian network.

However, anecdotal evidence would suggest that many offshore opera-tors will still be unwilling to pay the taxes that go hand-in-hand with being licensed and hence will remain on the grey side at least for the foreseeable future.







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NewEntrants

More perhaps than cash poker, it will be the introduction of online casino games in Italy which is likely to be the cause of a rush of new entrants into the market. Companies such as William Hill and 888 have stated recently that they are either in the process of or already have gained a licence for Italian operations. 888 said in late August that it felt it was “well-placed to capitalise” on its position in Italy via a joint venture with Endemol which will see it offer Big Brother and Deal or No Deal branded games to the Ital-ian market. 888 has also signed up both Bwin/Gioco Digitale and Micro-game to its online casino offering ahead of regulation. Playtech also said in late August that it had a number of current licensees eyeing up entry into Italy with a casino offering. “We are seeing a lot of interest,” said Weizer. “They are already in the licensing process. These are casino specialists look-ing to replicate what they have elsewhere. These are significant operators.” Speaking earlier in August, Jim Ryan, chief executive at PartyGaming, said the company would be looking to do a deal with an offline operator to get a jump on the competition. “We hope to marry our online capabili-ties with a land-based operator and we will hopefully get into that market before the vast majority,” he said at the time of Party’s interims results in August. In contrast, Ladbrokes announce back in May that it had ceased online operations as a result of the sale of its offline estate of shops to Cogetech. Nick Batram, analyst at KBC Peel Hunt, said the introduction of casino games would mark a step change in the Italian market. “Casino will be a transformation,” he told GamblingData. “That will be like flicking on a switch.”

But there was more caution from one Italian market operator who wished to remain anonymous. “I think Italy is somewhat misrepresented,” he said. “Now I agree, casino is significant. But from the recent past, when we opened up tournament poker, it took from our sportsbook. So I think that there is a certain level of spend. I don’t know if the market is growing. I’m not at all sure the market is expanding.”

He added that he feared that the era of market expansion was likely draw-ing to a close and that a consolidation would be taking place in the coming months and years. “I think the smaller operators will fall by the wayside,” he said. “I think you need 2,000 shops and corners. I think that is the sus-tainable level. The fear is the market might be wrapped up.”









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MainOnlineSports-BettingOperators

Lottomatica Runs the Better and Totosi brands

Sisal Runs the MatchPoint brand. Also operates the Super-enalotto and sports-betting games such as Totocalcio and Totogol. Also operates AWP machines

SNAI Sports-betting and horserace-betting provider, and ancil-lary gaming services provider

Microgame Network currently running 130 sports-betting and poker brands

Eurobet Italia Owned by Gala Coral

Intralot Secured a large number of sports-betting and horserace betting licences with Bersani and has a white-label deal with PartyGaming for online poker

Cogetech Bought the 142 Pianetta Scommese shops from Ladbro-kes in April 2010

Toto 2000 Owner of the Strike Scommese brand

Leisure & Gaming Owns the Betshop brand and is a major licensee on the Microgame network

Bwin Also owns the Gioco Digitale brand. Soon to merge with PartyGaming

Merkur Win Owned by the Gauselmann Group

GBet Gmatica’s sports-betting and poker online operation

MainPokerOperators

Microgame Network of over 130 sports-betting and poker independ-ent licensees including Betshop

PokerStars Global online poker powerhouse

Bwin/Gioco Digitale Gioco Digitale grabbed an early lead in the online poker market before falling back and being bought by Bwin

Lottomatica In the poker market with the Better and Totosi brands, owns the Boss Media poker network via its G2 online gaming software supply operation

SNAI Runs its poker operation on the Playtech network

Sisal Runs its poker operation on the Playtech network

Party Gaming Admitted it was slow to recognise the opportunity in Italy

Betclic Of the Mangas group which also runs the Expekt, Bet-at-home and Everest brands

GBet Owned by Gmatica

Gamenet Machine operator which runs a poker offering on the Playtech operation

Leonardo Service Provider A network with a number of poker and sports-betting licensees

MarketParticipants-LeadingPlayers




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AboutGamblingData The global gaming industry is changing fast. With many jurisdictions in transition between pre-and post-regulation, never has it been so important to have access to reliable data information about the market.

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GamblingData provides the facts, intelligence and analysis gaming businesses need to make the most of the opportunities in a volatile business environment.

We have a team of four dedicated business analysts researching, compil-ing and analyzing relevant gambling data points from over 150 jurisdic-tions.

We are able to provide tailored data research services specific to your company requirements and/or access to an online database with histori-cal data going back over 30 years.

Our database is updated in real time so you can be sure you are accessing the latest available research and has some market leading functionality allowing very focused intelligence gathering.







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Matthew Gipon+44(0)207 921 [email protected]




DisclaimerIn preparing this report GamblingCompliance Ltd. has made every effort to ensure the accuracy of the contents of this report. However, no representa-tion or warranty (express or implied) is given as to the accuracy or com-pleteness of the information contained in this report.

Any reader, or their associated corporate entity, that relies on any informa-tion contained in this report does so entirely at their own risk. Gambling-Compliance Ltd. and its employees do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or any decision based on it.

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