iGB Market Monitor: growth for Italy and Spain; UK set for growth but stress ahead

The latest iGB Market Monitor report shows new products and taxes help Italy and Spain grow and boost regulated volume. UK market also on path towards growth but stress points are emerging as UK Gambling Commission publishes latest figures.

The Gambling Commission's latest figures published today (Thursday 30 June) show that UK gross gambling yield reached £12.6bn for the 11 month period covering October 2014  to September 2015 compared with £11.2bn GGY for the April 2014-March 2015, the igaming sector recorded 29% of that total, £3.6bn. A detailed addendum will be published as part of the Market Monitor in the coming days.  

The regulated online gambling markets in Italy and Spain are predicted to continue their current growth paths as both benefit from the momentum generated by the introduction of new products, the latest issue of the iGaming Business Market Monitor reveals. 

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According to the latest figures from the Italian regulator AAMS, Italy’s igaming sector grew 21% in the first quarter, helped by continued 30%-plus gains in the casino and sports betting sectors.

Of particular influence on the Italian sports betting figures is Bet365, which entered the market in late 2014 and is already market leader on a turnover basis. In the first three months of 2016 total gross gaming revenue (GGR) from sports betting rose 41% while casino was also up 38% but the picture was mixed for poker.

The growth trend suggests that the market has been picking up speed since the first half of 2015, when GGR rose 9.5%, compared to a 16.5% growth rate in the second half and could reach total GGR level of €1bn by the end of 2016.

However, with no major football tournament in 2017 and no further changes to the tax regime or any further products to be introduced, Italy will face tougher challenges next year.

In Spain, the introduction of slots to the market in the second half of 2015 contributed to a market which grew 26% in 2015 and this continued into the first quarter, which rose 32% year-on-year, and a quarterly rise of 8% on the last quarter of 2015.

Driven as much by a 46% rise in roulette GGR, the Spanish online casino sector saw revenues in the first quarter rise 100%. Sports betting still remains the largest vertical but with the Spanish market still maturing, casino will likely take over sports betting as the main GGR generator.   

In the UK – arguably the most mature market in Europe – figures from the UK Gambling Commission for five months between November 2014 and March 2015 show that casino was worth circa 57.5% of the total revenues (a figure which includes poker) while sports betting stood at 32.6%. The Commission published its latest figures this morning, for which we will be publishing a detailed addendum in the coming days.  

The biggest question facing operators in Spain regards profitability with the tax rate set at 25% of gross profits (the highest of the GPT regimes across Europe), while advertising spend across all channels rose 40% in the first three months of the year.

Bet365’s participation in Italy and Spain show that there are lessons to be learned for any regulator looking at a new licensing regime and hoping to minimise the size of the remaining offshore-licensed market.

The rising GGR and shape of the Italian market following Bet365’s introduction in 2014 shows how a full product suite and the prospect of a more attractive tax regime (Italy moved to a 20% gross profits tax in 2015) means that the regulator can likely claim success in minimising the offshore market. It is likely Italy is now reaching the presumed 90%-plus levels of regulatory capture achieved by the UK.

In addition, the report suggests that Bet365’s market dominance both in Italy and Spain proves it is the only online gambling operator that can lay claim to true trans-European operator via an offer that has popular appeal both in previously grey markets and newly-regulated markets.

In the UK, reports from leading companies have shown growth across the market. But while the low double-digit growth likely continues into the beginning of the European Championships in mid-June, there are signs of stress emerging.

The recent financial trading updates from Gala Coral, 32Red and Paddy Power Betfair have been positive but the troubles have continued at William Hill and worries have been expressed in various quarters regarding the impact of the recent reality checks and the upcoming AML rules announced by the UK Gambling Commission in May.