The final tool in a challenging market
Compared to most of the brands that have already received a licence, Rootz stands out.
Of the first ten brands to receive a licence, seven of them were affiliated with land-based giant the Gauselmann Group. Novomatic was also connected to several of the early licensees. Throw in Kling Automaten-owned Jokerstar and retail betting giants such as Tipwin and Tipico and the list is dominated by brands that had a physical presence on the ground in Germany.
Is this a disadvantage for Rootz? On the contrary, Reussenzehn says that being an online casino specialist in a market where similar licensed businesses are lacking could represent an opportunity.
“Of course, it’s a bit different because most of the casinos licensed so far besides us have a very big past with their land-based casinos and are obviously very well known in Germany,” he says. “On the other hand, I also see it as an opportunity for us, because we offer the player a better and different gaming experience through our many years of experience in the field of online slot games and the best platform in the market, and we are now also bringing it to Germany.”
The last weapon
So why work to get a licence now? In many markets, the advantages of receiving a licence are self-evident. But Germany continues to offer a transitional regime, in which operators will not face enforcement action as long as they keep to the rules of the country’s Fourth State Treaty on Gambling.
The process to receive a licence certainly wasn’t simple.
“To be honest, it was a very long process and completely new for us,” Rootz country manager for Germany and Austria, Nico Reussenzehn, says. “The requirements of the new State Treaty are very high. The very close cooperation with our law firm in Germany and the very good exchange with the authority made the process of getting a licence much easier for us.
“My main task was to coordinate the internal processes in close cooperation with our compliance team and to find an answer or solution for all questions asked by the authority.”
Reussenzehn says the big advantage is in the ability of a licensed business to market its products.
“I would like to take this opportunity to point out how important advertising for licensed providers will be in the future,” Reussenzehn says. “This is an important tool against the black market casinos. Only this way can we draw attention to licensed products and fight the migration of players to the black market.
“Having an official licence in one of the largest online casino markets in Europe and complying with the requirements of the German Gaming Authority helps us to promote our product and signals to our customers that they are using a safe and reliable product that focuses on their protection.”
Product disadvantages
Marketing is one of the only tools that a licensed business has to fight the black market, especially given that those in the regulated sector know they face a huge disadvantage in what they can offer.
A 5.3% turnover tax on online slots has been a major challenge for the industry. Given the high-RTP nature of slots as a product, the tax rate doesn’t simply mean that operators can expect to take in less revenue from the product. Instead, they are forced to rethink how they can make the product work.
“The new taxation has a massive impact since 5.3% of all stakes in Germany have to be paid to the state,” Reussenzehn says. “In other European countries, the percentage looks similar, but it’s the percentage of revenue. Here, the actual turnover is taxed.
“The high tax burden forces us to significantly lower the RTP value of our online slots in order to continue to operate effectively our costs. This is a clear competitive disadvantage compared to the black market casinos that offer the full range of games with better RTP values.”
And, of course, the strict rules in Germany go beyond just the tax rate. Among the most notable other rules is a €1,000 deposit cap, that applies across all operators, rather than on a per-site basis.
“In addition to the high tax, the cross-provider deposit limit of €1000, the five-second rule and the betting limit of a maximum of €1 per spin altogether have a big impact on the gaming experience and the profitability.
“We are faced with the problem of having to comply with the strict requirements of the new State Treaty and at the same time having to compete with online casinos operating on the black market. They operate under completely different conditions.”