GPWA Times Magazine - Issue 17 - September 2011

Online betting in France – a taxing situation More than a year after regulation, optimism is giving way to frustration By Vin Narayanan W hen France began licensing and regulating online poker and on- line sports betting in the sum- mer of 2010, the Internet gaming industry wasn’t celebrating with wild parties on the Champs-Élysées. France’s population (excluding the five overseas regions) of 62.8 million with a median age of 39.9 (male median age is 38.4) made it an ideal potential market for online gambling. But heavy taxes, strict limits on how much money a player could win and burdensome player registration requirements had online gaming execu- tives wondering how they were going to make a profit in France. As a result, cautious optimism ruled the day. Gaming executives were going to take a shot at making money in France. And if they couldn’t, they’d try to change the leg- islation, as they had done in Italy. More than a year later, France has 2.9million active online gaming accounts. And cautious optimism has been replaced with frustration. Online sportsbooks have seen a dramatic decline in the amount of money wagered in France. Since the market opened up last summer, €741 million have been wa- gered at online sportsbooks, according to ARJEL, which regulates online gaming in France. But only €293 million have been wagered in the first half of this year – which represents a decline in wagers of nearly 35 percent. Shortly after the ARJEL data came out, Chilipoker founder and CEO Alexandre Dreyfus published his estimates on how the overall wagers translated into revenue. And according to his calculations, €293 million represents gross gaming revenue of €60 million. Gross gaming revenue represents the money companies will be taxed on – and the pool of money from which they have to pay out bonuses. The sharp six-month decline in wagers can’t be attributed solely to lack of World Cup betting this year. World Cup wager- ing accounted for only 16 percent of the money wagered on soccer. And as a result, alarm bells are being sounded. “Investors are starting to ask questions,” said Antonio Costanzo, the Director of Sport Integrity and Regulation at party. bwin at a June online gambling confer- ence hosted by Groupement des Editeurs de Services en Ligne (GESTE). “Business plans do not look good. . . . This [decrease] is unprecedented in Europe,” added Costanzo, according to ZDnet, which first reported his comments. “Taxation is central to the problem.” France charges a 7.5 percent tax on every sports wager. The story is the same for the online poker industry. Despite attracting sizable audiences €19m €129m €45m €423m €187m €10m €27m Handball Other sports Football (Soccer) Tennis Basketball Volleyball Rugby SOURCE: ARJEL 54 Online betting in France – a taxing situation