French online market not all roses

French online market not all roses

April 16, 2010.

Online gambling sites will not rake in easy winnings from a newly liberalised French gambling market, with high taxes and strict compliance rules eating into margins and a state monopoly retaining the sweetest part of the pie, according to an assessment by the Paris office of the Reuters news agency this week.

The assessment looks at what it describes as a host of offshore online gambling groups vying for a position in the newly opened market by applying for licensing, but points out that the terrain is risky because liberalisation is inadequate: online companies have been shut out of lucrative and low-risk casino games like blackjack and roulette as well as lotto.

"We won't make any money at first. But first-mover is important in this market so we're there," said Mangas Gaming vice-chairman Isabelle Parize, who described the French tax regime as "catastrophic". Companies say the sports betting tax rate, set at 8.8 percent of revenues, will erode profits.

The French regulator, ARJEL, has also put in one of the strictest compliance regimes in Europe and requires all bets to be permanently stored in order to track and fight addiction.

Reuters estimates that online gambling in France could reach Euro 1.25 billion by 2012, the UK consultancy H2 Gambling Capital told Reuters, explaining that around 50 companies are expected to apply for between one and three licences in France.

"We're missing casino games, which is a shame, since they are important to overall financial stability," said Antonio Costanzo, interim CEO of Bwin France. "Let's just say the monopoly will do fine."

Reuters advises that in 18 months the French parliament will review the law and could lower the tax rate then, as Italy did last year when it became clear that punters were not switching to legal sites because they were too expensive.

"The question remains over what role the media companies - with more money, legitimacy and market power than the gaming companies - will play," the report notes, pointing out that so far their entry has been cautious.

Martin Oelbermann at Munich-based consulting group, MECN commented: "You'd better have a good plan. You're betting against your customers. He added that he thought gambling too risky for media companies.

Another question is whether French players will switch to the legal sites and embrace gambling. In 2009, the average French adult lost Euros 171 gambling which H2 Gambling thinks will increase to Euros 192 by 2012. Reuters describes this as modest compared to the average Italian at over Euros 400 and it could take a lot to change French habits.