A3878 PDF
A3878 PDF
A3878 PDF
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COMMISSION
OF THE EUROPEAN
COMMUNITIES
This document has been prepared for use within the Commission. It does not
necessarily represent the Commission's official position.
ISBN 92-826-2899-X
Printed in Belgium
75".'/', {/ 7 7
II ~.til./ ,J JI
VOLUME I
JUNE 1991
CONTENTS
Page
2
I. Introduction
1. The Importance of the Market 2
Market Characteristics 3
The Structure of the Report 5
II. Methodology 6
EXECUTIVE SUMMARY
JUNE 1291
2
I. INTRODUCTION
The size of the betting, gaming and lottery market in the European Community,
measured by total stakes (that is, turnover) was approximately 46,554 million ECU in
1989.
If the industry was ranked amongst the major European Community industrial
sectors, it would figure above the Computer and Qffice Equipment industry
2. Market Characteristics
series of highly differentiated Member State markets. Each of these markets reflects
both national tastes and preferences and the legislative regimes that have evolved to
control the sector. Accordingly, while it is possible to view gambling and gaming on
lines. In every Member State· legitimate concerns about the control of criminal
activity and other 'public interests' are voiced by regulators and operators alike. This
indicates the often close relationships which have evolved between those overseeing
The sector as a whole is characterised by very strong vested interests. These interests
revolve around a clear wish to protect and exploit systems that have evolved
argued that the industry plays a valuable social role both as a source of finance to
the national exchequer and as a way of legally satisfying latent demand for gambling
Throughout the study it was clear that the gaming operators, be they private
occurring in the sector. This change has been driven by an apparent increase in
systems and the increase in consumer expectations encouraged by greater travel and a
broadening of consumer experience. It is clear that these changes will have an impact
which will contain elements which can be perceived as both positive and negative
Perhaps the most striking element that emerged in virtually every Member State was
the clear view held by operators that they could develop and grow betting and
gaming as a private sector activity and the view generally expressed by the regulators
that demand for gambling and gaming should be controlled or circumscribed by law
in some way.
In certain instances, the real effect of this legislative control has been to exclude all
non-national competition from the home market. Examples of this arise throughout
the Community in the casino sector and in certain Member States in horse race
betting and lotteries. There was an equally wide disparity of views on the desirability
of different types of betting and gaming activity. The major distinction that is drawn
is between games of skill and games of chance. Games of chance are generally more
distinction between the two is highly questionable. Distinctions may also be drawn
between hard and soft gambling, with lotteries or their equivalent being treated as
soft gambling and therefore open to wide promotion and broader distribution. Hard
Member States, there was a very strong consensus on the behalf of both operators
and regulators alike that the primary regulation of gambling and gaming should occur
at a national level. This reflects concerns over national taxes and preferences,
perceived social norms and the vested interests of the regulators and operators
themselves, who frequently enjoy guaranteed fiscal revenues and national monopolies
respectively. Amongst the multinational gaming operators, a wish was expressed for
equality of access to national markets rather thaan a single set of Europe-wide rules.
5
• casinos
• gaming machines
executive summary.
6
II. METHODOLOGY
Four separate sources of information were called upon in the preparation of the
study:
commentary;
Of these four categories of information, the third - publicly available market data -
was significantly lacking or unreliable. It was therefore necessary to rely for much of
the data collected on the goodwill and co-operation of all those who were
interviewed during the course of the study. Much of the data that was received was
indicative rather than definitive, which is reflected in both the qualitative and
quantitative analyses. The contents of this report have been prepared on a 'best
endeavours' basis.
The work was guided by the principle that any submission from whatever source
would be welcomed and taken into account in the preparation of the report.
1. Introduction
For the purposes of this study, we have grouped the industry into five market
sectors:
The football bets which have the characteristic of high win-low stake ratios,
(football pools in the United Kingdom and toto throughout the rest of the
European Community) have been statistically shown by operators to have an
element of skill. With the exception of the United Kingdom, however, these
football bets are run ultimately by the same organisations within each Mem-
ber State which run the lotteries and the lotto. They have, therefore, been
grouped with these two other products.
8
2. Market Size
2.1. Total Market
It was difficult to define the market size of betting, gaming and lottery activ-
ities throughout the Member States. Turnover figures were extremely diffi-
cult to obtain for the casino industry and the gaming machine industry.
The casino operators in particular were reluctant to release unpublished fig-
ures concerning the size of their market. Turnover figures have hence been
estimated on the basis of taxation receipts. Many of the taxation figures are
based on gross gaming wins in favour of the casino, not total stakes
wagered.
Gaming machines are taxed as individual units with no relationship between
tax level and turnover. It is normal for the size of the tax to relate to the size
of the maximum payout on each machine.
In the market sector classified as 'others', most of the activities were
insignificant in relation to the rest of the market. The exception was bingo.
The estimated total market size for betting, gaming and lottery activity within
the Member States amounts to 46,554 million ECU staked by players in
1989. This figure excludes marginal games.
Diagram 1 below shows the breakdown of the market by product sector.
Gaming Machines
11,17%
5200 M ECL ,,,,...,,,~,,, Lottery, Lotto/Toto
36,04%
16779 M ECU
Casinos
7753 M ECL
16,65%
Lottery and Lotto/Toto products and horse race and event betting account for
the majority of the market. The size of the casino market in particular, is
noteworthy as the number of players is limited. In Germany, France and the
United Kingdom the use of gaming machines in casinos makes a substantial
contribution to turnover.
The figures above do not include illegal gambling activity. With the exception.
of the parallel Totocalcio in Italy which it is estimated, turns over annually at
least 1. 7 million ECU , illegal gambling is insignificant in relation to the
market in total.
10
- Lotto where the player picks a number from a card of numbers ranging
from 0-45 or 49
- A footba II bet
The dominant lottery product within the Community is the lotto, which ac-
counts for 46.7o/o of all stakes. Lottery is the next largest product with 25.4o/o
closely followed by Toto with 22.3%. The instant lottery, a relatively new
phenomenon, accounts for 5.6o/o of the turnover.
INSTANT
946 M ECU
5,64o/o
TOTO
3739 M ECU
22,28o/o
LOTTO
7840 M ECU
46,72%
4253 M ECU
25,36o/o
11
The lottery, lotto and toto market is continually evolving. The lottery is a more
traditional product and its percentage of the total market share is likely to be
further eroded in favour of the lotto. Likewise the toto is in decline in many
countries. In Italy, however, it is the most popular game. The United King-
dom football pools is second to the Totocalcio in Italy as the largest football
bet within the Community.
The national breakdown of the national lottery, lotto and toto markets show
that the largest turnover is in Germany, which account for 28% of the total
market. This is followed by Spain with 25.3%. France is the third largest
market accounting for 15.9o/o of all stakes wagered.
BELGIUM GREECE
621 M ECU
751 M ECU
3,76%
4,55%
U.K.
974 M ECU
GERMANY
4690 M ECU 5,90o/o
28,41%
ITALY
1821 M ECU
11,03%
OTHERS
752 M ECU FRANCE
4,56% 2662 M ECU
16,12%
SPAIN
4238 M ECU
25,67%
Horse race betting is the second largest market segment accounting for
31% of all stakes wagered within the betting, gaming and lottery market of
the European Community.
Diagram 4 below clearly shows that horse race betting is most popular in the
United Kingdom and France. These two countries account for 85o/o of the to-
tal market.
BELGIUM OTHERS
IRELAND 381 M ECU 320 M ECU
407 M ECU 2,20o/o
ITALY
444 M ECU 2,79% - - -
3,05% -----A.~
GERMANY
516 M ECU
3,54%
U.K.
FRANCE 8042 M ECU
4456 M ECU 55,21%
30,59%
13
OTHERS
1011 MECU
13,04%
FRANCE
2136 M ECU
27,55%
U.K.
2143 M ECU
27,64%
GERMANY
2463 M ECU
31,77%
The industry in the United Kingdom and France is organised through private
enterprises. In Germany, the market is mixed with some Lander permitting
private enterprise and some insisting on state operators only.
14
GERMANY
1586 M ECU
30,5%
OTHERS
669 M ECU
12,87o/o
SPAIN
1945 M ECU
37,40%
U.K.
952 M ECU
42,20%
SPAIN
1304 M ECU
57,80%
Diagram 7 above shows that Spain is the slightly larger market with 1,304
million ECUs staked in 1989 compared to the United Kingdom with 952 mil-
lion ECUs staked. Portugal has organised private-enterprise operations run-
ning bingo although the size of the market is insignificant.
16
Throughout the Member States, betting, gaming and lotteries are illegal, ex-
cept where specific legislative exemptions provide otherwise. In general,
gambling is not considered to be in the public interest, however, it is recog-
nised that a level of natural demand exists and, as a result, legislation has
evolved in each of the Member States to allow betting, gaming and lottery
activities.
The motivations for legislation vary from market sector to market sector. The
lotto, lottery and toto market however, is essentially a vehicle for generating
state revenue.
The main motivations for the regulation of casinos is either to control illegal·
activity or to act as a method of promoting tourism. The latter argument is
not supported by the players who visit casinos. Invariably these are predomi-
nantly local nationals.
For hose race betting, regulations aim to eliminate criminal activity and sup-
port horse breeding.
The principle of acting to protect the public from themselves is often con-
tradicted by the active promotion of state-run games, i.e. lotteries, lottos and,
with the exception of the United Kingdom, football bets. All eleven of the
Member States with a national lottery or lotto actively promote the product,
encouraging consumers to play. Without exception the eleven countries
have televised draws. The use of television and telecommunication tech-
17
4. Advertising
Advertising takes many shapes and forms from posters, point of sale
material, window and car stickers and give aways (all of which are termed as
below-the-line advertising) to radio and television advertising (which is
termed above-the-line advertising).
National Lotteries and Lotto throughout the Member States are drawn live
on television during prime time viewing. This is a major enducement for the
consumer to play again. The live draws bring animation to the product.
Television companies often give this time free and other advertisers either
sponsor the period or take prime advertising slots either side of the draw
when the television has a large captive audience.
Other more hard forms of gambling and gaming are treated separately
from Member State to Member State. For example, Horse Race betting is
marketed on French television. Such activity is prohibited in the United
Kingdom, the other large Horse Race betting market. Casino's are allowed to
advertise in Holland, France, Spain, Italy and Portugal but not in the United
Kingdom.
18
Once again it could be envisaged that citizens in the United Kingdom will be
receiving advertising campaigns for foreign betting, gaming and lottery
products while national operators are prohibited from advertising.
5. Cross-Border Betting
5.1. Lotteries
The state-run lotteries and Lotto and Toto organisations do not wish to
encourage cross-border betting. If it were possible to enforce national
legislation strictly, there would be no cross-border betting. Cross-border
betting however does exist. The activity is likely to grow as a result of
improvements in audio-visual telecommunications, the breakdown of fiscal
barriers and the greater movement of people between Member States.
The United Kingdom does not have a national lottery and is regarded by the
agents as a market of immense opportunity.
The big prizes of the German Klassenlotterie are very attractive to con-
sumers who normally play on the smaller national lotteries which have
smaller first prizes. In this regard, diagram 8 shows the vulnerability of Den-
mark, Belgium and the Netherlands.
Diagram 8. Klassen lotteries' principle areas of promotional activity for cross·border betting.
- 'Q-
:.J. / -
b."-.-
,-t..4flo
-b. b.
c::u;:::?-A ••
20
The current market situation is that United Kingdom bookmakers, which are
private enterprises, have established operations in Belgium and the Nether-
lands. They have tried to enter the German market and only one company,
has succeeded in gaining a licence in Rheinland-Pfalz.
22
[]
m 0 The UK bookmakers operations
8 The PMU operations
Televised racing from England is already broadcast into Belgium and the
Netherlands and bets are taken in Belgium and the Netherlands on English
racing. Bets are taken in Germany on French racing, and bets are taken in
England on French, Irish and English races. It is technically feasible for an off-
track betting shop to receive racing from anywhere in Europe.
Credit bookmaking does not involve cash transactions at the time of betting.
Bets are placed over the telephone by players watching the race on a televi-
sion set elsewhere.
This part of the study deals only with large scale lottery operations. Local
lotteries have not been included in this section.
1. The Games
1.1. Overview
The lottery is one of the oldest type of games of chance. In some European
countries the origins of lotteries date back some two or three centuries.
Toto, a football pool' bet, has been included in this report as it is organisa-
tionally closely linked to the Lotto. In six of the twelve Member States both
games are operated by the same organisation, they have the same
distribution system and are subject to similar rules concerning payback rate,
gambling tax and the distribution of revenues.
25
The oldest type of lottery is the traditional ticket lottery where each ticket
bears a number. The winning numbers are determined by draws. It is the
simplest form of lottery. When the player buys a ticket he is handed a piece
of paper with a number printed on it. Whoever presents a ticket with a
winning number receives a prize.
Although the games vary by country and are offered under various names
(State Lottery, National Lottery etc.) the basic principle of the ticket lottery
remains the same.
One variation of the ticket lottery is the so-called Class Lottery. It is played in
Denmark, the Netherlands and in Germany. The Class Lottery is a ticket lot-
tery which takes place over a period of several months. Tickets are
purchased for one whole lottery and take part in all draws. Each lottery
consists of several 'classes' which are sets of several draws. The German
Class Lotteries, for example, last for six months and comprise six classes
with four draws each. Therefore, draws take place every week. The prizes
increase within one lottery from draw to draw and from class to class leading
to the 'main class' in the last month of the lottery.
The Lotto is by far the most popular type of lottery game in the European
Community and is played in all European Community Member States with
the exception of Greece and the UK. It is a number lottery where the player
selects six or seven numbers usually out of 45 or 49 options. Draws take
place every week, or in some countries, twice a week.
Although the chances of winning in the Lotto are considerably lower than in
the ticket or class lottery, it is mainly the low stake (0,5 to 1 ECU for one set
of numbers) and the fact that the player can select the numbers that make
this game popular. In many countries the draws are conducted live on
television.
Instant lotteries are the latest type of lottery played in five of the Member
States. Two Member States, the Netherlands and Greece, plan the introduc-
tion of an instant lottery. There are two main types of instant lottery. The
26
scratch lottery, where a part of the ticket has to be scratched off revealing the
prize, is the most common type. The second type of instant lottery has
tickets that are pieces of paper folded up which have to be torn open to
show the prize printed on the inside.
Where allowed, instant lotteries are very successful. The distribution of the
tickets is simple since no validation equipment is needed and only the minor
prizes are paid out by the distributor.
The instant lottery is a fast game. The player knows immediately if he has
won and how much the prize is. This fact is also the main reason why some
Member States have been reluctant to allow this type of lottery. The argu-
ment is that players are tempted to re-invest their winnings into new tickets
after they have collected a prize leading to an addiction to the game.
Private lotteries can take any form of lottery that a private operator is permit-
ted to organise. In practise these comprise all types of lotteries that are not
being operated by the state or a state owned company.
The Toto is a sport bet on the result of soccer games or other sporting
events. There are two types of Toto played in the European Community: the
most common is a bet on the results of a certain number of soccer games
(usually 12 to 15 games). The player has to predict the outcome by either
betting on a tie, a home win or a visiting team win. The other type of Toto
resembles the Lotto: out of a selection of about 40 games players have to
predict 5 or 6 games that will end with a tie.
For the purpose of the study the United Kingdom football pools have been
included under the Toto market sector even though it is a private operation.
27
Unlike the lotteries and the Lotto the Toto is to some extent a· skill game. An
understanding of the sport and the teams involved increases the chances of
winning.
In most of Europe lotteries have been played in one form or another for cen-
turies. In some countries, in the absence of specific legislation, the
sovereigns either established their own lottery to control this activity and tol-
erated small (mostly illegal) private lotteries which were not regulated before
the mid-19th century.
The oldest state lottery is the Dutch 'Staatsloterij' which dates back to 1750.
Only in 1905 did the Netherlands first legislate on lotterie$, when private lot-
teries were introduced. Spain put lotteries under royal supervision in 1763
and started the first national lottery in 1893. In Portugal, the first public lotter-
ies were organised in 1783 but only in 1886 was the first lottery act issued.
In countries like Belgium, Luxembourg, France, Germany and Italy private lot-
teries were operated long before the national lotteries were formed. These
countries had all passed lottery laws in the 19th century that allowed for the
organising of private lotteries. France introduced its national lottery as late as
1978. Ireland is the Member State with the youngest national lottery. It was
formed in 1987. Before that date only private, non-national lotteries had been
allowed.
In most Member States, the main reason for introducing Toto was to
establish a source of funding for the promotion of sports and public health. In
six Member States the organisation of this game is linked to sporting associ..
ations. In the Netherlands, for example, the sports clubs have had until re-
28
cently the exclusive right to market Toto tickets. In Italy, the popular Totocal-
cio is operated by the Italian Olympic Committee. One of the German lottery
companies is owned by three sporting associations.
Like the other games of chance lotteries are the product of the desire to
gamble which is inherent in human nature. For centuries states have
recognised gambling as a social phenomenon that is to be strictly controlled.
Having sheer luck decide over winner and losers was deemed immoral since
it led to the undesirable result that money was taken away from many to be
given to a few while the organiser of the game retained a profit.
Furthermore, this system was viewed as enticing fraud ·and attracting
criminals. Consequently, the states' first reaction to gambling was a general
prohibition of games of chance including lotteries.
Prohibition, however, did not prove effective to curb all gambling activities
some of which had continued undercover. Most states then realised that py
providing for certain legal games illegal activities could be reduced. This end
was achieved by legalising certain games under strict state control. The state
was considered the only trustworthy operator of a game that was generally
viewed as immoral. In order to make lotteries acceptable and "less immoral"
the revenues of the games were earmarked for public and charitable
purposes. The control of the use of the funds was best done directly by the
state.
The need for government control over the lottery operations and over the
distribution of the funds generated was the driving forces for the Member
States to legislate on lotteries. They have done so throughout the EC, yet
with the emphasis on different aspects.
Belgium provides for the authorisation of lotteries if their operation lies in the
"public interest". Being of public interest means that the lotteries' revenues
are used for philanthropic or charitable purposes.
Until 1978 France allowed only local lotteries of a limited size. The National
Lottery was introduced to satisfy the public demand for a nation-wide game.
In addition, the State's motive was to raise money.
Lotteries in Greece are pure fund raising mechanisms. They are run
exclusively by the state and the proceeds go directly into the national
budget.
Only small and local lotteries were allowed in Ireland until recently. The
National Lottery was legislated for in 1987 with the explicit goal of raising
money for the state.
Operating lotteries in Italy has always been the exclusive right of the state in
order to raise money. Italy is one of the few countries in the EC where
legalising games of chance has not proved successful in curbing large scale
illegal lottery operations.
Spain originally legislated for lotteries for social reasons such as protecting
players from unscrupulous operators and to stop illegal activities. Today,
lotteries are considered another means of raising funds for the state.
The UK legislation does not provide for lotteries. The legislator has taken the
view that only those forms of gaming and gambling should be permitted that
are inherent in the culture of the UK.
31
Although each Member State was guided by its own national motivations
when legislating for lotteries, a common philosophy can be detected
underlying the laws on lotteries in these countries. The motives behind the
introduction of specific games will be discussed in a later section.
Throughout the EC two main motives can be found for Member States to
legislate on lotteries: (a) the protection of the players and (b) the motive to
raise money and control its distribution.
The protection motive derives from the need to channel the human desire to
gamble by offering safe and legal alternatives to activities which would
otherwise be forced undercover. Government control of the lottery
operations is viewed as a guarantee for the proper functioning of the lottery
and a protection of the players from unsuited operators.
The states' control over the distribution of the lottery revenues derives from
the assumption that lotteries should not be used to make profits. The
revenues generated by the lotteries should be used for purposes that benefit
the public. Therefore many Member States have enacted legislation that
provides for the allocation of funds to charitable and other welfare purposes.
Some Member States provide for the revenues to accrue to the general
budget. These states are more concerned with the fund raising aspects of
lotteries than with the distribution of the monies raised.
The principle underlying the national laws of the Member States on lotteries
can be summarised as follows:
Table 1 below shows the 1989 tax revenues from lotteries and Toto by
Member State.
Table 1
Tax Revenues by Member State
In Belgium, Ireland and Luxemburg the national lotteries are exempt from
taxes.
The total figure of about 3 billion ECU is only an approximation. The financial
benefit which the states derive from lotteries and Toto can be expected to
be considerably higher.
Firstly, in most countries the lottery revenues are used for charitable and
public welfare purposes. In the absence of lotteries these expenditures
would sometimes have to be born by the state. Secondly, some lottery
33
Having looked at the legislation on lotteries in the Member States the overall
picture is quite uniform: with the only exception of the UK all Member States
have enacted legislation that provides for the authorisation of lotteries. In the
choice of lottery games, however, Member States have pursued quite
different approaches.
In general, pressure for introducing games comes from two sides: from the
market (domestic as well as foreign) and from within the national
administrations and/or the government.
The pressures from within the national administrations are in many cases
caused directly from market pressures which are just being passed on.
Sometimes, however, it is within the government that the initiative for the
setting up of a new game is taken. This was the case in Ireland in 1986.
The table below gives an overview of the lotteries and the Toto operated in
the Member States of the European Community.
34
Table 2
Lotteries and Toto available by Member State
Denmark
• • • t/
France • • • t/
.,
Germany
• • • •
Greece • 0
• -
Ireland
• • t/
Italy • • • t/
Luxemburg • • • • t/
Netherlands • 0
• • t/
Portugal
• • • -
Spain • • • t/
UK • t/
With the exception of the United Kingdom, where national lotteries are for-
bidden, all Member States allow and operate state-run national lotteries. The
United Kingdom only permits local private lotteries.
Belgium decided in the early 1960's to revamp its national lottery which
developed out of the former Colonial Lottery. Since then, the National
Lottery has introduced the Lotto and more recently a variety of instant lottery
games. It is interesting to note that no Toto is played in Belgium making it
the only EC Member State on the continent that does not offer this game.
Until the early 1960's Littlewoods organised a football pool in Belgium but
closed their operation due to the lack of interest of the players and the
success of the National Lottery. The National Lottery then tried to revive the
Toto in the early 1980's with limited success. After a few years the game
was again discontinued.
Denmark is the perfect example of a state where the regulators have yielded
to market pressures when introducing the Lotto. While the Toto has been in
operation since 1975 it was not until 1989 that Denmark decided to set up a
Lotto of its own. Players had for years participated in the Lotto of
neighbouring Germany depriving Denmark of valuable potential revenues.
When France established its Lotto operation 'France Loto' in 1978 it did so
to satisfy a demand that had not been yet been met on the domestic market.
In addition there was the motivation to raise money for the treasury.
Germany can be viewed as the pioneer of the modern lottery games. Its
Lotto operation is the oldest in the EC and has served as a model for the
Lotto in other countries. Due to the big domestic market Germany is the EC
country the least susceptible to market pressures from abroad. The main
goal of the introduction of new games is to ensure a stable share of the
German gambling market.
Due to its geographic position Greece has not felt any pressure from abroad
to introduce new games. The planned introduction of an instant lottery is
intended to re-stimulate growth for the national lottery.
The recent establishment of the Irish National Lottery in 1986 was motivated
by the perceived need to raise money in the context of severe governmental
budgetary deficits. The money raised is channelled to the benefit of the Irish
community without the need for recourse. to taxation or other compulsory
revenue raising measures.
For a small country like Luxemburg it was virtually impossible to stop the
osmotic influx of foreign (mainly German) games. Rather than introducing a
similar game themselves the government turned around and authorised two
German Lotto companies to extend their game to the whole territory of
Luxemburg.
While the State Lottery has existed in the Netherlands for over two hundred
years Toto and Lotto were introduced only in 1961 and 1974. By introducing
these games Holland followed the example of Germany where Toto and
Lotto had been very successful since several years. The planned introduction
of an instant lottery game will be an attempt by the Dutch Lotto/Toto
company to win back market shares now held by numerous illegal Lotto
operations.
Spain's National Lottery has a long tradition and was the only lottery allowed
until the country's return to democracy. Toto was played before the opening
up towards the rest of Europe brought the introduction a modern Lotto in
Spain. Due to the popularity of lotteries and the size of the market the
introduction of new games is mainly seen by the state from the fiscal point
of view.
A national lottery has not yet been introduced to the UK. The regulators have
so far not seen a need to legislate for these types of games as they are not
viewed as being "inherent in the British culture". Football pools have
supplied the market up to now with the Toto and no further demand for
lotteries seems to have existed. However, foreign lotteries have repeatedly
in the past years tried to market tickets in the UK by way of mailing
campaigns. HM Customs & Excise has confiscated substantial numbers of
envelopes posted into the UK by German agents.
Table 3 below shows how much of the turnover the lottery companies in the
Member States pay back in winnings to the players.
Table 3
Payback by game and Member State
Belgium 50o/o
Denmark State Lottery 62o/o
Lotto/Toto 41%
France 50%
Germany 50%
Greece Lotteries 65%, 53o/o
Toto 45%
Ireland 49o/o
Italy Lotteries 33%
Lotto/Toto 40%
Luxemburg National Lottery 57o/o
Netherlands State Lottery 70o/o
Lotto/Toto 50%
Portugal Lotteries 54-65%
Lotto/Toto 50o/o
Spain 55%
UK Toto 29%
Countries with old State Lotteries such as Denmark, Greece, Italy, the
Netherlands and Portugal apply different payback rates for the state lottery
and the Lotto. Notably in Denmark and the Netherlands, the payback rate of
the State Lottery is 20 percentage points higher than the one of the Lotto.
38
Table 4 below shows the distribution of the revenues of lotteries and the
Toto among the beneficiaries and the state. Column 5 ("Tax") contains the
figures for the gambling tax levied in some Member States. The last column
lists the rates for the withholding tax levied on the winnings. Since it is
deducted from the winnings the tax does not affect the breakdown shown
below. The withholding tax is a further revenue for the state.
Belgium 33o/o - - -
Denmark State Lottery - 23o/o - 15o/o
Lottoffoto 21 o/o - 18o/o 15o/o
France Lotto 2,5o/o 22% 3,7% 5- 30o/o
Toto 20% - 3, 7o/o 5- 30o/o
Germany 25o/o - 16,7o/o -
Greece Lotteries - 25o/o - 1Oo/o
Toto 18,7o/o 36,3o/o - 1Oo/o
Ireland 31, 7o/o - - -
Italy Nat' I Lottery - 40o/o - 25o/o
Lottoffoto - 33% - 25o/o
Luxemburg Nat' I Lottery 30o/o - - -
Netherlands State Lottery - 23o/o - 25o/o *
Lottoffoto 40o/o - - 25o/o *
Portugal Lottery 30o/o - - 25o/o
Lottoffoto 40% - - 25o/o
Spain - 33o/o - -
UK Toto 3o/o * * - 42,5 -
* on winnings over ECU 430
* * company profit
39
The specified revenues are significant accounting for over 1. 7 billion Ecu.
Table 4a
.,..
1989 Tcax Revenues aItocated~or spec11c purposes
Toto 20 48,406
Italy_
Spain
U.K. 29,229
1,798,282
The reader will note that only four countries (Denmark, Germany, Italy and
the UK) levy a tax on lotteries or Toto. All other Member States either receive
a share of the revenues or don't receive funds at all. The reason lies in the
different fiscal treatment of lotteries in the Member States.
40
There are four different ways in which Member States have regulated the
distribution of funds.
Once the winnings have been paid out and the costs deducted the net
revenues are paid into the general budget. Furthermore, it is up to the
government to decide on the use of the funds collected. No additional tax is
levied since the lottery operation itself already functions as a fund raising
mechanism for the state. This set-up can be found in countries where
lotteries are run directly by the state through its administration. This is the
case in Denmark (Royal Class Lottery)·, the Netherlands (State Lottery), Italy
(national lotteries), Greece and Spain.
3. Revenues belong to the treasury but are earmarked for social, cultural and
sports purposes.
In this ca~e the state receives the gaming profit and to varying degrees is
obliged by law to use it for certain social, cultural and sports purposes. This
system can be found in Belgium, Ireland, Luxembourg, the Netherlands
(Lotto/Toto) and Portugal.
4. Revenues are paid to the social purposes-tax yields for the state.
All four approaches described above leave the Member States with
considerable funds to fill their treasuries. Assuming that the states would
41
have to finance the activities of the beneficiaries if they were not funded by
the lotteries and the Toto the importance of the lotteries and the Toto for the
state as fund raising mechanism is even more visible.
Table 5 below shows the different treatment to which the two German
lottery companies also operating in Luxembourg are subjected in these two
countries.
Table 5
Taxation of the German Lotto/Toto companies
Operating in Operating in
German_y Luxembourg
Benefits to Benefits to
Germany Luxembourg
Revenue to
beneficiaries 25o/o 16o/o 9%
Only the turnover achieved in Luxembourg is taken as the base for the
calculation of the tax and the 9o/o levy to be paid in Luxembourg. Conversely,
the Luxembourg turnover is not taxed in Germany.
state can ensure the integrity necessary for the operation of a national
lottery.
While probably a valid argument at times when many lottery laws were
drafted, private operatorship as such does not compromise integrity provided
the state maintains effective control of the operation. Throughout the study
we have seen no evidence that privately run lotteries could not be controlled
as effectively as state operations.
Germany and Holland can be cited as examples for having consistent legal
regimes as regards the question of private operators. In Germany, private
operators can obtain a license provided that they meet the legal
requirements. The levels of payback rate, gambling tax and revenues that
have to be distributed are equal for private lotteries and for state lottery
companies. Similarly, uniform rules apply in the Netherlands to all lottery
activities regardless of the person operating them. The only exception is the
State Lottery which operates under a special set of rules.
There exists a valid argument for a single operator of a state lottery. The
motivation to play is a low stake high win ratio. The lottery must generate
enough income to ensure a big prize is achievable. Each lottery needs a
critical mass of revenue if it is to succeed.
The sections above dealt with the views and motives of the regulatory
bodies in the Member States. Their main concern is to keep a firm grip on
the lottery market in order to curb illegal activities and secure the income for
the treasury. In their decision making, however, the regulators are not
entirely at liberty but have to take into account the interests of other parties
involved in the market.
Organisers
The lottery companies manage the operation of the games. They issue the
lottery tickets, conduct the draws, receive the stakes and pay out the
winnings. (Some smaller prizes are settled directly by the agents). The
organisers' main interest lies in maintaining or increasing market share. The
43
The revenue from the state run games become incorporated into national
budgetary equations. Targets are set for revenue from gaming and national
organisers find themselves promoting and marketing lotteries despite the
principle that such games are viewed as immoral.
Belgium 1,380
Spain 47,241
France 1,011
Luxemburg 413
Portugal 4,450
EC Total 54,495
Agents
44
Agents
Lottery agents market lottery tickets and in most countries are independent
from the lottery companies. They are paid a commission for providing their
services. Agents maintain the direct contact with the players by selling the
.tickets and paying out the small winnings.
Agents are predominantly small shop keepers and kiosk owners. The Lotto is
not a prime source of revenue for them. There is a second, higher level of
collectors who organise groups of agents. This activity is generally their
primary source of income. In the UK Toto agents are exclusively door to door
collectors. The commission they receive covers their cost of handling the
tickets.
The legal relationship between operator, agent and player can be described
taking the German Lotto as example. The Lotto-Toto agents sell and collect
lottery tickets in the name of and on behalf of the lottery companies. In the
regulations governing Lotto-Toto, which every player implicitely accepts
when participating, the Lotto-Toto companies have excluded their liability for
any fault of the agent when collecting the tickets and forwarding them to the
company. The agent is only liable to the player in the case of intentional
fraud. In all other cases the risk associated with sending the ticket to the
Lotto-Toto company rests entirely with the player.
The situation is different in the case of the class lottery agents. Their main
activity-for many the only one-is the marketing of class lottery tickets. The
commission they receive from the lottery company is their only income. This
is the reason why some of them pursue their marketing quite aggressively.
It is worth noting that the majority of German class lottery agents do not sell
tickets abroad. The contracts between the German class lotteries and the
agents stipulate that the agents may only market lottery tickets in the
participating Lander and in those countries where it is legal to market foreign
lottery tickets.
Consumers
The players are the customers. They generally participate in their national
lotteries. The player's main interest is to participate in an attractive game. A
game's attractiv~ness is reflected in the size of the prizes, the chances to
win and in the fact that no or only little tax is levied on the winnings. Where a
45
foreign lottery seems more attractive than a domestic game some players
will participate either by ordering the tickets by mail or by crossing the border
to buy them at an agent's abroad. Mail order is particularly viable in class
lotteries as deadlines for accepting tickets can be many weeks in the future.
The present legal regimes in force throughout the EC enable the Member
States effectively to take control of lotteries and Toto at the following levels:
The governments regulate every aspect from how the games are played to
who gets the money for purposes already mentioned.
The state directly runs the lottery through its administration. The operating
entity is part of a Ministry, usually the Ministry of Finance. This model can be
found in Belgium, Greece, Italy (only for lotteries), Spain and partly in
Germany.
The Dutch State Lottery is directly operated by the state. Turnover has
stagnated over the past few years. The distribution system shrank due to the
fact that all the independent vendors resigned. In view of this situation the
Dutch government now intends to restructure the State Lottery as an
independent company. Furthermore, the Dutch post offices sell state lottery
tickets thus enlarging the distribution network considerably.
47
Although the state has given up the control of the direct operation of the
lottery the company still remains closely linked to one or more ministries and
dependent on policy decisions taken by the government.
The argument of control can only partly justify this way of operating. As we
will see below, sufficient control can still be maintained when using the
private company model. The advantage can be found in the development of
a business culture. In this set up the lottery activity is the sole activity.
Decisions are quicker and policies more coherent.
This model is the only possible legal construction that enables a private
operator to participate in or run a lottery operation. The government still
retains sufficient control by checking that the conditions under which the
license has been granted are fulfilled.
49
4.1. Turnover
Although most turnover figures for the lotteries and the Toto in the European
Community Member States are complete it is difficult to generalise
regarding the global European Community market. In some countries, like
Italy and Spain, the official figures do not reflect the real size of the market. In
Italy, illegal activities have not been taken into consideration.
The table below lists the turnovers achieved in the Member States for the
various games. Private lotteries have not been included.
Table 3
1989 Turnover of state lotteries, Lotto and Toto by Member State
(in .000 ECU) State Lottery Instant Lotto Toto Total o/o
Lottery
Belgium - 205 182 415 833 - 621 015 3.7o/o
Denmark 35 655 - 76 032 173 307 284 994 1.7%
France - 512 538 1 907 780 242 032 2 662 350 15.9%
Germany 594 160 224 451 3 697 977 173 106 4 689 694 28.0%
Greece 453 159 - - 298 644 751 803 4.5%
Ireland - - 180 737 - 180 737 1.1o/o
Italy n/a - 165 511 1 655 114 1 820 625 10.9o/o
Luxembourg 6 524 3 458 17 755 733 28 470 0.2 o/o
Netherlands 17 987 - 65 824 2 955 86 766 0.5%
Portugal 162 122 - 241 620 36 406 440 148 2.6%
Spain 2 984 380 - 1 070 827 182 695 4 237 902 25.3o/o
UK - - - 974 303 974 303 5.8%
TOTAL 4 253 987 945 629 7 839 896 3 739 295 16 778 807 100.0%
o/o 25.4o/o 5.6% 46.7o/o 22.3% 100.0%
4.2. Trends
The trends within the lottery market vary from country to country depending
on the way each country has historically organised and controlled lotteries as
well as on how long the market has been in operation.
In countries with a long lottery tradition and a well developed market the
lottery companies must constantly expand their line of gaming products, i.e.
50
introduce new games to maintain present market size. This is the case, for
example, in Germany where the market is well served in terms of operators
as well as games. Further expansion can only be achieved through the
development of new products.
Other countries which have only recently introduced national lotteries are
still in the phase of expanding in their national markets. Ireland, for example,
set up a national lottery to generate revenues for the state and to profit from
a market that had previously only been served by non-national lotteries.
Similarly, France introduced Lotto when it legislated for a national lottery in
1978 and expanded into Toto in 1985.
4.3. Expansion
The traditional state and class lotteries are well established in their national
markets. In countries where the state operates only one natio.nal game there
seems to be little scope for further expansion. In Denmark, Greece, Luxem-
bourg, the Netherlands, Portugal and -to some extent- in Germany the
growth potential of these lotteries is low due to competition from other
state-run lotteries (Lotto, instant lotteries) and the Toto.
In Spain and Italy the outlook for the state lotteries is brighter. The Spanish
Loteria Nacional is still by far the largest lottery in Spain and should profit
from the increase in spending power of the Spanish consumer. Italy has re-
cently announced the introduction of a number of new national lotteries. The
limiting factor for expansion in Italy are the illegal lottery operations that take
up a large portion of the market.
The United Kingdom and Greece are the only Member States that do not
have a Lotto. Due to its geographic location Greece has not been threatened
by an osmotic influx of foreign Lottos. Expanding into this popular game
could prove profitable for the Greek Department of Lottery.
4.3.3. Toto
In countries where both Toto and Lotto are played the latter has grown over
the past years at the expense of the football bet. The introduction of Lotto
has taken away market share from Toto since it ap~eals especially to those
players who were less interested in football and liked the idea of a new and
easy way to play a numbers game.
1. Types of Game
1.1. Overview
Horse racing and wagering on horse racing has developed in Europe over the
last two thousand years. During this period the development of horse
breeding was very much in the national interest. The governments have
traditionally involved themselves in mechanisms to develop horse breeding
via horse racing. The horse racing industries are most developed in the
United Kingdom, Ireland, France and Germany.
- bookmaking
- the totalisator
1.2.1. Bookmaking
For example in a six horse race where each horse is of identical quality and
carry the same amount of wager or stakes (1 00 ECU ). The bookmaker sets
the odds at 4.1 for each horse. No matter which horse wins the bookmaker
keeps 100 ECU.
53
15% 90 -costs
15o/o 90 - duties and horse racing levies
l.QlQ. !2.Q - winnings
100% 600 ECU
Both bookmaking and the tote can operate on-course at the racetrack, or off-
course through a network of specialised or non-specialised shops.
drawn for each horse that will run in the race. The ticket holder of the
winning horse, wins the pool.
55
(see overview)
Over the last decade, there has been a marked trend towards less negative
connotations being associated with betting on horse racing. Despite this
evolution, horse racing legislation is often very restrictive.
The totalisator bet was created to ensure integrity in racing and to impose
funding mechanisms on betting to subsidise horse breeding and racing.
Racing encourages breeding.
The regulation of tote betting reflects the facility of control associated with
the tote and the inherent guarantee of incorruptibility of the tote system, in
which the organiser of betting has no interest in the outcome of races.
Furthermore, since the system is based on centralisation, it is an excellent
vehicle for controlling (or prohibiting) the entry of undesirable newcomers to
the market. It is also used as a vehicle for channelling a sufficient proportion
of profits back into the horse racing/breeding industry.
B OK D F G IRL I L NL p s UK
Bookmakers
Allowed tl' -* tl' - - tl' tl' - - - - tl'
Operated tl' - tl' - - tl' tl' - - - - tl'
Tote
Allowed tl' tl' tl' tl' tl' tl' tl' - tl' tl' tl' tl'
Operated tl' tl' tl' tl' tl' tl' tl' - tl' tl' tl' tl'
The total market size of horse race betting in 1989 was ECU 14,566 million.
57
The largest market for horse race betting in Europe is the United Kingdom,
which is almost exclusively a bookmaking market. This market has been
estimated at approximately 8,5 billion ECU for 1990. The nearest in size to
the UK is France, with an estimated 1990 turnover of 5 billion ECU. The
French market is served by an exclusively state-run totalisator called the Pari
Mutuel Urbain (PMU).
There are a variety of taxes, levies and duties imposed on betting on horse
racing. In some cases, the imposition goes directly into the state coffers and
is destined for general state expenditure. In other cases, funds levied are
channelled back into the horse racing and breeding industry; operation costs
of the tote and racecourse infrastructure are also funded out of total stakes,
either directly or indirectly.
Without exception the profit from totalisators are used to fund horse race
breeding, irrespective of whether they are state or privately run operations.
Country TOTALISATORS
Tax expressed as a o/o of Stakes
Belgium 10 o/o Wallonia; 7 o/o Flanders, Bxl
Denmark 11 o/o win;15 o/o V5; 10 o/o others
Germany rebated
France 17 o/o
Greece Fixed fee
Ireland 10 o/o
Italy 26.8 o/o
Luxemburg N/A
NL 15%
p rebated
s rebated
U.K. 8 o/o
Table 3
Bookmakers are also taxed but the use to which these funds are put varies
from Member State to Member State. ·
In Belgium, the United Kingdom and Ireland the revenue goes straight to the
Treasury. In Italy and Germany it goes to the Ministry of Agriculture to be
59
The United Kingdom and Ireland also have a mechanism for bookmakers to
pay a levy to horse racing to assist in its development. This levy ranges from
1 to 1.5 o/o of stakes.
Table 4 below shows the tax levied in relation to off track bookmakers'
stakes:
2.5. Inconsistencies
In order for a horse race betting market to flourish it is important that horse
racing is clean and that it is seen to be an honest and fair activity by players.
Punters (people who wager) must have confidence in the activity before they
place bets.
Tax levels and practices are also shown to vary. Some countries effectively
rebate taxes back into horse racing while others do not.
60
The stake to win ratio for a single bet in bookmaking is low while for a tierce,
quarte or quinta, it is higher. These latter bets are nearer to a game of chance
than to a game of skill.
Bookmakers have a vested interest in the propiety of the race. They could
conceivably, for short term profit, try to fix a race. Historically however it is
the person who places the bet who is more likely to try to fix a race. It is
argued that bookmakers, particularly corporate bookmakers with greater
exposure to risk, are a positive influence in the policing of horse racing. They
are considerably more exposed to loss by virtue of fraud as their business is
based upon the ability to balance their books objectively.
payout per 'mise de base' also reflects the lack of players' interest in a horse.
The bookmaker is a target of fraud as too is the tote win pool. In the case of
the totalisator, it is the win pool which is subject of fraud. The victim is not
the organisation taking the bets but the other players who have bet on the
race.
The starting prices of a race reflect the on-track bookmaking odds. These
odds reflect the weight of money wagered on each horse.
The practice has been investigated in the UK by the Department of Trade and
Industry and the Monopolies and Merger Commissions and been found to
be legal. The activity was likened to that of a reinsurance brokerage, in other
words taking out insurance against commercial risk.
Players have two alternatives to betting at starting price odds: the totalisator
and fixed odds at off-track bookmakers.
Approximately half of all bets placed in the United Kingdom are at starting
prices.
62
3.1. Bookmaking
Both licensing and supervision are carried out by state institutions. Invariably
it is by those ministries responsible for horse racing and those responsible
for tax collection.
The highly regulated character of the market can facilitate the protection of a
market through a series of controls and authorisations.
3.2. Totalisator
The largest tote operates in France. The argument for a totalisator monopoly
is that it is in the public interest. The PMU is there to satisfy public demand
while protecting punters from exploitation. At the same time they are
maintaining the integrity of racing.
In Germany gaming machines, casinos and even some of the state Lottos are
operated by private companies. Indeed an off-track totalisator can be run by a
private enterprise. The only exception in the rule is bookmaking.
In most countries there is only one licence granted for the operation of a tote.
Permission to operate as a bookmaker is usually granted to more than one
operator. On-track betting, by virtue of its centralisation, is easier to control.
The centralised characteristics of a totalisator can also be argued as
facilitating control. The trend in bookmaking, at least for the major market
players, is towards increased centralisation, which facilitates control of their
activities.
64
4.1. Turnover
The total amounts of bets on horse racing in 1989 amounted to over 14,566
ECU mimon. Details are set out in table below. The main markets are those
of the UK followed by France and Germany.
B OK 0 F G IRL I L NL p s UK
Bookmakers 1402 - 1~ - - 11n 400 . - - - 9750
Tote 467* OT OT 6873 OT OT . . - OT OT 133+0T
* Assuming same density as bookmakers Tabla 6
OT = On-track only
4.2. Market Trends
From the above figures, it is apparent that the two major horse racing mar-
kets in the European Community are those of the UK and France.
In France, the PMU is the only market player, notwithstanding the fact that it
collects bets on behalf of a series of Societas de Courses. By French law,
only the Societas de Courses are allowed to organise betting on horse rac-
ing, but they can delegate this activity to an operator of their choice. The
PMU is the single tote operator in France and the largest worldwide. It has
been very successful in recent years in marketing its product.
4.3. Expansion
The French Government and the P.M.U. have been brought to the attention
of the Commission by Ladbroke. The French Government on unfair state aids
to the P.M.U. and the P.M.U. on the abuse of dominant position.
The PMU is marketing abroad the expertise it has amassed in the area of
totalisator technology and already operates a tote in Switzerland.
4.3.3. The Difference Between the French and the German Markets
Both the French and the German markets exclude foreign multinational
bookmakers. France's exclusion of foreign multinational bookmakers is
based on its claim that only through an oligopoly of its Societas de Course
can the interests of the industry be successfully furthered. In Germany,
however, the exclusion of foreign bookmakers is based on a legal
interpretation disallowing corporate bookmakers, on public interest grounds.
In reality the horse race event organiser sells the televised rights to a
broadcaster. Negotiations as to the market value of that race are conducted
between the broadcaster and the event organiser.
67
To conclude, it is quite clear that this market will only develop if there are
changes in legislation; this reflects the highly regulated nature of this market
sector.
The P.M.U. argue that French horse racing events are the property of the
organisers and they should be paid a royalty for the broadcasts. The corporate
bookmakers agree, but maintain that the broadcaster, and not the taker of the
bets, should pay the royalty to the race organiser.
The issue is further confused by the fact that the broadcaster is a company
called Satellite Information Services (S.I.S.), which was created by
bookmakers to service bookmakers who continue to hold shares and
positions on the board of S.I.S.
In casinos in Europe, the principal games are roulette, Black Jack and dice.
There are a number of variations in each game, e.g. American roulette,
English roulette or French roulette. Black Jack has variations such as
baccarat, punta banco or chemin de fer. Dice or craps may be played in
various combinations and odds.
Most, but not all, of the casinos in the Community are permitted to have
gaming machines. Such machines are known as 'amusements with prizes'
(AWPs). They differ from other video games by giving a cash prize in excess
of the original stake needed to play on the machines. The AWPs in casinos
traditionally have larger pay-outs than gaming machines situated in other
public places.
Casinos were first legalised in Europe in 1907 in France. They had become
popular during the 1890s despite being illegal under Article 40 of the French
Penal Code. The licences were granted specifically for spa towns. The
motivation for licensing was that the affluent members of French society
wished to have some entertainment when they visited these spa towns.
Casinos are not permitted in Paris. A ban extends for some 60 kms from the
centre of the city. The principle behind the distance is that prior to
automotive transport, it was considered impossible for a person to travel
60 kms and return home within the same day.
In Belgium casinos are illegal. However, eight are 'officially tolerated' by the
Belgian Government. Indeed, although they are illegal, there are officials
from the Ministry of Finance in each of the casinos during opening hours to
ensure that correct fiscal procedures are followed.
Games permitted
Member Casinos Approximate Gaming
Roulette Cards
States Permitted Number Machines
1t
Belgium
" 8
"" "
Denmark
" 10
" "
France
"" 135
" " ""
Germany 32
" "
Greece
Ireland
"
1t
3
- "- "- "-
Italy
" 4
" " "
Luxembourg
" 1
" " "
Netherlands
" 8
" " "
Portugal
" 11
" " "
Spain
U.K.
"
"
22
119 "" "
"
"
353 "
70
France illustrated the fourth reason for licensing casinos. French casinos are
seen as an entertainment and, in the history of its regulatory evolution, were
confirmed centres of relaxation frequented by the relatively well-off.
71
4. Taxation Revenue
In 1989, total tax revenue from casino gaming was over 600 million ECU. This
is small compared to the Lotto and Toto fiscal benefits to Member States
and is indicative of a relatively small market.
Tax regimes vary from country to country and in some cases are used to
suppress the growth of this activity by reducing net profits and hence the
motivation for private casino operators.
72
The fear of criminal involvement exists throughout the industry. During the
course of the interview programme, continual reference was made by both
regulators and casino operators to the need to keep the casino industry
clean. All the Member State regulators and operators agreed that the
licensing must primarily ensure that the operator is a fit and proper person.
They are:
- that the applicants are sufficiently solvent to meet any debts arising from
the operation of the casino.
In Portugal, the tourism theme continues with the Gambling and Gaming
Inspectorate operating under the Ministry of Tourism. New licences are
granted by a tender procedure organised by the Council of Ministers and the
Ministry of Tourism. The licensing of casinos in Greece also falls under the
Ministry of Tourism.
In Belgium, the municipalities grant licences, one of the conditions for which
is the promotion of tourism within the locality. Legislation in Denmark has
highlighted tourism areas as being prime locations for casinos.
From the examples above, it is clear that these countries view casinos as part
of the leisure industry and being part of the holiday experience. To some
extent, the same can be said in France.
In the UK, licences will only be granted if the local magistrate acknowledges
there is unstimulated and unfulfilled demand for casino gaming. Areas of
high population and a large number of visitors have been given the status of
areas where gaming can take place.
The casino market sector is mixed in terms of ownership. In Holland and four
German Lander, only the State can own and run casinos. In most other
countries of the European Community, private enterprises hold licences to
operate casinos although the property may be owned by the State.
There are a number of leisure groups with chains of casino operations, such
as Lucien Barriere and Citerici in France, and London Clubs, Brent Walker
and Stakis in England. Even in the newer market of Portugal, multiple casino
operators have sprung up with four casinos in the Algarve licensed to a
single operator.
6.2. Turnover
It is difficult to identify the exact size of gaming stakes (turnover) within the
EC casino market. In some Member States, casinos do not have to publish
total gaming stakes or total winnings in favour of the casino. They are very
reluctant to divulge this information.
6.3. Trends
Market trends vary from country to country and are dependent on how each
market has historically been controlled and taxed as well as how long the
market has been in operation.
6.4. Expansion
The tax ranges on gaming wins in favour of the casinos are as follows:
77
Table 4.
Range of Tax expressed as a %of the Casinos' Total Gaming Winnings per Annum
Where tipping is allowed there are often two deposit boxes for chips played
at a casino table; one for house wins, one for tips. The tips are used to off-set
the operating costs of the casino. If the tips are taxed, it is invariably at a
lower level. The tax system encourages people to syphon funds into the
lower tax bracket.
Tips may be given as a free bet, or they may sometimes be left on the table
until won by the house thus artificially increasing winnings.
It is impossible to quantify the level of such activity because of its nature, but
we understand that the practice is widespread. It clearly undermines the
integrity of operators.
78
The tax levels are indicative of a contradiction in the legislation for casinos.
The principle of incentives for tourism is often put forward by states as the
reason why casinos are permitted. In reality, however, the vast majority of
players (over 80% in the case in Spain, Portugal, Greece, France and Italy) are
in fact nationals and not foreign visitors.
There are local restrictions on licensing which effectively limit foreign licence
holders. They are :
- Spain: only 25o/o of capital of a casino operation can be foreign owned.
- Portugal: only 1Oo/o of ownership may be foreign.
- Holland: only the State may operate casinos.
- German: in four Lander only the State can operate casinos.
There are other Member States with a history of licensing foreign operators.
These are:
- Belgium: a history of licences granted to French, UK and German operators
- France: current licences have been granted to UK owners and other
European Community operators
- Denmark: the new licences include foreign multinational hotel groups
- Luxembourg: the .licence holder is German
79
This reflects the relative ease of control of national operators and the relative
simplicity of establishing the licensees' credentials, rather than a specific
bias against foreign ownership.
80
Gaming machines are machines into which coins are inserted providing the
right to play and the chance to win money prizes in excess of the stake
inserted into the machine. The games are principally games of chance. They
are known as amusements with prize machines (AWPs).
They differ fundamentally from video games and other entertainments which
require money inserted in order to play but not offering money prices.
Market information often groups AWPs with other non-prize paying video
games which make gathering of data difficult. Our market data thus contains
some estimates although accurate figures are available from the majority of
the Member States.
81
AWPs are permitted in some shape or form in all twelve Member States,
although access to machines varies and reflects the social and cultural
attitude to this form of gaming.
In Spain and the UK AWPs are accessible to all the population without regard
to age. In other countries, such as Portugal and France access is restricted by
the fact they are available only in casinos.
Market estimates indicate that there are some 700.000 AWPs throughout
the European Community (see Table 1). In each country games are graded by
the size of winnings and stakes. The larger the stake, the larger the prize and
the larger the direct tax on the machine.
Table 1
Member State Number of AWPs
Belgium 84,720
Denmark 2,000
France 1,100
Germany 173,800
Greece 400*
Ireland 3,500
Italy 400*
Luxembourg 80
Netherlands 10,000
Portugal 328
Spain 304,000
U.K. 117,500
TOTAL 697,500
* Estimates
82
Compared to other market sectors within the betting, gaming and lotteries
industry, AWP's are a relatively new phenomenon. Legislation permitting
these machines throughout Europe is likewise relatively new. In Germany
they first became legal in 1985, in the Netherlands 1986, in France 1987, in
Denmark 1988 and in Luxembourg 1989. Belgian legislation covering
gaming machines dates back to 1973, while Ireland goes back to 1956 and
chronologically ties with U.K. legislation.
4. Taxation Revenue
Gaming machines are taxed directly and indirectly. Direct taxation is applied
at the time licences are granted to install gaming machines. Indirect taxation
can take the form of entrance fees into arcades and casinos as well as
taxation on gaming profits within the arcades and casinos.
Direct taxation is levied when machines are licensed. The level of tax relates
to the size of stake and the size of prize that can be won. The direct tax at
time of licensing is often dependent on the type of machine. Such taxation
results in ranges of tax levels, for example in Belgium the tax ranges
between 69 and 830 ECUs. In France the taxation varies between 100 and
600 ECU and is dependent on the size of the population in the licensing
authority's area.
The machines are designed to excite. They play music, have flashing lights
and make noises when somebody wins. This is a form of static marketing
intended to create an exciting environment. Young people particularly have
become addicted to playing these machines. Such addiction may lead to
antisocial behaviour in order to obtain enough money to play continually on
these machines.
In Spain, where the machines are particularly popular, the health service has
introduced psychiatric units to deal with addiction. In many Member States
AWPs are easily accessible. This gaming machine is often the first gaming
bet that youngsters in Spain, the UK, Holland and Belgium make.
Police control and supervision operates in Denmark, and France where the
casino police enforces control and supervision. In Germany the Federal
Bureau of Criminal Investigations is responsible for the technical control of
machines and in Spain the gambling and gaming squad are responsible for
the control of these machines.
In Greece and Portugal the Ministries of Tourism are responsible for casinos
and hence machines situated in them.
85
Turnover or total stake figures for this market are difficult to obtain.: The
reasons for this are twofold. Firstly where the activity is limited to casinos,
operators were reluctant to provide unpublished turnover figures. Secondly,
where there is easier access to the machines, turnover data has not been
collected either by governments or industry. This is because the method of
raising taxes is dependent on the number of machines, the average stake
and the maximum prize and is not conditional upon turnover. Much of the
turnover data has been estimated.
The biggest market by far is in Spain, with turnover of 1,9 billion ECUs.
The Spanish market is followed by Germany, with 1,6 billion ECUs turnover
and the third largest market is the UK with approximately 1 billion ECUs
turnover.
This reflects the fact that Spain with 304.000 has the largest number of
machines in Europe. Germany has the next largest number of machines at
173.800, and the UK is third with 117.500 machines. Spain, Germany and the
UK operate 85% of all AWPs. Total stakes were 4,5 billion ECUs in 1989
continued growth is forecasted for this market.
In France for example these machines only became legitimate in May 1987.
Today fifteen casinos have received approval to have gaming machines.
When the Ministry of the lr'terior became aware of the high levels of
demand to play on these machines they were immediately concerned about
the social impact. Licences have since not been granted to the remaining
casinos in France.
87
Spain permitted gaming machines in 1981. They now account for forty
percent of all turnover on betting, gami~g and lotteries within that country.
The Spanish authorities have become so concerned about addiction that
new legislation curbing the marketing of AWPs was drawn up in 1990.
In Ireland, the Dublin authorities have banned the gaming machines from
their area of control; they are now limited to coastal resorts and are only then
available for three months of the year.
Denmark only granted permission for gaming machines in 1988. Since then
1.800 permits have been issued. These machines are not allowed in
amusements arcades where video games are available to minors.
In the Netherlands gaming machines have been permitted since 1986. There
are now nearly 10.000 machines in this country. In Belgium jackpot machines
and 'one arm bandits' were banned in 1973, although other gaming
machines regarded as less perversive have remained available.
The dilemma is that many manufacturers are owned by those who also
distribute and host the machines on their premises.
Within each Member State there are small market niches for betting and
gaming activities, reflecting social and cultural developments particular to
each Member State. They are often organised on an ad hoc basis without
supervision, control or taxation. Bingo, however, is organised and legislated
for in four Member States in a way that is different from general local lottery
legislation.
Table 1
Member State Other Forms of Betting and Gaming
Belgium Dog, Cycling and Pigeon racing
Denmark Dog, Pigeon racing and Prize bonds
France Dog, Cycling and Pigeon racing, Pelotte
Germany Prize bonds
Greece None Found
Ireland Bingo, Dog racing, Prize bonds
Italy Cycling and Car racing
Luxembourg None Found
Netherlands None Found
Portugal Bingo
Spain Bingo, Pelotte
United Kingdom Bingo, Greyhound racing, Events, Prize bonds
Betting on dog races is to be found in Belgium, Denmark, France and the UK.
In Belgium, Denmark and France the activity is regionalised. In Belgium
races are held in Liege and in France towards the Normandy and Brittany
coast. In the UK and lreland,greyhound racing and betting is found
throughout the state. Betting on dog racing takes the form of pool betting in
Belgium, Denmark and France. In the UK betting takes the form of
bookmaking and totalisator.
Bingo was evident in Ireland, Portugal, Spain and the UK. Similar games are
found in the other Member States, however, they were legislated for as local
lotteries.
Pigeon racing was found in Belgium, Denmark and France. This is controlled
by fixed taxes for rings which are placed on the pigeon as a form of licensing
fee. These rings identify the pigeon. When betting on pigeons, they also act
as a means of validating winners.
91
Prize bonds, that is to say Government bonds where no interest is paid but
the bond is numbered to allow a draw to take place with a grand prize, are
available in the UK, Ireland, Germany and Denmark.
92
Dog racing generally falls under the same legislation as that covering horse
race betting. The principles of the betting mechanisms are the same.
Bingo in most shapes and forms is covered under local lottery legislation.
The total bingo stakes for Portugal, Spain and the UK in 1989 was 2,3 billion
ECUs. Tax revenue totalled 355 million ECUs.
The breakdown of the tax revenue and turnover figures is shown in table 2.
As can be seen from the Table 2, Spain and the UK account for the majority
of stakes. Spain accounted for approximately 58 o/o of the total turnover in
1989, the UK 42%.
Table 2
Bingo Turnover and Tax Revenue 1989 (.000 ECU)
Member State Stakes in 1989 Gaming Tax
Portugal 988 136
Spain 130.362 260.724
United Kingdom 952.027 94.044
Total 2.255.747 354.782
In all three countries the supervising authorities for bingo halls are also
responsible for the supervision of casinos operations.
The bingo market in Portugal is growing. There are at present 35 bingo halls
in Portugal. Applications for additional concessions are currently being
considered. In Spain the market has declined following its initial.growth on
94
The key issue for the bingo industry in common with casinos is licensing.
There is a necessity to ensure that there is no discrimination in licensing
procedures, while enabling the licence authority to establish that the
applicant is fit, proper and able to run a bingo hall.
Illegal betting can take the form of wagering between friends on the
outcome of football matches, pigeon races, pelotte games, boxing, etc. or
games of cards, dominos, checkers etc. wagered in cafes, as weU as illegal
cross-border participation in activities that are legal in other Member States.
The only major illegal gaming operation that was identified was the parallel
Totocalcio in Italy and casinos in the Netherlands.
The illegal operation is clearly well organised. Utilising the results of the
official Totocalcio it pays out 10% more in prizes. The operation is financed
by the portion of revenue that would normally be paid in tax.
European Communities- Commission
Gambling in the single market - a study of the current legal and market situation
Volume I
Executive summary and pan-European Community market review - June 1991
Document
EN
ISBN 92-826-2899-X
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