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NEWS 10 February 2020

Roundtable: Will the German market prove to be a goldrush?

By Aidan Williams

After years of debate and negotiation, the 16 German states have finally unified and agreed on a proposal that would make online casino and poker legal across the whole country in 2021. This is a significant step for the country where gambling is currently regulated on a state-by-state basis and where only the northern state of Schleswig Holstein has offered online licensing over the last eight years. Although the minor details are yet to be revealed, minister have proposed a monthly deposit limit for players in the new draft treaty, which can be set at no higher than €1,000. Gambling Insider spoke to four industry representatives on the latest development and the potential of the German market.

Dominic Mansour, CEO of Bragg Gaming– DM
Vsevolod Lapin, 
Head of Product at Playson– VL
Mark Halstead, Compliance Manager at iSoftBet – MH

Is this announcement as good as it sounds or will the devil be in the details?

DM: While the key details and principles are still being ironed out, we feel that this is better than the alternative scenarios - where there was a breakaway group of Lander or a status quo for another undetermined period. This situation was the one we had hoped for, but long expected not to materialise. Those of us who have monitored Germany for the past 20 years have heard that new legislation is near many times and nothing ever came to fruition. It’s nice to see that it finally got somewhere.

VL: Many markets neighbouring Germany are already regulated – it’s a natural evolution of the gambling industry. Having a solid and robust framework provides a structure beneficial to suppliers, operators and players. In Germany’s case, the coordination needed to implement new regulation across the 16 states will be complex. But in a similar vein to regulation in Sweden, while it may not be a smooth process to begin with, it will settle down in time.

MH: We will have to wait to see how this new legislation evolves as we get closer to the 2021 proposed go live date. Going on previous experience from 2019, the bar was set quite high for Sweden and Switzerland. German regulation is something we are watching closely as we do for all new markets, so iSoftbet will always evolve with these new markets as they emerge to continue to offer our games and support our partners.

We are very often first movers into new regulated markets, such as Switzerland last year where we had 71 iSoftbet games approved by the Swiss regulator EBSK in June for all approved licensed casinos and were the only provider to go live just a month later. 2019 was a breakthrough year for many emerging markets and we went live in five new territories including Sweden, Switzerland, Malta, Colombia and Bulgaria increasing our presence to more than 20 regulated territories.

Considering this has been years in the making, will we see a goldrush or will there be a wait and see approach?

DM: Germany is one of the largest economies in the world so therefore a very attractive market. A well-regulated regime is one that favours the entire industry, including the players themselves, so when a new market is about to open you will initially see a lot of interest. For sure, there is a school of thought that this new development may be a false dawn and will take a wait and see approach and another that believes this is finally ‘it’ and will move fast, but ultimately there are a few more legal hurdles to get over yet before this becomes a reality, including the meeting between ministers in March and EU ratification.

VL: It’s likely we’ll see a combination of both. The German market clearly has huge potential, but it all depends on the amount of investment required and the strictness of regulation. Similar to the emerging US online market, we can expect the major players with big budgets to take the plunge first, followed by smaller companies who will watch on from a distance and see how the market develops.

MH: There is always a healthy interest in new and emerging markets as we have seen this year-on-year with other territories, but especially for German legislation. We are already seeing great interest even in these early stages, so the first indications are good. We hope there will be a phased approach to regulations over a period with clear guidance and support from local regulators from day one. This will be key for operators and providers.

What do we still have to see from the German Lander for the country to be a viable option for operators/what hurdles are there?

DM: Outside of the steps mentioned above, the monthly deposit limit (€1,000/month) is a little concerning. Those kinds of rules, similar to this strange idea of introducing a £2 bet limit in the UK, do nothing to protect players or the industry. They simply push players who want to play at higher levels to offshore or unregulated operators. In those circumstances, player protection, especially for the vulnerable becomes nearly impossible, so we just don't see how this does anything positive. Whilst the German proposal has been sensible in calling for a central database of excluded players that operators must link up to, this limit seems less logical.  

MH: I would hope for clear guidance from the regulations to enable legislation to be implemented as it was intended. This hasn’t always been the case with emerging markets, but we’re hopeful this will take place in Germany and the early signs are positive.

What do you expect the interim period to look like before the framework is in place (i.e. will operators who are still operating there today be forced/frozen out etc)

DM: We believe there is likely to be another "Düldung" - or a period of toleration - whereby existing, Schleswig Holstein (SH) licensed operators will be able to continue operating under the terms of the SH licence. 

MH: As we get closer to the intended 2021 date, I believe the market will adapt to new legislation. One example was the introduction of UK legislation in 2014 that were clear and updated over a period of time, with players needs in mind and with a hard approach to non-compliance.  For a market to succeed, and to ensure a smooth transition from the get-go, you need an agile approach.

How big is the German online market/what will the potential be of the market?

DM: Based on various different sources, our estimates are that the market is currently worth around €2.6bn. Obviously a regulated market is going to be materially bigger, something closer to the UK and eventually probably even bigger, given it is a larger economy in both value, size and population. 

MH: This is something I will be working on quite heavily in the coming months, but first indications seem positive and we are excited to get started on this project. It is one of the largest trading areas in Europe with a large and diverse population, and one where we have already seen there is a keen appetite for both gaming and sports betting over the years.

Germany has a strong land-based gaming sector, will this be an advantage to the online sector?

DM: Without wanting to sound like we're pitching our exclusive content, what we know is that the games that we distribute on our platform into Germany that are already well known in land-based are the ones that perform the best online (Gamomat in particular). This obviously results from players recognising the titles, having already played them at various land-based venues.

MH: We have seen this with many other markets with the introduction of online gaming through tablets and mobile devices, so the trend suggests this could be similar for Germany. Local brands will have an advantage but will equally be mindful of strong pan-European gaming operators who have significant experience and arguably more marketing power and the latest technology and tools at their disposal.

How does the German player preference differ from other European countries?

DM: In all honesty, not significantly. I think it will be more interesting to see how it evolves when it becomes regulated as that's when we'll get a clear picture of a typical player and their preferences. 

VL: German players tend to appreciate games which evoke the feeling of land-based casinos. Many of them enjoy taking a big risk with an offer of wins, leaning towards high volatility slots. This doesn’t mean players are averse to innovation, as just like any large market, they are influenced by global trends. High quality, mobile-first content will be key to building awareness and retaining players as the market develops.

MH: This will be part of my evaluation for this new market. Player protection/responsible gaming should be the focus of the regulation, so I believe the player reality check should be hardcoded into the regulations as a standard. One question I would have for the regulator would be the spin time for games and whether a limit will be set in the legislation. Spin time is important but shouldn't impact the players experience of the game, so clear guidance is needed here.

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