Vive la resistance?

Market openings and the end of government-owned monopolies in favour of open competition and access to mainstream media are business cycles we should rejoice in. France’s regulation of its online gaming and betting market and the ensuing influx of new business activity falls exactly within that remit.

For all the groaning about the tax levels and additional levies the authorities have imposed on online gaming operators, which also will not be able to rely on the 20,000-odd retail points of national lottery operator Francaise des Jeux (FDJ) or horse racing tote company Pari Mutuel Urbain (PMU); French consumers, PR firms, print publishers, TV and web companies are all rubbing their hands at the prospect of, if not a tidal wave of new business, at least a substantial increase in advertising spend from licensed operators seeking exposure.

As Stéphane Martin, head of France’s Professional Advertising Regulatory Authority (ARPP), says: “Market openings, as happened with the telecom or energy sectors, always create new business as they often become major advertisers in order to gain market share. Existing companies [former monopolies] will defend theirs and this is a good thing in a market economy. The online gaming industry will work in such an environment.”

These new entrants, companies such as BetClic, Bwin, Eurosportbet, Unibet, Winamax, Chiligaming, along with the incumbents Française des Jeux (FDJ) and Pari Mutuel Urbain (PMU); have all been in hyperactive mode to have applications ready and up to scratch for the first wave of licences announced on 8 June by the Autorité de Régulation des Jeux en Ligne (ARJEL) and its president Jean-François Vilotte. Among those listed, Unibet is the only one that has not been approved for a licence and has decided to enter the market via a white-label partnership with France Pari, still not launched at the time of writing.

In late June, another round of licences were awarded to operators and software platforms, including PokerStars and PartyGaming, for its PartyPoker.fr network and its PartyBets and Gamebookers sports betting brands.

New old pretenders

Of course, many have commented with just a hint of sarcasm that with the exception of Eurosportbet, the operators mentioned above are not ‘new’ at all and have been taking bets from French customers for years. Which is true, to varying degrees. For example, an operator like Chiligaming, while accepting French players, has done little advertising or sponsorship in France when compared to an operator such as Winamax.

At the same time, some operators have been more respectful of the new regime than others. One only has to look at the customer account closures requested by ARJEL, operators’ transfer of existing accounts to sites licensed offshore but still targeting France, the regulator’s demands for transparency over the ownership structures of those applying for a licence, and the advertising of .com over .fr portals.

One company even undertook the strategy of offering online casino games, but getting around the regulation which clearly banned them by getting players to deposit real money and play roulette or slots with tokens, only to cash in their winnings in exchange for”¦ real money. Legal certainly, but on a knife edge nonetheless. Myriad other bones of contention and disgruntlement for operators could be mentioned, while such examples simply reflect the varying limits to which some are prepared to go to keep working in the market.

But for the activity this new market has fostered among industry stakeholders, it should be remembered that the intention behind the controlled opening of France’s egaming sector was never to allow a level playing field among all the operators. It was of course to cement the position of dominance and strength of the two ex-monopolies FDJ and PMU. By and large it is likely to succeed in its aim. PMU will look to develop its partnership with the French football team, despite this currently appearing the worst sports sponsorship deal ever agreed following Les Bleus’ World Cup capitulation. FDJ meanwhile is seeking to build on its TV presence via its partnership with TF1, France’s largest commercial TV channel. Both are also able to delve into the close to €9bn turnover they each made in 2009 to finance their online activities and marketing, all the time supported by their vast retail base.

Brand wars

In terms of advertising, both ex-monopolies are by far the biggest spenders in the country within just two weeks of the market being opened (see box for more).

As for the competition, it should make for a fascinating spectacle, as the ‘generalists’ such as FDJ, PMU and media companies getting into gaming launch their full product suite and pit their wits against the specialists with already substantial brand recognition in France, such as PokerStars and Winamax.

Of the software suppliers, Playtech is so far the biggest absentee of the egaming firms in terms of major deal announcements. However, the Israeli firm should be announcing new partners soon and already has major market share in France in the shape of Titan Poker, Poker770 and Chilipoker, whose partnership with Iliad-Free, the second-biggest internet service provider in France, is also likely to yield more white-label agreements shortly.

Although it is difficult to quantify the future value of the market, Vilotte said during the press conference of 8 June: “We won’t try to value the online poker market because no one really knows. For sports, we don’t believe the horse racing betting sector will grow exponentially. PMU recorded around €600m worth of stakes on the internet in 2009, and we can expect that amount to rise to between €800m and €900m, which in fact represents the value brought in by previously illegal sites. As for fixed sports betting, an estimate of €1bn in stakes, with 5% of that amount going to FDJ, is the figure most observers agree on.”

So clearly France is not the pot of gold some might have been expecting, and as BetClic’s chief executive Nicolas Béraud commented during the CEO panel at EGR Live in London last month: “Entering these regulated markets will be very difficult and expensive, and only the big companies will be able to do that. To get the French licence before the World Cup, we worked for four months, had to fill out 18,000 pages of information. It cost us millions of euros. The former monopolies are doing lots of marketing through their shops, and if you want to exist you have also to put a lot of money into marketing.”

There will be intense lobbying for online casino games to be introduced in 18 months time, tax rates for sports betting to be reduced and a widening of the bet types and poker games operators can offer punters when the legislation is reviewed at that time.

In the meantime, expect a raft of lawsuits against the monopolies for abuse of dominant position and unfair competition in the not too distant future. Lawyers should be busy as they ready their pleas and the legal process drags on and private operators wear themselves out and spend millions in legal fees, while FDJ and PMU grow in strength with every passing month.

Advertising Arms Race

The ad spend of gambling operators in France exploded to nearly €14m in the two weeks following the opening of the online gaming and betting sector, according to Paris-based consultancy Kantar Media.

The research covered the period from 8 to 20 June, with advertising spend in the first week from 8 to 13 June reaching €6.2m. Bwin led the way during that initial period, spending €1.6m on marketing, followed by PMU, on €1.5m, and FDJ, on €1.4m.

However, Kantar Media’s data showed that by 20 June, both FDJ and PMU were outspending the Austrian operator, accounting for close to €3.8m (27%) and €3.4m (24%) respectively of the total €14m spent.

Television accounted for 63% of overall advertising spend, ahead of print, with 38% and radio, with 7%.

In addition to TV adverts for gaming operators’ products, there were also 357 TV sponsorship appearances: 206 on free-to-air TV and 151 on cable and satellite. While on the internet, advertising carried on at pre-regulation levels.

The first outdoor advertising campaigns also appeared in June in France, although these appeared to early for Kantar to capture.