Analysis: Slots will not be Spanish silver bullet
Although the newly regulated slots vertical is to be welcomed, tax concerns mean only the strongest are likely to benefit
The introduction of slots into Spain’s somewhat sluggish online gaming market is expected to bring a welcome boost to the country’s licensed operators after the regulations were finally rubber-stamped by Spanish authorities yesterday.
Its absence had been cited as one of the primary reasons the Spanish market has so far failed to meet early projections for the regulated market, which first launched in June 2012.
Casino has been a steady performer in Spain, regularly posting quarterly gross gaming revenues of around 8-9m with the latest available figures showing 8.7m for Q1 2014.
But once slots is up-and-running, market analysts believe these figures could potentially double in a scenario replicating the impact slots had on the Italian market when introduced in June 2012.
The Spanish regulator Dirección General de Ordenación del Juego (DGOJ) is hopeful a wider variety of games in the regulated market place will suppress the size of the country’s black market, which a recent eGR Insights study revealed was used by more than a third of Spain-based players.
However, licensed operators offering regulated slots will still find themselves at a handicap to their unlicensed rivals, not only due to a 25% GGR tax rate but also the strict social responsibility and player protection measures they will have to adhere to.
And while gaming consultant Eduardo Morales-Hermo predicts an upturn of around 75-80% in casino revenues due to slots, he believes the benefits will only be felt by those commanding enough market share to turn a profit “ the likes of 888, bet365 and William Hill.
“The taxation is a very high hurdle and they need massive turnover to profit from slots, just as they need for the rest of the game content,” Morales-Hermo told eGR.
The market is also likely to bring fresh competition with the likes of 32Red, Betsson and Paddy Power all believed to be considering entering the market now that slots is on the table, while Full Till is also preparing to take its recently launched casino into the country.
However, newcomers may well find it difficult to gain a foothold with Morales-Hermo pointing to the experience of William Hill and Paddy Power in Italy, who both struggled to gain market share despite significant marketing outlays.
Last week, 32Red CEO Ed Ware, whose company has yet to enter the Spain, told eGaming Review the addition of slots would only make the market “palatable” as overriding concerns remain over the tax regime.
The DGOJ has previously suggested the possibility of a reduction in the country’s tax rate, however, thus far no fresh proposals have been forthcoming.
So while the introduction of slots may well improve the fortunes of few well established brands, those currently battling to keep their heads above water may well need more help to survive in the longer-term and talk will now turn once more to reforming the tax regime.