Hidden messages: The fallout from Italy’s blanket ban on gambling marketing

When Giuseppe Conte, a 53-year-old law professor, was sworn in as Italy’s 58th Prime Minister on 1 June after three months of political wrangling, a sense of foreboding probably permeated the country’s licensed gambling industry. Conte now heads up a populist coalition that includes far-right Lega and the anti-establishment, Eurosceptic Five Star Movement, which has been outspoken in its opposition to gambling and its effects on society. “In the eyes of the Italian government, gambling is the ‘Absolute Evil’ and must be suppressed,” says Quirino Mancini, a partner at Rome-based Tonucci & Partners.

That suppression manifested itself in the so-called ‘Dignity Decree’, which Italy’s Council of Ministers approved earlier this month, and includes a blanket ban on gambling advertising across all media platforms, including TV, radio and online. Sports clubs are barred from signing sponsorship and advertising deals with gambling companies. The ban, which has to be rubber-stamped by the Italian parliament, will come into force on 1 January 2019, although at this stage it doesn’t apply to existing contracts with sports bodies and media outlets; these will be allowed to run until 30 June 2019, which is a small crumb of comfort for operators with existing deals in place. National lottery operations are exempt from the prohibition on advertising.

Understandably, those gambling operators serving the EU’s fourth-largest economy have been left reeling. “The legislation is completely wrong,” Niklas Lindahl, MD for LeoVegas in Italy, tells EGR Compliance. “It is done without taking into consideration any real data [and] it is based on myths and populistic opinions that will damage not only the industry of gaming, but also send plenty of sports clubs into economic crisis, both on elite level and amateur level as gaming companies sponsor plenty of this.”

Lindahl, who says the ban would limit growth and damage LeoVegas’ business in Italy, penned an open letter to Deputy Prime Minister and leader of the Five Star Movement Luigi Di Maio in which he urged the government to “revise” the ban, as he argued the case that the black market would flourish with advertising outlawed. However, Di Maio responded publicly via Facebook and dismissed the notion that unlicensed operators would benefit. He argued the opposite would happen because current levels of advertising have “a clear effect on the desire to play – something that causes more to be played also in illegal markets”.

Yet Lindahl blasts back: “He does not know what he is talking about; he only throws populistic slogans. What will happen is this: if serious and licensed operators cannot advertise, it will create a vacuum, both online and offline. This vacuum can and will be filled by non-serious operators that don’t care to follow the rules and laws because they have no licence to lose nor do they intend to pay any fines. Thus, they will be able to attract customers who will end up in the hands of illegal operators that care nothing at all about their clients’ wellbeing.”

Stymieing growth

Since becoming the first EU member state to legalise and license egaming in a comprehensive manner in 2006, Italy has gone on to become Europe’s second-largest regulated online gambling market. According to Italy’s gaming news agency Agimeg, the online sector achieved revenues of €47.6m in June, a 38.3% rise on June 2017. While analyst firm Eilers & Krejcik Gaming says revenue growth rates for the online sector have been above 20% for the past two years and remain high throughout H1 2018, the ad ban is bound to clip the industry’s wings and put a dent in operators’ earnings, which could lead to further consolidation.

Logic seems to suggest the vertical most likely to feel the full force of the ban is casino due to the fact lifetime values tend to be shorter and churn rates higher than sports and poker. If correct, it means the firmly entrenched sportsbook brands like bet365, Planetwin365 and Eurobet are best placed to overcome the blackout than casino brands and smaller sportsbooks. GVC spokesman Jay Dossetter says: “As an operator of well-established brands – Eurobet, Gioco Digitale and bwin – which are amongst the largest and most popular in the Italian market, we are confident that GVC is well positioned to succeed despite the introduction of such draconian restrictions on advertising and marketing.”

As Lindahl alluded to earlier, there are deep fears about the wide-reaching ramifications the prohibition will have on sport. Betting companies are thought to contribute about €120m sponsoring sports teams in Italy ever year, including a number of football clubs competing in Serie A – the country’s top-flight league. More than half (12) of the 20 Serie A clubs have sponsorship and partnership deals with egaming companies.

Italian football chiefs say the ban will leave clubs at a competitive disadvantage. They point to the fact 45% of English Premier League clubs have gambling companies as shirt sponsors, while all 20 clubs display gambling brands on pitchside advertising. So, could the ban be a financial catastrophe for Italian football clubs? “Absolutely so,” says Mancini, “and the most frightening thing is that the Conte cabinet does not seem to have a clue about this potentially lethal impact. And if they do, they simply don’t care.”

Despite the impending blackout, it is understood that Marathonbet agreed a €7m sponsorship deal with Lazio earlier this month. Meanwhile, Betway has inked a three-year deal with Serie A’s AS Roma to have the operator’s logo emblazoned across training kits and access wider advertising at the club. In a statement, CEO Anthony Werkman said both parties were satisfied that the arrangement “meets all the requirements of Italian law” and that in the longer term, Betway would “wait and see” how the regulatory landscape evolves.

Divided opinions

According to a government report in 2015, as many as 1.3 million people in Italy were problem gamblers at the time, although just 12,000 were receiving treatment for addiction. Di Maio recently told RAI state TV that gambling was a “social emergency”, yet many licensed operators argue that they should be able to use their own tools to monitor playing patterns and intervene where necessary, as well as allow customers to set deposit limits and self-exclude. Moreover, they believe a sweeping advertising ban won’t prove to be problem gambling’s panacea. “Banning advertising will not reduce the number of problematic gamblers,” asserts Jesper Kärrbrink, CEO of Mr Green, a licensed operator in Italy.

“If we look at prevalence studies done in the last 30 years, we can see the level of problem gamblers has stayed the same – 2% of the population, while gambling has grown extensively. This clearly indicates there is very little or any relation between number of brands, products, marketing and problematic gambling.” He adds: “Banning advertising is just a political plot or a way to protect the state monopoly and it will not help any of the 1.6% problem gamblers in Italy.”

With key stakeholders up in arms, it is a safe bet the betting industry, football clubs and broadcasters aren’t going to take this lying down. Lindahl is “firmly convinced” the industry will “manage the government to reason”, while Mancini expects a judicial challenge. “I envisage multiple and grounded issues of legal relevance – restriction and discrimination of services, unfair competition and so on. I reckon that not only the already-licensed operators, who are bound to be directly hit by the ban, but also those currently waiting to be granted a licence they applied for just a few months ago – when the ban was not in sight – will take legal action to protect their business and investment in the Italian market.”

So, this highly controversial issue looks set to rumble on as the egaming industry plots the best course of action to try to overturn the ban.