t is important to highlight that, as to previous occasions in the Spanish market, it is not a proper actual opening of the market as the formal approval from the Ministry of Finance (who has a maximum of 3 months since the 20th of September) is still needed. After that, the announcement will be approved through a Ministerial Order and interested companies will be able to start sending their applications to DGOJ.
The license system in Spain
Spain, differently from other regulated markets, has a “double license” system to operate in the market. In this sense, operators need to firstly obtain a general license to exploit online gambling, existing 3 different licenses (betting, other games and contests). General licenses can only be applied for during the corresponding opening periods defined by the Regulator. Previous open windows were:
Late 2011: Corresponding to the first opening of the online gaming market and whose licenses were granted in June 2012, meaning the start of the Spanish regulated market. A total of 53 companies were granted 83 general licenses.
Late 2014: In parallel to the regulation of slots and betting exchange, it meant the introduction of 10 new operators asking for general licenses (other 6 operators who already have general licenses asked for additional ones)
In addition to general licenses, operators also need to obtain the singular licenses corresponding to the games they want to offer (sports betting, roulette, slots, poker, etc.). Differently to general ones, singular licenses can be applied for anytime as long as the operator has the associated general license or at the same time.
Under this scenario, it is expected that a series of new operators (specially from international environments) will ask for licenses aiming to launch from mid-2018 onwards. Based on our experience as MAG, operating in the Spanish market since 2008, there are many reasons why operators should invest in Spain: market is growing and not mature; taxation level is affordable (even if there is room to improve it); attitude of the Spanish customers toward gambling is positive; DGOJ requirements are clearly defined and manageable by operators; competition or regulatory restrictions in some countries in Europe push operators to target attractive market to improve sustainability of the business.
Schedule for the procedure
Even if in this case we are under a slightly different scenario than the last opening of the market in late 2014 -where, in addition to the window for new general licenses, also slots and betting exchange were regulated- a similar schedule is expected.
In this sense, DGOJ sent a proposal of rules for the tender to the Spanish Ministry of Finance, that have a maximum of 3 months to publish the final version of the rules (where no big modifications are expected). After this moment, any interested party can present his application for general licenses in Spain.
One of the relevant news on this procedure is that the timeframe to ask for general licenses has been increased until 12 months (versus one month in the previous announcement), a much more adequate timeframe for operators to prepare all the extensive required documentation. After the application, DGOJ has a maximum of 6 months to grant the licenses, so new operators are expected to be live since June 2018 onwards.
As a summary, this is the expected calendar for the procedure (Fig.1)
Fig. 1 – Spanish application process timeframe
Source: MAG elaboration
It is also important to highlight that the final certification from operators needs to be sent to DGOJ maximum 4 months after the licenses has been granted.
Requirements for new operators
As expected, no big modifications have been made in the list of requirements defined for companies asking for general licenses. Minimum share capital for applicant companies is still 60.000€ (minimum capital required for PLCs – Sociedades Anónimas- in Spain), to be applied both for Spanish companies and companies located in other country of the European Economic Area.
Regarding guarantees, previous system from 2011 is also maintained, being operators forced to present guarantees of €2 million for general betting and other games licenses or 500.000€ in case operators are asking for contests license. The amount of the guarantees is reduced from year 2 onwards up to €1M (or 250.000€ for operators that only have contests general license).
For technical and operative requirements, apart from the usual requirements already present in previous processes, DGOJ also requires the operators to present a “Fraud Manual” (Base 7, Section 1, Paragraph L) describing all procedures and measures defined by the operator to identify potential customer fraudulent activities (identification of customers, payment methods, origin of funds, collusion, betting fraud, geolocation, etc.)
Overview of the Spanish gambling Market
Since the introduction of the Spanish regulated market in June 2012, a growing trend on GGR volume is observed. The market is still betting driven (covering 50% of total GGR) and casino games show a sustainable growth each month specially thanks to the good performance of slots (meaning casino currently 35% of total GGR). Poker, on his side, shows a clearly decreasing trend (similar to other international markets) that is expected to be slowed down with the introduction of international liquidity in the very short term, meaning currently less than 12% of total GGR versus the 30% that it meant just 3 years ago. The rest of the market is shared between bingo and contests.
Fig.2 – Monthly GGR per product (€)
Source: MAG elaboration with DGOJ data
In the medium and long term, market is expected to continue its growing trend thanks to the following factors:
Growth of sports betting: The main product for the Spanish Market, is also the main acquisition source for operators. Apart from the potential advertisement limits that could apply with the new regulatory regime for gambling advertising (expected to be approved in the coming months), advertising investment from operators is expected to keep growing in the medium term.
Establishment of slots: A product that was not available in Spain until June 2015 and that is showing excellent performance for operators, with sustained month by month growth and that currently shows similar performance than the rest of casino games.
Slots growth is expected to continue reaching up to 60% of total casino market (similar to other comparable markets like Italy).
Live games: Market inputs clearly show that live roulette is one of the preferred games for Spanish customers offering a very relevant plus of security and immersion. In the medium term, it is also expected that regulation will allow other live games like live Blackjack that is showing great performance in other markets.
Launch of new operators: Thanks to the opening of the market during 12 months, new operators will certainly launch their offer in Spain. Recent acquisitions of Spanish operators also show a clear interest in the Spanish market, smaller than other comparable markets (France, Italy) but attractive and potentially profitable for operators with clear strategic visions of the market.
International liquidity: It is very clear that global poker market is facing complicated times, far from the incredible growth shown in the last decade. In addition, the lack of international liquidity in Spain has contributed to the slightly decreasing volumes on poker activity that is shown year by year since the regulation. The opening of international liquidity between Spain, France, Italy and Portugal can be a very relevant leverage for the growth of the market thanks to the evident benefits associated to a bigger number of concurrent poker players.
Fig.3 – MAG estimations of the Spanish Market 2012-2020 (€millions)
Source: MAG estimations