UK gaming companies betting on French legislation

A bill that comes before the French parliament October 7 would let foreign companies offer sports betting and poker, ending the monopolies of state lottery provider Groupe Francaise des Jeux and Pari Mutuel Urbain, which runs gambling on horseracing. All other online betting is currently banned.

“The size of the population and the appetite for gambling, and the group’s historically cautious approach to France make this a particularly exciting opportunity for us,” said Jim Ryan, chief executive officer of PartyGaming, the owner of the PartyPoker.com brand and the U.K.’s biggest online-gaming company by revenue.

Sales from electronic gambling in France will more than double to 671 million euros ($992 million) in 2010 if new rules come into effect in the middle of next year, according to estimates from H2 Gambling Capital, a Manchester, England-based consulting company. In 2011, the market will be worth 1.03 billion euros, an additional 53 % increase.

UK gambling companies struggled this year as the worst recession since World War II restrained spending. First-half net income fell by 26 % to us$ 95.8 million at William Hill, the country’s second-largest online- gaming company, and by 57 % to us$ 8.1 million at 888 Holdings. PartyGaming posted a net loss of us$ 66.9 million.

To broaden their reach, the companies take bets on subjects beyond horse racing and soccer. 888 Holdings is accepting wagers on the outcome of the upcoming German election. William Hill is offering odds on the 2012 U.S. presidential election, with Barack Obama favored 8-to-11 against 10-to-1 for former Alaska governor Sarah Palin.

The companies still need new growth engines to get them out of the doldrums. “The U.K. is fairly flat if you like, or at least slowing down,” said Simon Holliday, director at the researcher H2. France is “the largest single market on the horizon.”

France began plans to open and regulate its market in response to 25,000 illegal gambling sites accessible in France, of which a quarter are in French, accounting for 75 % of Web bets, Budget Minister Eric Woerth said in a March statement.

The European Commission has also pressured European Union states to reform gambling markets, threatening to sue France over the issue in 2007. Italy is now implementing rules that allow online gambling, and this month Portugal defeated a court challenge against its sports-betting monopoly by BWin Interactive Entertainment AG at the European Court of Justice.

The French market is “large and sophisticated,” Martin Higginson, CEO of Netplay TV Plc, a Lancaster, U.K.-based electronic-gaming company said. “As it becomes more liberalized, it will be as big as the U.K.”

888 Holdings is “watching closely” as legislation proceeds in France, so it will be in a position to apply for an online-gambling license, the company said in its interim results statement last month. A spokesman of the Gibraltar- based company declined to comment further, citing yet-to-be- determined French regulatory changes.

London-based William Hill, which is also the U.K.’s second-biggest bookmaker, is “very aware” of potential opportunities in France, spokesman David Hood said. “We would have ambitions to attract business from there.”

The attractiveness of France to foreign operators will depend in part on tax rates and other rules, Sigrid Ligne, secretary-general of the European Gaming & Betting Association, a Brussels-based industry group, said in an interview.

France’s original proposal in March included a 7.5 % tax on sports bets and a 2 % tax on poker. Final tax levels will be set by parliament. “The tax conditions that have been put in place by the French question how economically viable this is going to be” for new market entrants, Ligne said.

The industry group EGBA has also criticized proposed restrictions on the types of gambling and payouts that can be offered, which cause “huge concerns about how the project is going to allow fair access” to outside companies, Ligne said.

“The law does not protect monopoly activity,” a spokeswoman for the French budget ministry, who declined to be identified in line with government policy, said in an e-mail. Existing gambling companies “will have to file an application for approval and conform to specifications. Only lottery, scratchcards, and games of random chance remain under monopoly” of Francaise des Jeux, she said.