“The new regulation in Spain favors big operators”

Which is the potential of the online gaming Spanish market after the approval and implementation of the new gaming law?
It is hard to know exactly the potential of the Spanish market and make previsions when there is still no official report. The government has recognized that it has regulated online gaming without having enough information from an economic point of view.

There are numbers a bit optimistic that estimate that in 2014 the market could exceed the 800 million euros.

It is obvious that, once operators obtain their respective licenses and start operating in a regulated environment, global gaming income will grow and the number of players too, such as it had occurred in other countries like Italy and France. Maybe the market is big, but not enough so the 58 societies that requested license will operate. Nowadays, the Spanish online gaming sector is mature and is quite consolidated. Besides, the regulation and high taxation will do the business too profitable so far.
 
In which way does this new legislation affect or benefit players?
The new regulation protects under-aged and pathological players. So, for those groups, the legislation is beneficial. However, during the regulatory process, professional players have not been considered. The gaming offer has been limited for them, and some restrictive requirements have been imposed.

The law has not planned any modification on the tax system of the players, who tax according to the Tax on the Income of Natural Persons due to the total winnings obtained in winning bets, without being able to deduce the losses suffered in the losing bets, which brings them into a specially costly situation in continuous games such as poker, where the winning or losing bets happen in each hand played and where it only can be attributed the character of winning or lose to the total of bets and jackpots during a period of time. This way, it could happen that many players may contract debts due to taxes that can be very superior to the jackpots won.

What will happen with the companies that have operated in Spain for years before the establishment of a regulation?
Most of the big solvent and serious international companies that operated in an illegal way, have lost licenses. So they play with certain advantages because they know the market, they have famous brands and besides they have earned the confidence of a great number of players.

From no won, these companies will have less competence and will be able to have more advertising. However, they will reduce their benefits because they will have to pay more taxes to Spain. Of course the small companies and gambling stalls will disappear or will be expelled from the Spanish market.

The new regulation favors big operators, those that can enable a big investment in technology, pay high fees to technological companies and face important advertising and marketing campaigns. Of course, the great beneficiary of this new regulation is Loterías y Apuestas del Estado (LAE), which starts from a very interesting position.

Which are the opportunities and/or disadvantages that traditional operators have to face from now on?
Despite the regulation aims to create a gaming field so the companies that obtain a license develop the activity in equality of conditions, I see it is difficult due to the delay in the regulation and the existence of a legal void for seven years, which has given a competitive advantage a number of powerful foreign companies.

The traditional Spanish sector plays with disadvantage due to the lack of knowledge and lack of experience in this new business model that is not just a gaming channel. Business margins are reduced and more money will have to be spent in marketing and advertising. There are important casino groups and recreational venues that can have big sinergies between the traditional and the virtual world. Maybe the most remarkable advantage for the traditional operator is the possibility to differentiate offering a more complete experience to the player, combining the best of traditional gaming with the best of online gaming.

Is the new Spanish market attractive for potential foreign investors?
It is evident that the Spanish market is attractive for foreign investors from a long time ago. Many of them have been operating for years in a market that has not been regulated so far. Despite Spain is going through moments of uncertainty and difficulty, and is not pioneer in online gaming, it is attractive for foreign operators due to its strategic position, its language, and the chance to operate as a bridge between Europe and Latin America.

How is Spain positioned with regards to other countries that have regulated online gaming?
In numbers, it could be between the third and fifth place, behind Italy, UK and France, ahead Germany. Its position will depend on if it reaches, in a greater or lesser extent, the regulatory development of all the online gaming modalities, if international liquidity applies in products such as poker and if it revises the decrease in the level of taxation of the companies and users. So, if it does not allow operating recreational machines in bingos and online casinos, which are more or less between the 60 and 70% of its incomes, and does not authorize cross-betting, Spain will not be attractive enough for foreign investors.
 
What is the current situation of online gaming in Spain in numbers and which are the future perspectives?
The Jdigital Association estimates that in 2011 the online gaming sector has generated net incomes -deducting the jackpots- superior to the 370 million euros in 2011, which has supposed an increment close to the 20% with regards to 2010. Besides, in 2012 the sector will generate 500 million euros, in 2013, around 650 million euros, in 2014, it could exceed the 800 reaching the 840 million euros.

With regards to the number of users, last year the 600,000 unique users have been exceeded, which have implicated an increment of more than 60% compared to 2010. The investment performed by the different online gaming companies in advertising and sponsoring has been of 90 million euros in 2011.

Which are the most popular online games in the country?
The most popular are, in first place, the sportsbooks with more than 500,000 bettors, in second place, online poker with 200,000 players, followed by other games of chance such as casino games with 100,000 users, according to information estimated by the association
Jdigital in 2011.