Emerging Markets | Czech Republic

2 March 2009
The Czech gaming industry is regulated by the 1990 gaming act, which allows all types of land-based gambling but does not address online gambling. The industry is regulated by the Finance Ministry.

The Czech Republic has a developed and growing gambling market. Turnover, before winnings, passed 100 billion Czech koruna for the first time in 2007. The average growth in gambling turnover was over 9 percent during the last six years. Gambling spend per capita doubled in the period from 1997 to 2007, reaching $570 billion, by handle. The Czech Republic has the highest gambling spend per capita in Central Europe, with only Hungary close to it.

The gross gambling revenues after winnings increased from 11.3 billion koruna in 1996 to 24.4 billion koruna, or about $1.2 billion, in 2007. The Czech gambling industry’s growth, adjusted for inflation, is positively correlated with the growth of real economic output in the past 11 years, showing that the Czech gambling industry is prone to economic cycles.

Not all Czech gaming sectors have shown cyclicality in the past decade, which makes them less likely to be affected by the current crisis in the immediate term. However, as people have less money to spend on entertainment, the gambling industry will likely suffer. The current forecasts from the major international institutions do not forecast a recession for the Czech Republic, but only slowing of growth, which means that its gambling industry should also prove more resilient to the crisis than those economies expected to experience a severe recession.

In 2007 more than 50 percent of gross gambling revenues were accounted for by gaming machines outside of casinos. The Czech Republic has hundreds of gaming -- or herna -- bars. The halls together with casinos operate more than 50,000 machines in the country. There is one machine for every 200 Czech citizens, twice as many as in Germany. Herna bars also sometimes offer betting, besides the machines.

The Czech Republic has around 130 casinos and electronic casinos. Casinos Austria International is one of the market leaders, which, together with Czech casinos, operates a total of eight casinos in the country. Casinos Austria International has been involved in Czech Casinos since the company was formed in 1989.

The Czech Republic has one of the largest densities of casinos when compared to the total population in Eastern Europe. There are 12.6 casinos per million people in the country, whereas the United Kingdom, for example, has only 2.4 casinos per million citizens. Despite the large number of venues, casinos accounted for below 10 percent of total gross gambling revenues during 2007.

Technical games overtook lotteries during 2007 as the second most popular type of gambling. The revenues of this sector nearly doubled in 2007 and they reached approximately 20 percent of total gaming revenues. Technical games include remote gambling -- like telephone betting and interactive betting using TV -- but also electronic dice games, electronic casinos and Interactive Video Terminals.

The Czech national lottery operator, Sazka, was formed in 1956. Besides lottery games, Sazka also offers betting and is among the top five bookmakers. The company is the largest non-governmental provider of funds for good causes in the country. Its shareholders are civil associations in the field of sports and physical education.

The Czech Republic has 15 racecourses, six of which are located in the vicinity of the capital. Betting on horse races is operated by Betino, which, since 2005, has held the monopoly for betting on horse races.

The sports betting sector is dominated by five large domestic companies, most of which were established in the early 1990s. The total number of betting shops in the country exceeds 3,500, not including the sales points of the lottery operator Sazka. There are more than 340 shops per million people, more than in Poland and Slovakia, but less than in Eastern European countries like Croatia or Bosnia and Herzegovina. For comparison, the United Kingdom has less than 150 shops per million people.

The Czech Republic also has bingo halls, but their share of the total market is below 1 percent. The popularity of land-based bingo is decreasing, similar to developments in other European countries. The revenues in the bingo sector decreased from 180 million koruna in 1996 to 45 million koruna, or about $2.2 million, in 2007.

The 1990 law does not address online gambling and, until recently, it seemed that the Czech Republic would be moving toward an online gambling ban. The Czech government has moved toward a more anti-gambling stance in recent years. A bill in 2007 was introduced to block online gambling transactions -- similar to the Unlawful Internet Gambling Enforcement Act, or UIGEA -- but the bill was never enacted probably because it would have been in breach of European Community law.

During 2008 the existing gambling act was under review. The review process began that spring with a public consultation. Later the Ministry of Finance hired Ernst & Young to advise on the law changes. The consultants talked to domestic operators and foreign land-based operators, as well as associations and software providers, which brought hope that online gambling might be legalised instead of being prohibited.

Domestic operators wanted legislation that would allow them to compete with foreign online sites that already target the Czech market illegally. Fortuna Group, which offers betting through land-based venues in four countries, together with offering online betting in Slovakia where it is permitted, led the fight. Fortuna’s strict requirements to deal with problem and underage gamblers finally convinced the finance ministry to allow online gambling from Jan. 5, 2009.

Online gambling was allowed with a sub-legal act, without amending the current 1990 gaming law. The five largest bookmakers now offer online gambling as well.

GBGC believe that online gambling legalisation with prohibition measures in place will decrease the number of foreign online operators targeting the market. Local operators have the advantage because they have a known and trusted brand that is advertised throughout their land-based estates. We noted this outcome in the Slovak Republic.

Ms. Jurican, a research analyst with Global Betting and Gaming Consultants, graduated from the Faculty of Economics and Business, Zagreb University, in 2004 with a major in economic development and analysis. Before entering the gambling industry she worked for the Croatian National Bank's research department as an analyst.