Spanish Gambling Spend Encouraging ahead of National Online Regulation

30 March 2009
While gaming operators await details of new national legislation that will govern online betting and skill games in Spain, the country’s gamblers are still spending considerable sums on those products that are regulated by the autonomous regions, which have been in control of gaming since the end of the Franco regime in 1977.

In the last year, United Kingdom bookmakers with Spanish partners from the gaming industry, particularly, have been busy building their networks of outlets in the two regions that have regulated offline betting.

For decades, bingo and slot machines have been products that attract huge levels of spending -- as well as differing tax rates in each region -- while lotteries, like the famous Christmas “El Gordo,” are renowned the world over for their multimillion euro prizes.

Despite a decline in bingo turnover in recent years, annual spending on all forms of gaming in Spain still tops 30 billion euros. However, the imminent arrival of online betting is certain to increase spending further, as several billion euro is spent by Spanish gamblers with high-profile offshore bookmakers like Bwin Interactive Entertainment A.G., Ladbrokes and Miapuesta (Sportingbet) each year.

In response to the presence of overseas bookmakers, which have been targeting the Spanish public since the beginning of the decade, two of the Autonomous Regions -- Madrid and the Basque Country -- decided to go it alone and offer licenses for betting shops several years ago. The region of Valencia is also expected to follow soon.

Subject to the new laws that were introduced in December 2006, in the Madrid region, it is simply a matter of satisfying the authorities that the necessary levels of expertise and technical infrastructure are in place, and of providing a 12 million bank guarantee, in order to secure a license.

In the Basque Country, as a result of legislation introduced back in 2005, a tender process was established in the summer of 2007 in order to select just three successful operators from seven bidders, including the Greek company Intralot S.A., and joint venture companies involving Stan James, Betfred, William Hill and Ladbrokes -- all United Kingdom bookmakers.

In November 2007, the Basque government awarded the licenses to William Hill and Codere S.A.'s joint venture with Garaipen Victoria Apustuak S.L., a local operator; to Betfred’s joint venture with the market leader in the region’s slot business, Ekasa; and to local company Tele Apostuak.

The new Basque law allows operators to open between eight and 25 off-track betting shops each, with a maximum of 10 betting terminals per shop. Already William Hill’s joint venture company has 49 points of sale in existing gaming arcades, and plans to open a further 20 by the end of the year as well as four Victoria-brand dedicated betting shops. A further 100 self-service betting terminals are also due to be rolled out in bars by the end of the year.

The Betfred-Ekasa joint venture opened its first two outlets in Bilbao in August 2008, and by the end of the year had reached double figures. Ekasa, which manages 10,000 of the Basque Country’s 12,500 slot machines, has earmarked 18 million euros in order to ensure that estate will reach 25 outlets by 2010, while Tele Apostuak has also begun its roll out.

In Madrid there is a straight fight for market dominance between the William Hill-Codere tie-up and the Ladbrokes-Cirsa joint venture, although Intralot and a leading Italian operator have both recently announced their plans to open outlets in the region.

Madrid has a modest 10 percent betting duty on gross margin, and a license allows an operator to open as many outlets as it wishes. Furthermore Madrid is the most affluent and well-populated part of the country, so it is no surprise that gaming operators are setting their sights on building their estates in the region.

At present, in the William Hill-slash-Codere-versus-Ladbrokes-slash-Cirsa battle for dominance, it is the Sportium brand used by Ladbrokes-Cirsa that appears to be slightly in the lead. Already, the operator has 54 locations up and running, all corners in existing gaming locations and -- subject to the timely completion of the 18-month planning process required for new stand-alone outlets in the region -- the first of the Sportium-branded betting shops is expected to open by the end of April. The company plans to end the year with a total of 100 outlets open in the region.

The Victoria brand used by the William Hill-Codere joint venture has so far secured 36 points of sale in Madrid: 33 "corners" placed in bingo halls and gaming arcades, and three exclusive betting shops.

Both operators report that football is the main betting product in the outlets, but greyhound racing is proving to be particularly popular. Victoria report that football unsurprisingly makes up the lion’s share of turnover, but it is interesting to see that this only amounts to just over 50 percent of the total, with dog racing accounting for 32 percent, horses, 7 percent, and other sports -- primarily basketball and tennis -- making up the remaining 9 or 10 percent.

Average stake in the outlets is proving to be similar to that experienced in the United Kingdom. Victoria report average bet value of 15 euros in Madrid, and 11 euros in the Basque Country. Both operators speak of “encouraging levels of turnover,” which should not come as surprise given Spain’s relatively high gross domestic product and historic interest in all forms of gambling.

In addition to the bets being made over the counter, betting shops can benefit from up to four amusement-with-prize terminals per outlet in Madrid and two in the Basque Country, although United Kingdom-style fixed odds betting terminals are not presently allowed.

Given the relatively relaxed regulations, modest betting duty levels both in Madrid and the Basque Country, it is not surprising that the business is proving to be a success, and also appearing to attract interest from other regions interested in regulating and raising revenues. It appears that Spain’s combination of local regulation for off-line and national laws for online may prove to be a success no matter how strange it may at first appear.

Mr. Wood is a veteran of the international betting and gaming industry, having worked in the past for companies like Ladbrokes and Victor Chandler. He is now an established consultant and researcher advising companies on market entry and business development projects in Europe.