Benchmarking Germany’s new

gambling regulatory regime

October 19th, 2020
 Global gaming market ($bln)
The online gaming market incidence is increasing globally, notwithstanding the impact of the
COVID-19 crisis

7,8% 8,6% 9,7% 10,5% 11,3% 12,0% 13,2% 18,2% % ONLINE

448 453
427
399 407 400 411
356

394 393
368 378 LAND BASED
368 372 361 291

39 43 48 54 60 65 ONLINE
31 35
2013 2014 2015 2016 2017 2018 2019 2020E
Source: Elaboration MDF Partners on H2GC data

2
 Global online gaming market ($bln)
The online industry is driven mainly by Betting and Casino

CAGR
2013-2020 65
60
11,2% 18%
12 OTHER
54 16%
10
48 16% 3
5% POKER
9 4%
3
43 16%
8 5%
3
39 25% 27%
18 CASINO
35 16%
7 3
5% 15
31 16%
6 3
6% 14
25%
16%
6 13
26%
16% 3
7%
5 3
7% 26%
11
8%
3 10
26%
9
26%
8
24%
54%
32 50%
32 BETTING
53% 53%
29
52%
22 26
52%
16 18
51% 20
51%

2013 2014 2015 2016 2017 2018 2019 2020E

Source: Elaboration MDF Partners on H2GC data

3
 Gambling regulation in Europe
Most of the European countries regulated online gaming during the last 20 years

Main countries regulating online gambling Gambling regulation landscape

2000 - 2020 2020
REGULATED
Pre-2010
IN PROCESS

MONOPOLY
2011 - 2012

2013 - 2014

2015 - 2016

2017 - 2018

2019 - 2020

Source: MDF Partners, EGBA

4
 The path towards the Re-Regulation
Some countries are now planning and implementing a new approach on taxation,
advertising and responsible gaming
Next to
Regulation Re-Regulation come
Last 20 years Last 3-5 years 2020+
+

Impact for the industry

• Advertising ban
• Tax increase
REGULATORY CONSTRAINTS

• Increased regulatory costs:

• Advertising ban
• Advertising restrictions
• Deposit limits
• User verification system
Financial, technical, operational
requirements, etc.
• Higher complexity: Advertising
and other constrains limit the
entrance of new players

• Advertising restrictions
• New strategy and marketing
• Payment methods approach: Responsible gaming as
restriction key element and differential factor
• Tax increase
-

- TIME +

5
The European online gaming market (GGR 2019; mln€)
The online regulated European gaming market reached 13,3 bln€ in 2019, driven by the
top 10 countries that represent the 90% of total GGR
ESTIMATED
76% 84% 78% 81% 90% 80% 87% 70% 80% 79%
CHANNELIZATION

4.545

Top-10 operators
11,8 bln€

OTHER

1.780
1.423
1.152
746 36%
437 449 535
338 399 81% BETTING
63% 43%
90% 72% 51% 42% 51%
43%
Poland Czech Rep. Greece Belgium Denmark Spain Sweden France Italy UK

Source: Elaboration MDF Partners on H2GC data

6
 The current state of the German regulation
Effective channelization will really depend on the regulatory framework. The new treaty is
scheduled to come into force since the 1st of July 2021

Main aspects of the current regulation (Inter-State Treaty) Germany GGR forecasts, €mln
Off-shore
AREA DESCRIPTION
2020 - 2025 estimation

• Betting: Live betting limits (only to result and

PRODUCT 3.540
next/number of goals) 3.440
• Poker 3.240
3.080
• Virtual slots: Max 1€ spin & 5 sec 2.850
• Table games
MARKET • Betting, Poker and Virtual Slots: Unlimited 2.230
STRUCTURE licenses
• Table games: One license per land-based
casino (Lander regulation)
• Betting: 5% Turnover
TAXES
• Virtual slots, table games & Poker: VAT
applicable
• Casino & Poker: Limited to 9pm-6am
ADVERTISING
• Betting on broadcasted events not permitted 2020e 2021e 2022e 2023e 2024e 2025e

• Cross-operators deposit limit of 1.000€/month

OTHER
• €5M guarantee Source: Elaboration MDF Partners on H2GC data
• Players cannot log to more than one website
simultaneously
• Detailed technical requirements to be defined 7
 How to define a sustainable regulatory framework
Principles-based rules allows to adapt the regulation to the dynamic market evolution

PILLARS FOR A SUSTAINABLE REGULATION THE GAMING ECOSYSTEM

Effective measures
REGULATOR
to monitor and Complete portfolio to
minimize compete with illegal
problematic gaming market
RESPONSIBLE
GAMING & ADV PRODUCT
RULES

CONTROL
(Operators MARKET Open licensing
Reasonable operator
requirements) STRUCTURE system
requirements and
technical tools help
customer protection
and control
TAXATION

Taxation have a critical impact on

CONSUMERS OPERATORS
product and channelization

8
MDF Partners analysis
The market attractivity and sustainability is the result of an effective regulatory strategy

COUNTRY PILLARS ATTRACTIVITY MATRIX

PRODUCT

GROWTH
MARKET
MARKET

+
STRUCTURE

TAXATION

LEGAL/FINANCIAL REGULATORY
REQUIREMENTS EASE TO ACCESS

TECHNICAL
REQUIREMENT

-
RESPONSIBLE
GAMING
- +
ADVERTISING

9
 Product offer
A complete gaming offer is essential for targeting the channeling goals

AREA

PREMATCH

Strong live
LIVE betting
BETTING limitations

VIRTUAL

HORSES State monopoly

TABLE GAMES
Limited to
Slots one license
CASINOS SLOTS per
limitations
Lander?
LIVE GAMES Only live roulette

POKER

OTHER BINGO

SKILL GAMES

Source: MDF Partners analysis 10

Market structure
Limits on the number of licenses affect negatively the natural market development

COUNTRY MARKET STATUS # LICENSES # OPERATORS

OPEN NO LIMIT +300

CLOSED
Open every ~6 LIMITED TO 200 Expected to be
years 120
reduced to 40 in 2023

OPEN NO LIMIT 14

OPEN NO LIMIT 72

CLOSED Open every ~3 NO LIMIT 79

years

OPEN NO LIMIT 16

CASINO:
BETTING: ONE PER
HYBRID
NO LIMIT LANDER
Source: MDF Partners analysis 11
Taxation
High taxation levels represent a strong limitation for channeling and sustainability
of the market
BETTING CASINO

5% GGT: 20%-80% GGR VAT applicable

50% equivalent depending on payout

21% 21% Tax on GGT

Tax on GGR

18% 18% Sustainability level

55% Sport betting Casino not

regulated
38% Horse betting

22% Virtual betting

24% Sport betting 25%

15% 15%

20% 10% GGR in Ceuta 20% 10% GGR in Ceuta

12
The critical taxation effect
Taxes are the most impactful factor for the channeling to the legal offer

Channeling to the legal market in Europe

Sustainable tax > High channeling
100%

90%
CHANNELING

High tax > Low channeling

80% Sustainable taxation levels help fight

the illegal market and encourage
channelization to legal offer

70%

Restrictive taxation models

have direct effect on the
channelization to legal offer
60%
0% 5% 10% 15% 20% 25% 30% 35%
Source: Ecorys TAX (GGR EQUIVALENT)

13
 Legal/Financial/Business requirements
It is critical to check applicant companies' reliability

AREA

Depending on
Provisional: 100k € First year: 4 mln €
GUARANTEE contract value 5 mln €
Definitive: >100K € N. years: >1 mln €
FINANCE (1,5 - 2 mln€)
MIN. SHARE
ND
CAPITAL

EXPERIENCE

BUSINESS MIN. REVENUE ND

BUSINESS PLAN

REGISTERED
OFFICE

LEGAL
LEGAL STRUCTURE
ND

SHAREOLDER
IDENTIFICATION 3% 2% 10% 2%

Required Not required

Source: MDF Partners analysis

14
 Technical requirements: looking for the good balance
Effective and feasible control mechanisms guarantee the security and compliance of
the operators

AREA

SERVER
LOCATION

CONTROL
MODEL
TECH.
REQUIRE CERTIFICATION
MENT
USER
VERIFICATION

B2B LICENSE

Regulator real time Internal Control

Required Not required
control System

Source: MDF Partners analysis

15
 Responsible gaming
A key area that is being increasingly targeted by regulators to guarantee the player’s
protection

AREA

Daily, weekly, Daily, weekly, Daily, weekly,

TYPOLOGY Weekly Not defined Not defined Monthly
monthly (optional) monthly monthly
DEPOSIT 1w
COOLING - OFF 24h 1w 48h 72h 1w ND
LIMITS

PAYMENT LIM. Ban of credit cards ND ND ND ND ND ND

Temporary & Temporary & Temporary & Temporary & Temporary

TYPOLOGY Temporary Temporary
SELF Permanent Permanent Permanent Permanent (min. 3 months)
EXCLUSION NATIONAL
REGISTER

TIME LIMIT POKER SLOTS

OTHER
SOCIAL Contribution to Warning National assistance Self-assessment Bet limits (time and
RESPONS.
ND ND
charities message phone test amount)
Required Not required

Source: MDF Partners analysis

16
 Advertising: stigma on gaming led to backlash?
Most of the countries are currently evaluating tighter advertising controls, but advertising
ban is not an effective way to protect the customer

PERMISSIVE
BAN TO BE
MODEL WITH ADVERTISING &
APPROVED IN
MINOR CASINO, POKER SPONSORSHIP
OCTOBER
RESTRICTIONS AND SLOTS BAN
PERMISSIVE MODEL WITH MINOR RESTRICTIONS
BANNED EXCEPT
AFFILIATION, SEM
9PM-6AM AFFILIATION
AND OTHERS TO
TV BAN EXCEPT ALLOWED
BE ALLOWED
FROM 9PM

Open Restrictive
Source: MDF Partners

17
 The opportunity for Germany: Attractivity Matrix first results
Germany is set to become one of the leading regulated countries in Europe, but…

GROWTH
MARKET
In progress
+

REGULATORY
EASE TO ACCESS
-

- +
Source: MDF Partners 18
 The opportunity for Germany: Sizing and recommendations
…some key improvements are required to build a sustainable environment and effectively
fight versus the illegal offer

EFFECTIVE REGULATION NOT EFFECTIVE REGULATION RECOMMENDATIONS

Market growth
Progressive channeling to • Set-up a central Regulatory Authority
regulated market
• Define an open licensing system
Low market growth
Slow channeling to regulated market • Define a sustainable tax level
• Review live betting and slots limits to
3.440 3.540
3.240 allow a competitive product vs the off-
3.080
2.850 shore
2.230 • Execute and fine-tune the regulatory
model
95%
95% 80%
60% 60% 50%
30% 45% 40%
25% 20% 18%
2020e 2021e 2022e 2023e 2024e 2025e 2020e 2021e 2022e 2023e 2024e 2025e

Regulated Offshore

Source: MDF Partners estimates

19
“Competition is only one
click away”
Larry Page, Google Co-Founder
 “We partner with operators and public institutions, in regulated
environments, helping to build effective and sustainable models in
the gaming and entertainment sector”

Mauro De Fabritiis
Founder MDF Partners
mauro@mdfpartners.com

Thank you