Gaming News

Gaming in Bulgaria - Market Report

The economy of the country is based mainly on tourism, with agriculture, services, and light industry. Since 1989,when the former communist government resigned, there have been 7 changes of government. Currently, the National Movement for Simeon II or NMS2 party, whose leader is Mr.Simeon SAXE- COBURG-GOTHA, former King of Bulgaria and current Prime Minister, forms the government, and has a majority in the parliament. The gaming industry in Bulgaria has evolved substantially over the past decade -from virtually no-regulation to a rather significant one. After 1989,there was no gaming except in a few hotels that hosted foreigners. There was no gaming regulation either. Due to the lack of guidelines, some antiquated AWPs and slots began to enter the market. Chaotic growth, non-consistency, low quality products, and low payout percent were predominant in the market for 2-3 years.

With the initiative and foresight of a few local operators, government officials and the only association at the time of the local manufacturers, BTAOPII, regulation was introduced for the first time in Bulgaria. Gaming was officially defined in Bulgaria in 1993 through a Government Decree, which legalized Casinos, Bingo Halls, Government Lottery and Government Lotto.

Gaming machines were legalized with certain restrictions and limited payout, and they became popular as a route operation in gaming locals, arcades, and coffee shops. During these years, gaming grew substantially and the lack of more detailed and strict laws formed fertile soil for some "gray" operations. This situation created the necessity for different and even more specific regulation.

The Gaming Law was promulgated at the end of 1998.The law defined further the requirements for the casinos and the gaming operations, introduced a licensing system, stipulated new taxes, made certain changes in the definition and the requirements for gaming equipment, defined clearly the regulatory body and structure, and enforcement policies and procedures.

Only licensed, specialized gaming locations/casinos were allowed to operate gaming equipment. In order to obtain a license a necessary application and supporting documentation as described in the Law was required by the Gaming Control Commission (structure of the Ministry of Finance) and due diligence was performed on the applicant company and its owners. There were some limitations in respect of foreign ownership of casinos and also a requirement for an upfront licensing fee, which is different for casinos, bingos, and gaming arcades. Casinos were not permitted to open within 300m of a school or university. No one under 18 or in a military uniform were to be allowed in casinos. The limited payout for the gaming machines was eliminated. Gaming equipment tested and approved by a specialized laboratory was allowed for operation after specific registration. Jackpot systems were permitted. Publicity and mass media advertising of casinos was forbidden.

Strict regulatory and controlling agencies were formed under the direct supervision of the Ministry of Finance to ensure proper implementation and adherence to the new Law. In 1999,the Gaming Law was amended and licenses for gaming equipment manufacturers, service centers, and distributors were introduced.

The casinos can be categorized either as local casinos, or tourist casinos -for visitors or for organized junket groups (mainly from Turkey and Israel). The casinos in Bulgaria are predominantly located around tourist areas and work either all year round or in some places only during the season (end of May until the beginning of September).Because of the tourist flow during the summer, there are several casinos on the shores of the Black Sea. In the capital, Sofia, there are six casinos, and some seasonal ones. In other big cities and the surrounding areas, there are on average 2-3 small casinos. Mainly live games are played in those casinos, and only very few have limited number of video or reel slots. Usually, there are 3 to 5 gaming tables. Due to the high double taxation -upfront payment per table and corporate tax on the income -the number of the gaming tables per casino is optimized. The most popular games are Roulette, Black Jack, and Poker. Punto Banco, Baccarat, Craps is not popular among the public.

Gaming machines are located mostly in separate popular locations like gaming arcades and their number constantly changes. The luxury ones (type electronic casino)typically have up to 50 gaming machines (on average 30).The less attractive locations have 10-20 slots. According to the legal requirements, those locations are categorized based on the population of the city. In cities with less than 30,000 people population gaming owners are allowed to have gaming arcades with a minimum of 10 slots. Cities,where the population is over 30,000,can open gaming arcades with minimum 20 slots. The major part, close to 90%of the currently installed gaming slots, are in the gaming arcades and are videos (video reels, pokers, etc.).The mechanical reel slots are not very popular among the locals and they are primarily found in tourist locations. The total number of legal gaming machines is approximately 6,000, which is close to the maximum saturation of the market under the current conditions.

Due to specifics in the taxation system, which is tied to a quarterly advance payment of a fixed tax per gaming seat/table, in addition to the corporate income tax, the number of gaming tables and slots is kept to an optimal level. For example, the required tax per gaming Roulette table is approximately 12,000 USD per quarter upfront payment followed by a corporate tax on the income amounting to up to 28%.For slots, the upfront tax is close to 200 USD per slot per quarter, or 20-30%of the gross revenue per machine for the same period.

According to the official statistics, the average salary of a four-member household with 2 working people is 100-150 USD, a big part of which is spent to cover the energy needs and cover the daily living expense. There are some exceptions in a few much better paid professions, mainly in the private sector. The available disposable income is pretty low considering the low income and the high cost of living. The rate of unemployment in 2002 was 18%.

Bulgarian gaming operators,with the gradual development and understanding of gaming, have a better appreciation of high European standards. Unfortunately, the availability of limited financing and an under developed banking credit system do not permit them to invest in expensive equipment. Most of them can only afford to buy used equipment that is 3-4 years old.

There are some large casino operators in Bulgaria. The biggest one is the Turkish entertainment group, Princess, which owns 3 of the biggest casinos with live tables and slots as well. Local operators include the bookmaking chain Eurofutbol with 2 casinos, Multigroup (with 3 casinos), and some smaller operators, who mainly have seasonal casinos. In the electronic casino category, one of the biggest local chains is Eldorado which has more than 20 locations (electronic casinos)featuring video slots, automatic roulettes, and progressive jackpots. Eldorado has also successfully established multiple, international operations because of its brand name popularity, built on their sophisticated management system, marketing program, and professionalism. Additionally notable are the chains Queens Club, Blitz Club, and other local smaller operators with 1-2 gaming arcades. All of the equipment placed in the casinos has to pass laboratory tests and to be certified for compliance by the local Gaming Laboratory. The payback percent can vary, but is not allowed to be less than 80%. The market for slots in Bulgaria is very limited and saturated. Import is limited mainly to used equipment due to the high cost of new machines as well as the high import duties. There are few licensed local manufacturers. Most of them are involved in refurbishment, service, and distribution.

There is only one local company that manufactures internationally compatible gaming equipment -Casino Technology. Although a new company (since 1998),its management team quickly acquired and assimilated know- how, expertise and experience from previous players in the market, which allowed the company to grow rapidly and competitively.

Their range of equipment involves several different series of video slots and pokers, automatic roulette systems, video betting terminals, progressive jackpot systems, management control systems, CRM and player tracking system, POS and accounting controls, maintenance and inventory control, on-line and local network capabilities. The company spends a substantial amount in R&D, resulting in frequent, significant innovations and developments, and has more than 80 highly qualified employees involved in engineering, programming, design, etc.. They produce 10-15 new games annually. Casino Technology's products are popular not only in Bulgaria, but are also well recognized in the international market. Among the most popular of their games are: Aztec Gold, Space Diamond ,Five Star Party ,Mega Jack, Mega Stone ,Banana Poker. New games that are coming are Dolphin Pearl, Mystic Nile, Gems for Free, Matrix Poker. The company has a presence in Europe, Eastern Europe, Asia, South and Central America. Recognizing the value of excellence in product design and performance and reliability, their corporate strategy is rooted in innovation and high quality standards, and its mission is driving it toward a highly competitive, leading position in the industry globally.

The future development of the gaming industry in Bulgaria is closely related to and dependent on the continuous process of economic development in the country. The acceptance of the country in the European Union will be a positive factor in the future of the gaming business in Bulgaria.

For Bulgaria, acceptance in the EU will mean economic integration, enhanced competition, lowering of the trade barriers, free capital movement and positive stimulation of direct foreign investment, liberalization of the labor migration. All of this will effect in a positive way the living standard of the country and increase the levels of per capita income, which will provide more opportunities for the gaming sector. This is expected to occur by 2008, but the ongoing progress in the country in meeting the mandated criteria of political and micro/macroeconomic levels will accelerate or delay this event.

< Gaming News