No Signs of Slowing

The Italian regulatory authority, AAMS, does not make it easy for operators to offer their products in the country’s gaming market. There are strict criteria to be fulfilled before it is possible to acquire a licence, and to operate online, a fee of just short of 300,000 euros is payable albeit valid for a period of seven years (until Summer 2016). However, the Italian gaming business is booming with the latest product, poker, proving to be an even bigger success than sports betting in this football-mad country.

Italy is still a country where the Vatican has influence and where betting and gaming are viewed with suspicion. In recent years the huge amount of income finding its way to the Treasury from each newly liberalised product -- scratch cards, slot machines, sports betting -- has made it easier to convince Members of parliament of the wisdom of regulating rather than banning gaming, but it was still difficult to make the case for the effective legalisation of poker.

In order to placate those parliamentarians who saw poker as a step too far, it was agreed that only tournaments would be allowed (no cash games), and the term Poker Sportivo was adopted as a means of illustrating that the game is based on skill rather than chance. To overcome the suspicions of those who saw the liberalization of online poker as being a means for operators to transfer Italian customers from their dot-it licensed sites to dot-com offshore businesses, it was ordered that all tournaments played in Italy be ring-fenced, and that there be no tables where Italian players mixed with those from the rest of the world.

Unsurprisingly, operators were initially suspicious that the measures would prevent the business from growing. They could not have been more wrong.

With integration to the Sogei Italian government database being streamlined and reporting to the authority less onerous, it proved simpler for operators to get up and running than had been the case previously with sports betting. During the summer of 2008 operators began launching play-for-fun sites as a means of educating the Italian public and testing the software.

As soon as the first operator -- local company Gioco Digitale S.A. -- launched its real-money platform on Sept. 2, albeit for only a few hours a day initially, business boomed. With Sky Italia broadcasting the European Poker Tour, World Poker Tour and other tournaments each night -- and many Italians already playing with offshore sites (research indicated that of the operator’s registered users, 70 percent were already playing with overseas Web sites) -- the immediate success of the product was not totally unexpected. By Sept. 9, the first day of extended hours of 8 a.m. to 8 p.m. each day, Gioco Digitale had 6,000 registered users playing or making deposits.

Two operators, Gioco Digitale and the Italian white-label operator, Micrograme S.p.A., generated turnover of 18 million euros in September, and in the following month, they clocked up almost 51 million euros.

However, once poker became available 24 hours and new operators went online, the public's reaction exceeded all expectations. In November, Bwin Interactive Entertainment A.G. and Lottomatica S.p.A. launched, making a modest contribution to the total of 74 million euros. Despite the effect of Christmas and New Years on the figures, December’s tournaments generated just short of 100 million euros in turnover, and with the January arrival of Snai S.p.A., Sisal S.p.A. and Eurobet -- all using the Playtech Ltd. platform -- the normally slow month still showed an increase of 40 percent to 140 million euros. Growth finally slowed in February, with figures of 143 million euros, but March is expected to show substantial increases as PokerStars -- which had already built a substantial off-shore business in Italy -- entered the market.

With PartyPoker and other big names yet to join the fray it is likely that the skill games boom will continue for some time. Amazingly enough, the first two months of 2009 saw online poker overtake online sports betting in terms of turnover -- the 285 million euros trumping the 212 euros million bet on sporting events (primarily football).

In January 2009, the first month of operation by the majority of leading companies, Gioco Digitale accounted for 56 million euros of the total (39.9 percent market share) while Microgame consolidated its position as number two in the market with turnover of 35 million euros (25 percent). Lottomatica had turnover of 23 million euros (16.4 percent) while the relatively new network operated by Playtech reached 12.3 million euros (8.8 percent), with Bwin turning over 11.6 million euros (8.4 percent).

In February Gioco Digitale was still market leader with a 35.8 percent share (with Microgame still on 25 percent), but March is expected to reveal a stronger showing from the established operators using the Playtech platform.

Another source of growth in the skill game sector -- effectively 99 percent online poker at present -- is the expected crackdown by AAMS on overseas operators transferring players to their dot-com businesses. PokerStars was heavily criticised last summer for a massive promotional campaign, for its play-for-fun site, which was also a back door to its offshore site. AAMS has shown of late that it is in no mood for idle threats, with Unibet effectively being switched off in February over suspicions that Italian customers were allowed to transact using the bookmaker’s dot-com site. With AAMS warning that they will get tough it is expected that there will be a flood of poker customers "returning" to play in Italy.

The potential resilience of the poker business is also illustrated by the number of tournaments and the low average stake. In February, just short of 19 million competitors took part in 3.95 million games, with the average stake being 7.65 euros. Tournaments have a buy-in of between 50 euro cents and the maximum of 100 euros, so it is clear that most players are there for the pleasure of the game. With at least 80 percent of the pot being paid out as winnings, and a tax of 3 percent on the stake, operators are left with a rake of up to 17 percent, creating substantial revenues based on present volumes. With poker already accounting for 52.9 percent of all online gaming turnover, no one is expecting business to slow anytime soon.