MARKETING REPORT «The world market of traditional and online lotteries»

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1 AMIKO, RESEARCH AND CONSULTING COMPANY , MARKETING REPORT «The world market of traditional and online lotteries» Over 500 marketing reports in different sectors of the Russian economy. Moscow, AMIKO

2 CONTENTS CONTENTS PARAMETERS OF THE RESEARCH MARKET OF TRADITIONAL AND ONLINE LOTTERIES EUROPEAN UNION COUNTRIES Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry GREAT BRITAIN Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry GERMANY Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry FRANCE Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry ITALY Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry USA Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry CANADA Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry CHINA Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry Regulation of the cryptocurrency AMIKO, Consulting and Research company, , 2

3 2.9. SOUTHERN KOREA Main indicators of the market of lotteries Key trends on the market of lotteries Role of online lotteries on the market State regulation of the industry Regulation of the cryptocurrency MARKET OF MOBILE ONLINE LOTTERIES CHARACTERISTICS OF CONSUMERS MARKET CONDITION FACTORS AFFECTING DEMAND VOLUME AND DYNAMICS OF THE MARKET PROBLEMS OF THE MARKET OF TRADITIONAL LOTTERIES MAIN CONCLUSIONS AMIKO, Consulting and Research company, , 3

4 1. PARAMETERS OF THE RESEARCH Parameter of the Research Research objective Description of a Parameter Market analysis of traditional and online lotteries in the following countries: USA, Canada, China, South Korea and European countries (particularly France, Italy, Germany and the UK). 1. Main indicators of the market of lotteries 2. Key trends on the market of lotteries 3. Role of online lotteries in the market Research tasks 4. State regulation of the industry 5. Problems of the market of traditional lotteries Methods of the Research and sources of information Date of the Research carrying out Geography of the Research 6. Analysis of the global market of mobile online lotteries (characteristics of customers, market condition, factors affecting demand, etc.) Statistical portal Statista, data of the state statistics agencies of various countries, reports of European Lottery Association, reports of Gambling Comission of Great Britain, reviews of Digital Marketing Ramblings, of the company China LotSynergy Holdings Limited, official data of The Korea Lottery Commission, online service Practical Law (Great Britain), reports of the company Gambling Compliance (Great Britain), reports of FDJ (La Française des Jeux), data of holding IGT, data of mass-media various countries, expert assessment, desk research, analysis of secondary information 2018, January USA, Canada, China, South Korea and European countries (particularly France, Italy, Germany and the UK) 2018 AMIKO, Consulting and Research company, , 4

5 2. MARKET OF TRADITIONAL AND ONLINE LOTTERIES 2.1. EUROPEAN UNION COUNTRIES Main indicators of the market of lotteries According to experts about 7 million people in the EU constantly play the lottery. In this chapter we describe the main indicators of the companies included in European Lotteries Association 1. Key indicators of the members of the European Lotteries Association are presented in table. Reporting EU Members All Reporting EL Members EL Members Money to Society 21.3 bn 23.5 bn Direct Full-time Employment Indirect Employment Sales 79.8 bn 87.1 bn Gross Gaming Revenue bn 36.5 bn Gross Gaming Revenue via the internet 2.0 bn 2.4 bn Table 1. Key indicators of the members of the European Lotteries Association In the structure of sales for lotteries by members of the European Lotteries Association in the countries of the European Union by games categories, Draw Based Games lead with a share of 60%. 1 European Lotteries Association. Report on the lottery sector in Europe Gross Gaming Revenue - GGR Sales minus prizes 2018 AMIKO, Consulting and Research company, , 5

6 Structure of sales for lotteries by members of the European Lotteries Association in the countries of the European Union by game category, % 9,3% 0,9% 0,3% 0,02% 60,0% 29,5% Draw Based Games Sports Games Pari-Mutuel Horse Racing Pari-Mutuel Instant Games Sports Games Fixed Odds Horse Racing Fixed Odds Diagram 1. Structure of sales for lotteries by members of the European Lotteries Association in the countries of the European Union by game category, % Lottery sales of EL members in the EU by game category are presented in the table below: Game category EUM: Lottery Sales for 2016 ( M) Draw Based Games Instant Games Sports Games Pari-Mutuel 711 Sports Games Fixed Odds Horse Racing Pari-Mutuel 204 Horse Racing Fixed Odds 16 Total Table 2. EL members in the EU: Lottery sales by game category 2016 ( M) In 2016, the category of Draw Based Games had sales of bn, growing by 3% in comparison with the figure of the previous year AMIKO, Consulting and Research company, , 6

7 Lottery sales for Draw Based Games of members of the European Lotteries Association (EU), M % 100% 103% % 102% 101% 100% 99% % % 97% 96% % 94% % Draw Based Games Growth, % Diagram 2. Lottery sales for Draw Based Games of members of the European Lotteries Association (EU), M 2018 AMIKO, Consulting and Research company, , 7

8 Sales for the six Lottery categories (Draw Based Games, Instant Games, Sports Games Pari- Mutuel, Sports Games Fixed Odds, Horse Racing Pari-Mutuel and Horse Racing Fixed Odds) by EL members in the EU amounted to 79.8bn in 2016, representing already a third year of growth after a period of decrease in , and showing a solid increase of 4.2% in comparison with Sales for all lottery categories by EL members in the EU, M % % 104% % % % 100% % 98% % % Total Growth, % Diagram 3. Sales for all lottery categories by EL members in the EU, M The volume of lottery sales by categories of games by members of the European Lotteries Association in EU countries is presented in the table. Game category EUM rep. Lottery Sales for 2016 EUM: Lottery Sales for the respective year in M Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel Horse Racing Fixed Odds Total Table 3. EL Members in the EU: Lottery sales by game category Development ( M) 2018 AMIKO, Consulting and Research company, , 8

9 In the structure of sales for lotteries of members of the European Lotteries Association (all EL members) by game category, Draw Based Games have the leading role with a share of 60.2%. Structure of sales for lotteries of members of the European Lotteries Association by game category (all countries), % 0,16% 60,2% 9,8% 0,4% 0,9% 28,5% Draw Based Games Sports Games Pari-Mutuel Horse Racing Pari-Mutuel Instant Games Sports Games Fixed Odds Horse Racing Fixed Odds Diagram 4. Structure of sales for lotteries by members of the European Lotteries Association by game category (all countries), % Sales for lotteries of members of the European Lotteries Association (all EL members) by game category are presented in the table. Game category Lottery Sales for 2016 Draw Based Games Instant Games Sports Games Pari-Mutuel 807 Sports Games Fixed Odds Horse Racing Pari-Mutuel 327 Horse Racing Fixed Odds 135 Total Table 4. EL Members in the EU: Lottery sales by game category 2016 ( M) In 2016, the volume of lottery sales for the industry of Draw Based Games of members of the European Lotteries Association (all EL members) amounted to 52,440M, growing by 3% in comparison with AMIKO, Consulting and Research company, , 9

10 Lottery sales for the industry of Draw Based Games of members of the European Lotteries Association (all EL members), M 103% % 103% 102% % 101% 101% % 100% 99% 98% % % Draw Based Games Growth, % Diagram 5. Lottery sales for the industry of Draw Based Games of members of the European Lotteries Association (all EL members), M 2018 AMIKO, Consulting and Research company, , 10

11 In 2016, the volume of lottery sales for all game categories of members of the European Lotteries Association (all EL members) amounted to 87,087M, growing by 5% in comparison with Lottery sales for all game categories of members of the European Lotteries Association (all EL members), M % 106% 105% 104% % % % 102% % % 100% 99% % % Total Growth, % Diagram 6. Lottery sales for all game categories of the European Lotteries Association (all EU members), M The volume of lottery sales by categories of games by members of the European Lotteries Association (all EU countries) is presented in the table. Game category ELM rep. Lottery Sales for 2016 ELM: Lottery Sales for the respective year in M Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel Horse Racing Fixed Odds Total Table 5. EL Members: Lottery sales by game category Development ( M) 2018 AMIKO, Consulting and Research company, , 11

12 In the structure of Gross Gaming Revenue of members of the European Lotteries Association by game category (EU countries), Draw Based Games have the leading role with a share of 61.9%. Structure of GGR of members of the European Lotteries Association by game category (EU countries), % 8,5% 1,1% 61,9% 0,0% 0,1% 5,3% 1,1% 22,0% Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel Horse Racing Fixed Odds EGMs outside casinos All other games Diagram 7. Structure of the Gross Gaming Revenue of members of the European Lotteries Association by game category (EU countries), % The volume of Gross Gaming Revenue of members of the European Lotteries Association by game category (EU countries) is presented in the table. Game category EUM: GGR for 2016 ( M) Draw Based Games Instant Games Sports Games Pari-Mutuel 353 Sports Games Fixed Odds Horse Racing Pari-Mutuel 44 Horse Racing Fixed Odds 4 EGMs outside casinos All other games 362 Total Table 6. EL members in the EU: GGR by game category 2016 ( M) In 2016, the volume of GGR for the industry of Draw Based Games of members of the European Lotteries Association (EU countries) amounted to 20,477M, which corresponds to the previous year AMIKO, Consulting and Research company, , 12

13 GGR for the industry of Draw Based Games of members of the European Lotteries Association (EU countries), M % 104% 100% 105% 100% % % % % % Draw Based Games Growth, % Diagram 8. Gross Gaming Revenue for the industry of Draw Based Games of members of the European Lotteries Association (EU countries), M 2018 AMIKO, Consulting and Research company, , 13

14 In 2016, the volume of Gross Gaming Revenue for all game categories of members of the European Lotteries Association (EU countries) amounted to 33,084M, growing by 1% in comparison with GGR for all game categories of members of the European Lotteries Association (EU countries), M 103% % % 103% 102% 101% 100% % % % 98% 97% 96% 95% % Total Growth, % 93% Diagram 9. Gross Gaming Revenue for all game categories of members of the членов European Lotteries Association Association (EU countries), M The volume of Gross Gaming Revenue of members of the European Lotteries Association by game category (EU countries) over several years is presented in the table. Game category EUM rep. GGR for 2016 EUM: GGR for the respective year in M Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel Horse Racing Fixed Odds EGMs outside casinos All other games/ and non- gaming activities Total Table 7. EL members in the EU: GGR by game category Development ( M)) 2018 AMIKO, Consulting and Research company, , 14

15 In the structure of Gross Gaming Revenue of members of the European Lotteries Association by game category (all EL countries), Draw Based Games have the leading role with a share of 61.9%. Structure of GGR of members of the European Lotteries Association by game category (all EL countries), % 8,6% 1,1% 61,9% 0,1% 0,2% 5,7% 1,1% 21,3% Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel Horse Racing Fixed Odds EGMs outside casinos All other games Diagram 10. Structure of Gross Gaming Revenue of members of the European Lotteries Association by game category (all EL countries), % The volume of Gross Gaming Revenue of members of the European Lotteries Association by game category (all EL members) is presented in the table. Game category ELM: GGR for 2016 ( M) Draw Based Games Instant Games Sports Games Pari-Mutuel 400 Sports Games Fixed Odds Horse Racing Pari-Mutuel 78 Horse Racing Fixed Odds 28 EGMs outside casinos All other games 412 Total Table 8. EL members: GGR by game category 2016 ( M) In 2016, the volume of Gross Gaming Revenue for Draw Based Games of members of the European Lotteries Association (all EL members) amounted to 22,576M, growing by 1% in comparison with AMIKO, Consulting and Research company, , 15

16 GGR for Draw Based Games of members of the European Lotteries Association (all EL members), M % 99% % % % 104% 102% 100% 98% 96% 94% 92% 90% 88% 86% 84% Draw Based Games Growth, % Diagram 11. Gross Gaming Revenue for Draw Based Games of members of the European Lotteries Association (all EL countries), M 2018 AMIKO, Consulting and Research company, , 16

17 In 2016, the volume of Gross Gaming Revenue for all game categories of members of the European Lotteries Association (all EL members) amounted to 36,496M, growing by 2% in comparison with GGR for all game categories of members of the European Lotteries Association (all EL members), M 103% % 104% 103% 102% % % % 100% 99% 98% % % 95% % Total Growth, % Diagram 12. Gross Gaming Revenue for all game categories of members of the European Lotteries Association (all EL members), M The volume of Gross Gaming Revenue of members of the European Lotteries Association by game category (all EL members) over several years is presented in the table. Game category ELM rep. GGR for 2016 ELM: GGR for the respective year in M Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel Horse Racing Fixed Odds EGMs outside casinos All other games/ and non-gaming activities** Total Table 9. EL members in the EU: GGR by game category Development ( M)) 2018 AMIKO, Consulting and Research company, , 17

18 Key trends on the market of lotteries In the near future in the European Union, much attention will be paid to the regulation of gambling in Europe and the responsibility in gambling. At present, more and more jurisdictions tightening the rules of the gambling market, including suppliers of gaming software and affiliates, and gradually eliminating unlicensed operators. The gaming operators were asked to track the traffic on their sites and to block unlicensed gambling operators. There were even talks about the fact that gambling providers can be liable for crimes committed by unlicensed gambling operators using branded platforms. Sales of lottery market for members of the European Lotteries Association in the EU was 79.8bn in for the third year of growth after a period of decline between 2011 and 2013 (an increase of 4.2% in comparison with year 2015). Taking into account all members of the Association, the progress is even more impressive with total sales amounting 87.1bn (an increase of 4.7%). The most important type of activity of members of the European Lotteries Association is Draw Based Lotteries, such as Lotto, EuroMillions, Eurojackpot, and Joker. In this category of games according to representatives of the European Lotteries Association in the 27 EU countries, sales amounted to 47.9bn and GGR amounted to 20.5bn, growing by 2.5% and 0.3% respectively compared to the year GGR for Draw Based Games accounted for almost 62% of GGR for all game categories. The second largest category is Instant Games, reported by EL members in 27 EU countries and 13 non-eu countries. It is a growth category, showing a continuous sales increase for the last six years. The EL members in the EU had sales from Instant Games of 23.5bn (43 reported this category) which is a growth of 5.0% in comparison with 2015 and GGR remained stable at 7.3bn (42 reported; representing some 22.5% of their total GGR. The two Sports Games and two Horse Racing categories, both collected and analysed separately for Pari-Mutuel and Fixed Odds wagering, are rather minor product categories and totalled a GGR of 2.2bn by EL members from the EU (6.5% of their total GGR) and 2.6bn by all EL members (i.e. 7.1% of their total GGR). The most important product category (representing more than 80% of the GGR generated for the four product categories) is Sports Games Fixed Odds. This category was reported by 29 EL Members in 18 EU states and showed a total GGR of 1.8bn in This represented already a fifth year of continuous growth in EU member states which amounted to 10.5% growth compared to All 39 EL members reporting this category enjoyed a total GGR of 2.1bn, which also meant a year on year increase by 9.1% compared to The fourth category, EGMs outside casinos, includes: slot machines separate from casinos, Video Lottery Terminals and Electronic Instant Lotteries. These were operated by EL members in 6 EU member states, with a GGR of 2.8bn, and in 11 states in total generating 3.1bn in For the EL members in the EU, the GGR figure accounted for 8.5% of the total GGR. Compared to 2015, the growth amounted to 5.2%, mainly driven by the Italian market. For all EL members in total, their GGR share of the category on the total GGR accounted for 8.6% and recorded a year on year increase of 4.7% AMIKO, Consulting and Research company, , 18

19 Role of online lotteries on the market A major industry trend is the continuous growth in sales via the internet. The 35 EL members in 20 EU states reported GGR for online activities of 2.0bn, an increase of 13.5% compared to Out of all EL members, 45 reported GGR of 2.4bn, showing a 16.2% growth when compared to The annual compound growth of GGR via the Internet has averaged 6.5% over the past five years. Statistics show that more than 75% of European adults play national lottery, but only 5% of these tickets are sold online. Proportion of the adult population in Europe, playing the lottery, % 75,0% 25,0% Adults playing the lottery Adults, not playing the lottery Diagram 13. Proportion of the adult population in Europe, playing the lottery, % 2018 AMIKO, Consulting and Research company, , 19

20 Share of online sales in total sales of lottery games in Europe, % 5,0% 95,0% Share of lottery tickets sold online Share of lottery tickets sold in any other way Diagram 14. Share of online sales in total sales of lottery games in Europe, % In the structure of Gross Gaming Revenue of members of the European Lotteries Association by game category in the industry of online lotteries, Draw Based Games have the leading role with a share of 67.8%. Structure of GGR for online lotteries of members of the European Lotteries Association by game category, % 10,5% 67,8% 0,2% 9,8% 2,2% 9,6% Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel All other games/ and non- gaming activities** Diagram 15. Structure of Gross Gaming Revenue for online lotteries of members of the European Lotteries Association by game category, % 2018 AMIKO, Consulting and Research company, , 20

21 Gross Gaming Revenue for online lotteries of all categories of members of the European Lotteries Association in is growing rapidly. So, in 2016, the volume of Gross Gaming Revenue for online lotteries of all categories increased by 16% compared to the previous year and amounted to 2,447M GGR for online lotteries of all categories of members of the European Lotteries Association, M 140% 116% % 113% % % % 80% % % % Total Growth, % 0% Diagram 16. Gross Gaming Revenue for online lotteries of all categories of members of the European Lotteries Association, M In recent years, the share of online lotteries in the structure of GGR for lotteries of all categories is growing every year. So, in 2016, it amounted to 6.7% of total GGR AMIKO, Consulting and Research company, , 21

22 100% Share of online lotteries in the structure of GGR for lotteries of all categories of members of the European Lotteries Association, % 90% 80% 70% 60% 50% 94,7% 95,4% 94,9% 94,1% 93,3% 40% 30% 20% 10% 5,3% 4,6% 5,1% 5,9% 6,7% 0% Online lotteries Offline lotteries Diagram 17. Share of online lotteries in the structure of Gross Gaming Revenue for lotteries of all categories of members of the European Lotteries Association, % In 2016, the volume of Gross Gaming Revenue for Draw Based Games in the industry of online lotteries of members of the European Lotteries Association amounted to 1,659M, growing by 12% in comparison with AMIKO, Consulting and Research company, , 22

23 GGR for Draw Based Games in the industry of online lotteries of members of the European Lotteries Association, M % % % % 120% 100% 80% % % % % Draw Based Games Growth, % Диаграмма 18. Валовой доход онлайн-лотерей в отрасли игр на основе розыгрыша членов European Lotteries Association, млн. евро In 2016, the share of online lotteries in the structure of GGR for lotteries in the industry of Draw Based Games already amounted to 7.3% of total GGR AMIKO, Consulting and Research company, , 23

24 100% Share of online lotteries in the structure of GGR for lotteries in the industry of Draw Based Games of members of the European Lotteries Association, % 90% 80% 70% 60% 50% 94,6% 94,6% 93,9% 93,4% 92,7% 40% 30% 20% 10% 5,4% 5,4% 6,1% 6,6% 7,3% 0% Online lotteries Offline lotteries Diagram 19. Share of online lotteries in the structure of Gross Gaming Revenue for lotteries in the industry of Draw Based Games of members of the European Lotteries Association, % Gross Gaming Revenue of members of the European Lotteries Association in the industry of online lotteries by game category in presented in the table. Game category LM rep. online GGR for 2016 ELM: GGR via the Internet for the respective year in M Draw Based Games Instant Games Sports Games Pari-Mutuel Sports Games Fixed Odds Horse Racing Pari-Mutuel All other games/ and non- gaming activities Total Table 10. EL members: Online GGR by game category Development ( M) 2018 AMIKO, Consulting and Research company, , 24

25 State regulation of the industry Overall, the lottery legislation of the European countries is liberal, and does not forbid to play the lottery to its citizens, but also foreigners. Of course, this player must be at least 18 years old. AUSTRIA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: Licenses for sports betting and betting on horse racing are available to private operators on a regional basis in Austria, then as poker, casino, bingo and lottery are controlled by the monopoly lottery of Austria. BELGIUM Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: all products are available to private operators, except lotteries, which are reserved exclusively for the monopoly provider. The Belgian government has decided to apply VAT of 21% for online gambling games from 1 July BULGARIA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery (except for some lottery and instant lottery games). Operators: games of all categories are available to private operators, except lotteries, which are reserved exclusively for the monopoly provider. CROATIA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: games of all categories are available to private operators, except lotteries, which are reserved exclusively for the monopoly provider. Private operators may be licensed to offer online gambling if they get the territorial casino or license to purchase AMIKO, Consulting and Research company, , 25

26 CYPRUS Regulated gambling games: sports betting, horse racing betting and lottery. Operators: monopoly on lotteries; Licenses for sports betting are available to private operators. CZECH REPUBLIC Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators of the EU and of the European economic area can apply for a license which, if granted, will run from 1 January Lottery is reserved for the monopoly. DENMARK Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: sports Betting, poker and casino are available to private operators. Bets on bingo, lottery and horse racing (only fixed odds) are controlled by the state monopoly. ESTONIA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: Licenses for all gambling games are available to private operators, except that the monopoly has the exclusive rights to the lottery. FINLAND Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: all the gambling games are under the exclusive control of three monopoly providers: Raha-automaatiyhdistys ("RAY"), Fintoto Oy and Veikkaus Oy. Three monopolies have recently merged into one state structure, from 1 January FRANCE Regulated gambling games: sports betting, horse racing betting, poker and lottery. Operators: Private operators can obtain online licenses for sports betting, betting on horse racing and poker. The monopoly has exclusive rights to lottery AMIKO, Consulting and Research company, , 26

27 GERMANY Regulated gambling games: Schleswig-Holstein regulates sports betting, horse racing betting, poker, casino and bingo. The other 15 German Federal States currently allow only sports betting and horse racing betting. Operators: Private operators can no longer obtain any license in Schleswig-Holstein, and they will expire at June 30, In the remaining 15 States license for horse racing betting are available at the regional level. UK Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: all the licenses are available to private operators, with the exception of the lottery, which is exclusively reserved for the monopoly provider Camelot. GREECE Regulated gambling games: sports betting, horse racing betting and lottery. Operators: all products are permitted exclusively for the monopoly providers, although the 24 transitional licenses for private operators remain active, meanwhile all the products are allowed. HUNGARY Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: only state monopolies (Szerencsejáték Zrt. and Magyar Lóversenyfogadást- SzervezőKft) and the local concession companies can apply for a license. IRELAND Regulated gambling games: online games not accounted in the obsolete laws of Ireland and as such are currently not regulated. Online betting is regulated from August Status: Ireland is in the process of updating its legislation, which will create a comprehensive regime for online gambling games and limitations of payments. The law on the rates (amendment) now requires that remote bookmakers had a license and paid the 1% rate based on turnover. ITALY Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: games of all categories are available to private operators, with the exception of the lottery, which is reserved for the monopoly provider. LUXEMBOURG 2018 AMIKO, Consulting and Research company, , 27

28 Regulated gambling games: lottery. Operators: monopoly. MALTA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: private operators can apply for a local license, but not with respect to the lottery. NETHERLANDS Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: monopoly for all products. NORWAY Regulated gambling games: sports betting, horse racing betting and lottery. Operators: online gambling games are reserved for his two monopoly providers: Norsk Tipping and Norsk Rikstoto. POLAND Regulated gambling games: sports betting and horse racing betting. Operators: from 3 September 2015 licenses are available for companies representatives in Poland, but not local institutions. PORTUGAL Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: Any operator of the EU / EEA can apply for a license for online gambling games. Lottery games and fixed rates games remain for the monopoly. ROMANIA Regulated gambling games: sports betting, horse racing betting, casino, bingo and lottery. Operators: Any operator from the jurisdiction of the EU / EEA or the Swiss Confederation can apply for a license. Lotteries remain reserved for the monopoly AMIKO, Consulting and Research company, , 28

29 SLOVAKIA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: games of all categories are controlled by the monopoly, except that operators of offline sports betting can offer services online in connection with a legal loophole. SLOVENIA Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: online gambling games should be controlled by offline casinos or lotteries, as a result, only the monopoly gives online license in Slovenia. SPAIN Regulated gambling games: sports betting, horse racing betting, poker, casino, bingo and lottery. Operators: Private operators can apply for licenses for all gambling games except lotteries. SWEDEN Regulated gambling games: sports betting, horse racing betting, poker, bingo and lottery. Operators: licenses can be obtained by only social welfare organizations, horse industry and the state lottery. There are no local licenses to private operators AMIKO, Consulting and Research company, , 29

30 2.2. GREAT BRITAIN Main indicators of the market of lotteries In this chapter we describe the main indicators of the gaming industry of Great Britain according to the Gambling Commission. In the period from April 2016 to March 2017 regulated gambling industry of Great Britain has produced a Gross Gaming Yield (GGY) of 13.7bn, which is 1.8% more compared to the previous year. Sector 2014/ / /2017 Arcades (non-remote) 387,2 415,1 414,4 Betting (non-remote) 3 266, , ,8 Bingo (non-remote) 679,0 690,6 686,8 Casinos (non-remote) 1 159,8 998, ,5 Remote casino, betting and bingo (previous legislation) 753,5 Remote casino, betting and bingo(new legislation) 1 485, , ,3 National Lottery (remote and non-remote) 3 232, , ,6 Lotteries(remote and non-remote) 349,7 379,7 441,5 Total , , ,9 Table 11. Gross Gaming Yield in the UK by game category, M As at 31 March 2017, overall in the UK there were operators licensed by the Gambling Commission, 357 of them work in more than one sector. These operators have licenses (remote and/or remote) 3, which allowed them to carry out kinds of activities (a decrease of 1.4% compared to the previous year). In the financial year, Gross Gaming Yield in the sector of traditional and online lotteries in the UK was 441.5M, which is 16% higher than in the previous year. Gross Gaming Yield of the National Lottery in the UK in the financial year amounted to 2,978.6M, which is 13% lower than in the previous year. 3 Online gambling games in the UK since 2005 are referred to as "remote gambling games", those people play by means of remote communication (e.g., communication via the Internet, telephone, radio, or any other form of electronic or other technology link) 2018 AMIKO, Consulting and Research company, , 30

31 Gross Gaming Yield of the National Lottery in the UK, M 3 500, , ,8 106% 120% 100% 3 300, , ,1 87% 80% 3 100,0 60% 3 000, ,6 40% 2 900, ,0 20% 2 700,0 2014/ / /2017 0% National Lottery (remote and non-remote) Growth, % Diagram 20. Gross Gaming Yield of the National Lottery in the UK, M Split of proceeds from the sale of lottery tickets of the National Lottery is presented in the table. Split of proceeds from ticket sales M Prizes capable of being w on by players (including unclaimed prizes) 3 943,2 Primary Contribution 1 486,9 Lottery Duty 830,6 Retention by Licensee 364,8 Reteilers' commission 296,3 Table 12. National Lottery. Split of proceeds from ticket sales, M In the structure of the sales of lottery tickets of the UK National Lottery, prizes have the largest share of 57.0% AMIKO, Consulting and Research company, , 31

32 Split of proceeds from ticket sales, % 57,0% 4,3% 5,3% 12,0% 21,5% Prizes capable of being won by players (including unclaimed prizes) Primary Contribution Lottery Duty Retention by Licensee Reteilers' commission Diagram 21. National Lottery. Split of proceeds from ticket sales, % In the financial year, the volume of Primary contribution (Balance to good causes) of the National Lottery in the UK amounted to 1,486.9M, which is 17% lower than in the previous year. Primary contribution (Balance to good causes), M 2 000,0 120% 1 800, , , ,3 107% 1 486,9 100% 1 400,0 83% 80% 1 200, ,0 60% 800,0 600,0 40% 400,0 20% 200,0 0,0 2014/ / /2017 0% Primary contribution (Balance to goodcauses) Growth, % Diagram 22 National Lottery. Primary contribution (Balance to good causes), M 2018 AMIKO, Consulting and Research company, , 32

33 In the financial year, the volume of Prizes of the National Lottery in the UK amounted to 3,943.2M, which is 6% lower than in the previous year. Prizes, M 4 250, , , ,9 104% 106% 104% 102% 4 100,0 100% 4 050, ,1 98% 4 000,0 96% 3 950, , ,2 94% 94% 92% 3 850, ,0 2014/ / / % 88% Prizes Growth, % Diagram 23. National Lottery. Prizes, M In the financial year, the volume of Lottery duty of the National Lottery in the UK amounted to 830.6M, which is 9% lower than in the previous year. In the financial year, the volume of Retention by licensee of the National Lottery in the UK amounted to 364.8M, which is 5% lower than in the previous year AMIKO, Consulting and Research company, , 33

34 Lottery duty, M 940,0 110% 920,0 913,9 105% 900,0 105% 880,0 873,0 100% 860,0 840,0 820,0 800,0 91% 830,6 95% 90% 85% 780,0 2014/ / / % Lottery duty Growth, % Diagram 24. National Lottery. Lottery duty, M Retention by licensee, M 390,0 385,0 380,0 375,0 370,0 106% 384,4 108% 106% 104% 102% 100% 98% 365,0 360,0 362,2 364,8 95% 96% 94% 92% 355,0 90% 350,0 2014/ / / % Retention by licensee Growth, % Diagram 25. National Lottery. Retention by licensee, M 2018 AMIKO, Consulting and Research company, , 34

35 In the financial year, the volume of Retailers commission of the National Lottery in the UK amounted to 296.3M, which is 10% lower than in the previous year. Retailers' commission, M 340,0 101% 102% 330,0 328,2 330,2 100% 98% 320,0 96% 310,0 94% 300,0 290,0 280,0 270,0 296,3 90% 2014/ / / % 90% 88% 86% 84% Retailers' commission Growth, % Diagram 26. National Lottery. Retailers' commission, M The Bingo sector includes various types of companies, including large Bingo clubs, recreation parks, business clubs and outdoor playgrounds. In the financial year, the volume of Gross Gaming Yield in Bingo sector in the UK amounted to 686.8M, which corresponds to the previous year AMIKO, Consulting and Research company, , 35

36 GGY in Bingo sector in the UK, M 692,0 690,6 102% 690,0 102% 102% 688,0 686,0 686,8 101% 684,0 101% 682,0 100% 680,0 678,0 676,0 679,0 99% 100% 99% 674,0 99% 672,0 2014/ / / % Bingo (non-remote) Growth, % Diagram 27. Gross Gaming Yield in Bingo sector in the UK, M In the financial year, in the structure of Gross Gaming Yield in Bingo sector in the UK, Mechanised Bingo has the leading role with a share of 64.4%. Bingo GGY by game, % 34,3% 1,3% 64,4% Prize Bingo Main Stage Bingo Mechanised Bingo Diagram 28. Gross Gaming Yield in Bingo sector in the UK by game, % 2018 AMIKO, Consulting and Research company, , 36

37 In the financial year, in the structure of premises in Bingo sector in the UK, independent operators have the leading role with a share of 43.1%. Number of premises by operator, % 22,7% 34,2% 43,1% Mecca Bingo Limited Gala Leisure Limited Independents Diagram 29. Number of premises by operator, % 2018 AMIKO, Consulting and Research company, , 37

38 As at 31 March 2017 there were 491 non-commercial lottery operators which own 847 licenses. In the financial year, the volume of Gross Gaming Yield in Lotteries sector in the UK amounted to 441.5M, growing by 16% in comparison with the previous year. GGY in Lotteries sector in the UK, M 500,0 118% 450,0 400,0 350,0 349,7 379,7 441,5 116% 116% 114% 300,0 112% 250,0 200,0 110% 150,0 109% 108% 100,0 50,0 106% 0,0 2014/ / / % Lotteries(remote and non-remote) Growth, % Diagram 30. Gross Gaming Yield in Lotteries sector in the UK, M to year. It should be mentioned that the number of operators working in online sector is growing from year Licence Society lottery External lottery manager(elm) Type As at 31 Mar2015 As at 31 Mar2016 As at 31 Mar2017 Non-remote Remote Ancillary remote Non-remote Remote Total Table 13. Lottery licences 2018 AMIKO, Consulting and Research company, , 38

39 table. Marketing report «The world market of traditional and online lotteries» Split of proceeds from the sale of lottery tickets except the National Lottery is presented in the Split of proceeds from ticket sales 2016/2017 Balance to good causes, M 255,6 Prizes, M 145,2 Expenditure, M 186,0 Table 14. Split of proceeds from ticket sales, M 43.6% of the price of a lottery ticket accounts for charitable purposes. Large society lotteries prizes, expenditures and balance to good causes, % 43,6% 31,7% 24,7% Balance to good causes Prizes Expenditures Diagram 31. Large society lotteries prizes, expenses and balance to good causes, % In the financial year, the volume of Balance to good causes in Lotteries sector in the UK amounted to 255.6M, growing by 20% in comparison with the previous year AMIKO, Consulting and Research company, , 39

40 Balance to good causes, M 300,0 250,0 120% 255,6 122% 120% 200,0 190,6 212,1 118% 116% 150,0 114% 100,0 50,0 111% 112% 110% 108% 0,0 2014/ / / % Balance to good causes, M Growth, % Diagram 32. Large society lotteries, balance to good causes, M In the financial year, the volume of Prizes in Lotteries sector in the UK amounted to 145.2M, growing by 28% in comparison with the previous year AMIKO, Consulting and Research company, , 40

41 Prizes, M 160,0 140,0 145,2 128% 130% 128% 120,0 100,0 80,0 60,0 40,0 20,0 96,4 113,6 118% 126% 124% 122% 120% 118% 116% 114% 0,0 2014/ / / % Prizes, M Growth, % Diagram 33. Large society lotteries, prizes, M In the financial year, the volume of other Expenditures in Lotteries sector in the UK amounted to 186.0M, growing by 11% in comparison with the previous year AMIKO, Consulting and Research company, , 41

42 Expenditures, M 190,0 185,0 180,0 186,0 111% 112% 111% 110% 175,0 109% 170,0 165,0 160,0 159,1 167,6 105% 108% 107% 106% 105% 155,0 104% 150,0 103% 145,0 2014/ / / % Expenditures, M Growth, % Diagram 34. Large society lotteries, expenditures, M In 2016, more than 32% of UK residents aged 45 to 54 years, participated in gambling games. In 2017, on the question of gambling participation more than 53% of UK residents aged 55 to 64 years answered positively AMIKO, Consulting and Research company, , 42

43 Distribution of gambling participants excluding the National Lottery in the United Kingdom (UK), by age, ,0% ,0% ,0% ,0% ,0% ,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% Diagram 35. Distribution of gambling participants excluding the National Lottery in the United Kingdom (UK), by age, 2016 Distribution of gambling participants excluding the National Lottery in the United Kingdom (UK), by age, ,0% ,0% ,0% ,0% ,0% ,0% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% Diagram 36. Distribution of gambling participants excluding the National Lottery in the United Kingdom (UK), by age, AMIKO, Consulting and Research company, , 43

44 Distribution of gambling participants in the UK as of March 2017 by game category is presented in the diagram below. 30% of respondents participated in the UK National lottery. Distribution of gambling participants in the UK as of March 2017 by game category Spread betting Virtual dog jr horse races Poker at the pub Any other activity Dog races Betting on over events Online slot machine style games / instant wins Virtual gaming machines in a bookmakers Football pools Casino games Bingo Fruit or slot machines Horse races Private betting Sport betting 0,0% 1,0% 1,0% 1,0% 1,0% 1,0% 2,0% 2,0% 2,0% 3,0% 4,0% 5,0% 5,0% 6,0% 7,0% Another lottery Scratchcards 12,0% 13,0% National lottery draws 30,0% 0% 5% 10% 15% 20% 25% 30% 35% Diagram 37. Distribution of gambling participants in the UK as of March 2017 by game category In 2016 in Wales, the survey was conducted. The diagram below displays the results of the survey on the percentage of male adults participating in lotteries in Wales in 2016 by age group. During the period of the survey it revealed that 47.1% of male respondents aged 55 to 64 years stated that they took part in the National Lottery draw AMIKO, Consulting and Research company, , 44

45 Share of male adults participating in the National Lottery draw in Wales in 2016, by age group ,2% ,0% ,1% ,6% ,3% ,9% ,0% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% Diagram 38. Share of male adults participating in the National Lottery draw in Wales in 2016, by age group Lotteries with scratch cards are the most popular among respondents aged 25 to 34 years, but other types of lotteries among people aged 65 to 74 years AMIKO, Consulting and Research company, , 45

46 Share of male adults participating in scratchcard lottery games in Wales in 2016, by age group 75+ 7,0% ,5% ,2% ,1% ,3% ,3% ,5% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0% Diagram 39. Share of male adults participating in scratchcard lottery games in Wales in 2016, by age group Share of male adults participating in other lotteries in Wales in 2016, by age group 75+ 9,6% ,5% ,0% ,4% ,0% ,5% ,5% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% Diagram 40. Share of male adults participating in other lotteries in Wales in 2016, by age group 2018 AMIKO, Consulting and Research company, , 46

47 Key trends on the market of lotteries In November 2017, the Gambling Commission of the UK published a new strategy which will help to improve the plan for the regulation of the gambling market in the country. The program presented by the UKGC, will be of interest both for consumers and suppliers of gambling games. The new strategy includes five priority areas: protection of consumer interests through the strengthening and extension of sanctions against operators who are not playing fair; prevention of harm by providing players and their families detailed information about gambling games and possible risks; improvement of standards of services in the gambling games market; optimization of profits from charity lotteries; improvement of the rules regulating the activities of the Gambling Commission. The strategy submitted by the Gambling Commission, is aimed to ensure more fair and safe gambling games over the next three years. But the Commission representatives noted that they will be able to succeed only in the case of consumer relations and cooperation with all regulatory partners of the UKGC. The activities of the EuroMillions Lottery in the United Kingdom will be limited by the decision of the Department for Digital, Culture, Media and Sport in connection with the losses of the British National Lottery. Recently, the Department for Digital, Culture, Media & Sport (DDCMS) in the United Kingdom has conducted a public consultation on the current lottery market. The government, as stated, decided to forbid the activities of the EuroMillions Lottery, which is beyond the control of the British authorities. Since the British National Lottery has faced a decline in revenue by 8.8%, the company Camelot has announced the revision of the strategy and the general structure of lotteries in the country. The main problem that now stood in front of Camelot, is the emergence of new competitors such as Lottoland, which is known to be exempt from additional contributions to charitable organizations. In accordance with the new measure, transactions conducted by the company Lottoland will be prohibited or restricted by the new rules. And after open consultations, DDCMS made the decision to implement new conditions of licensing that will prohibit residents from the UK to bet with the EuroMillions on games that take place in the territory outside the United Kingdom. Previously, the government stated that a British exit from the EU will not affect the EuroMillions and other lotteries, regardless of the political status of the country AMIKO, Consulting and Research company, , 47

48 But due to the fact that the sales of lottery tickets purchased in the British National Lottery fell from 7.59 in 2015 to 6.92 in the period from 2016 to 2017, DDCMS was forced to reconsider its decision AMIKO, Consulting and Research company, , 48

49 Role of online lotteries on the market Remote gambling games are gambling games in which people participate by using remote communication, typically via the Internet (accessed through computers, tablets and smartphones), phone, TV. Information in this chapter applies to remote gambling games in Great Britain after adoption of the law on gambling games, which entered into force on November 1, In the 2016, the volume of Gross Gaming Yield in the online industry for casino, betting and bingo in the UK amounted to 4,680M, growing by 10% in comparison with the previous year. Gross Gaming Yield in the online industry for casino, betting and bingo in the UK, M 5 000, ,3 350% 4 500, , , ,8 286% 300% 250% 3 000,0 200% 2 500, ,0 150% 1 500, ,5 110% 100% 1 000,0 500,0 50% 0,0 2014/ / /2017 0% Remote casino, betting and bingo (new legislation) Growth, % Diagram 41. Gross Gaming Yield in the online industry for casino, betting and bingo in the UK, M 2018 AMIKO, Consulting and Research company, , 49

50 State regulation of the industry Bingo is an equal chance. Although there is no legal definition or standard set of rules regulating the game, bingo in the country is developed very strongly. The Gambling Commission (the Commission) has published guidance on what bingo is and how it differs from other forms of gambling games. This recommendation was developed with the support of key stakeholders in the bingo industry. Lotteries can't be used for private or commercial gain and are defined as the simple lotteries, if you apply all of the following conditions: To participate in the payment is required. One or more prizes are assigned to one or more members of the game. The distribution of prizes relies wholly on accident. There are several kinds of lotteries, but the basic types are society lotteries (small and large ones), private lotteries and the National lottery (according the special legislation). There are two types of licenses from the Gambling Commission (the Commission): Non-operating licenses for offline activities which require licenses for the accompanying premises. Remote licenses for online activities. Players must be 16 years of age to play lotteries, 18 years of age to play any other form of gambling games. Existing tax regimes for land and online gambling games during the year for taxes: Bingo duty, a percentage of profits from the sale of: 10%. Lottery duty, a percentage of the price paid or payable when you receive a ticket or chance in the lottery: 12%. Remote gaming duty, Gross Gaming Yield on all transactions with customers whose normal place of residence is in the UK: 15%. The majority of gambling games are exempt from VAT. In November 2017, the Gambling Commission of the UK has published a new strategy which will help to improve the plan for the regulation of the gambling games market in the country 2018 AMIKO, Consulting and Research company, , 50

51 2.3. GERMANY Main indicators of the market of lotteries The lottery market in Germany is monopolized by the State. The state lottery association of Germany annually generates revenues of about 7.3bn ($7.8bn). Taxes amount to 17% of the price of a lottery ticket in Germany. Since the introduction of the Treaty on gambling games (2012), the turnover of lotteries fell by 26% from 10 to 7.3bn, but, in general, over the last 8 years it grew by 64%. Split of price of the lottery ticket Euro-Lotto in Germany, % 49,0% 3,0% 8,0% 17,0% 23,0% Prizes capable of being won by players Contribution for sport, culture, care of monuments, social spending Taxes Reteilers' commission and offices Expenditures for personnel, materials, advertising Diagram 42. Split of price of the lottery ticket Euro-Lotto in Germany, % Tax revenues in Germany from betting on racing and lotteries amounted to 1.8bn, growing by 6% in comparison with the previous year, of which 1.5bn accounted for tax revenues from lotteries AMIKO, Consulting and Research company, , 51

52 Tax revenues in Germany from betting on racing and lotteries, bn 2,000 1,800 1,600 1,400 1,200 1,412 1,421 1,432 1, % 1,673 1,712 1,81 120% 115% 110% 1, % 105% 0,800 0, % 101% 102% 102% 100% 0,400 0,200 95% 0, % Tax revenues in Germany from betting on racing and lotteries, bn Dynamics, % Diagram 43. Tax revenues in Germany from betting on racing and lotteries, bn 2018 AMIKO, Consulting and Research company, , 52

53 Key trends on the market of lotteries In principle, The Federal state of Germany has a monopoly on all forms of gambling games and lotteries. It is regulated by so-called Glücksspielstaatsvertrag, the German Federal Treaty on gambling games. A notable exception is the sports betting: here private companies can enter the market. Legal provisions do not allow any licenses to online gambling games, there are very few exceptions in the Federal state of Schleswig-Holstein. Thus, all providers based in Germany, who are not among the elected ones, are in fact illegal. Lottery market in Germany, according to experts, stagnates, because the lotteries now are more than ever competing with other gambling games. In the German lottery there are no innovative new products and the most modern rules of advertising and distribution. They need to develop a comprehensive new lottery regulation that meets the needs of digital community, to compete in the future. Independent lottery agents repeatedly stimulated sales of the state lottery companies by new services and modern products. In the mid-1990s, lottery brokers has discovered the Internet as a new sales channel, opening the younger target group for lottery companies. The European Commission also believes that the second state agreement on disclosing (GlüÄndStV), signed by the Prime Ministers, is inadequate. A decision of the situation may be: - Elimination of disproportionate restrictions on the distribution and advertising for independent lottery agents; - Fair, non-discriminatory provision of services of independent lottery agents (i.e., return to the rules prior to 2008, or as specified in the second GlüÄndStV); - Legally compliant, appropriate design options in relation to the development of innovative products for the lottery operators and brokers (e.g. the Netherlands, UK or Czech Republic). Only with legally compliant, consistent total solution for all gambling games, lottery revenues can be assured and increase again AMIKO, Consulting and Research company, , 53

54 Role of online lotteries on the market Although cryptocurrency trading in Germany is not illegal and online gambling games in most cases are prohibited, the market is rather active. In many countries online casino with or without bitcoin are either explicitly illegal or they are in the gray zone between legality and illegality. Often gambling games themselves are not declared illegal in theory, but in practice the online gambling games are unlikely to take place at all. For example, the US government does not allow financial transactions between banks and online casinos; the Malaysian government provides similar restrictions for financial institutions in the country. Germany, however, takes a different approach to make life more difficult for online casino. First, Germany is a very attractive market for online gambling games at the casino, while the total market is about 14bn ($16.8bn). 22% of this amount is accounted for unregulated gambling games, and that market share is growing much faster than gambling games regulated and / or partly owned by the state. The vast majority of providers of unregulated gambling games offer their services on the Internet and the sector in 2016 have increased by 30% compared to Unregulated gambling games include two types of suppliers: based in Germany that do not have a German license - the black market, and those based in other countries, offering gaming opportunities to the citizens of Germany - the gray market. In principle, the government in Germany has a monopoly on all forms of gambling games and the lottery. It is regulated by so-called Glücksspielstaatsvertrag, the German Federal Treaty on gambling games. A notable exception is the sports betting: here private companies can enter the market. Legal provisions do not allow any licenses to online gambling games, there are very few exceptions in the Federal state of Schleswig-Holstein. Thus, all providers based in Germany, who are not among the elected ones, are in fact illegal. However Glücksspielstaatsvertrag do not match with EU law, so Schleswig-Holstein has successfully licensed 12 online casinos. The EU Commission has often criticized the activities of Germany in relation to online gambling games, but the European court of justice in Luxembourg affirmed the right of Germany to rules that differ from EU legislation in None of that reduces the enthusiasm of German citizens to online casino. A recent survey showed that 36% of citizens participated in online gambling casino games for money in the last 12 months AMIKO, Consulting and Research company, , 54

55 Share of citizens participated in online gambling games for money during the year in Germany, % 64,0% 36,0% Share of citizens not participated in online gambling games for money during the year Share of citizens participated in online gambling games for money during the year Diagram 44. Share of citizens participated in online gambling games for money during the year in Germany, % Among playing online gambling games, according to the survey, 61% played online lottery. Participation in online gambling games in Germany by segment, % roulette 18% poker 22% sports betting 33% sweepstakes 52% online lottery 61% 0% 10% 20% 30% 40% 50% 60% 70% Diagram 45. Participation in online gambling games in Germany by segment, % On average, in each gambling game, the average rate was (about $22) AMIKO, Consulting and Research company, , 55

56 Only 7% of survey participants knew or at least recognized that they know their gambling games are illegal under the German legislation. About 26% said they believe that online gambling games may be illegal, but it is considered unlikely that they will be prosecuted. While Germany tries to get hold offline gambling games in fear, online gambling games are already far ahead of such from the offline sector. 50% of players or more, depending on the kind of a game play via their mobile devices. Share of online players playing via mobile devices in Germany, % 50,0% 50,0% Share of online players playing via other devices Share of online players playing via mobile devices Diagram 46. Share of online players playing via mobile devices in Germany, % 29% of respondents have never won; 48% have received payouts, 21% have done without payouts to wager the money in another game, and 2% have been scammed AMIKO, Consulting and Research company, , 56

57 Structure of results of participation in online gambling games in Germany, % 29,0% 2,0% 21,0% 48,0% have never won have received payouts have done without payouts to wager the money in another game have been scammed Diagram 47. Structure of results of participation in online gambling games in Germany, % 50% respondents believe that a General prohibition of online gambling games cannot be effectively applied. They may be right: although there is a section of the criminal code, which is applicable to the participants of gambling games in an online casino, nobody had to deal with these charges. Situation with online gambling games with bitcoin Since the most of the online gambling games as a whole legally are situated in the gray area - except German unlicensed providers, which is clearly illegal - it is not surprising that there are no rules regarding the use of bitcoin in online gambling games. However, it is possible with high probability to assume that the state will not be loyal to gambling games with bitcoin. The greatest benefit that the state can get by the legalization and licensing of gambling games is, of course, increase in tax revenues. This threatens the use of bitcoins and other cryptocurrencies in online casinos. According to German legislation, cryptocurrency is not a currency, but object of speculation. Consequently, they will be taxed only when they return back to euros or other currency, and only if they are held for less than a year. Thus, if the German government decides to declare bitcoin online gambling games illegal, it is likely that German players will not notice: they already enjoy the game in illegal online casinos, whether with bitcoin or without it AMIKO, Consulting and Research company, , 57

58 State regulation of the industry The gambling games act primarily relates to individual competencies of each of the 16 Federal States of Germany. The legal framework regulating offline and online gambling games, is the Federal Treaty on gambling games of 2012, which was adopted by 15 of the 16 Federal States in 2012 and by the Schleswig-Holstein in Main objectives: Consumer protection. Fraud prevention. Fight against black market. In addition to define specific types of gambling games covered by the legislation, the Treaty maintains the state monopoly on the activities of lotteries, provides for a complete prohibition on transactions in online casinos and restricts the availability of licenses for sports betting. Licenses for activities of small or charitable lotteries. They are regulated by sections of the Federal Treaty. There are no legitimate restrictions, but private operators cannot obtain licenses, and their economic value is limited. Traditional large-scale lotteries remain under the state monopoly. Licenses for the promotion and sale of traditional lottery products of the state. Federal lands limit the number of sales outlets of lotteries to achieve the main objectives of the Treaty. License for online promotion and sale of the state lottery products. A license to promote lottery products in the Federal States usually comes from the relevant Ministry of internal Affairs. If licensing is required for several or all Federal lands, the regulator is the Ministry of internal Affairs of Lower Saxony. Lotteries are taxed by the lottery tax on 16.66%, at rates in accordance with the Law on lottery bet. It is prohibited to advertise gambling games on television, in the Internet or other forms of telecommunications, but exceptions can be made in respect to the licensed lotteries, sports betting operators and betting on horse racing, in condition of obtaining permission from the regional government in Dusseldorf AMIKO, Consulting and Research company, , 58

59 2.4. FRANCE Main indicators of the market of lotteries The lottery market in France is monopolized. Française des Jeux (FDJ) is the operator of the national lottery games in France. The name of the company translates as the French Games. The company is owned and managed by the French government. In addition to lottery games, the company also works with online games and betting on various sports such as soccer, bicycling and others. In 2016, the volume of sales of Française des Jeux amounted to 14,331M, growing by 4.6% in comparison with Sales of La Française des Jeux, M % ,4% % 105% 105% 105% ,6% 105% % 104% % Sales of La Française des Jeux, M Growth, % Diagram 48. Sales of La Française des Jeux, M 2015). The share of lottery games accounted for 82% of sales, i.e. 11.8bn (compared to 11.4bn in The growth in sales in 2016 in the sector of interactive lotteries amounted to 7.7% AMIKO, Consulting and Research company, , 59

60 The French players mainly continued to play for small sums: 26 million players have played at an average bet of 10.6 per week (compared to 10 in 2015). The prizes amounted to 9.5bn ( 500m more than in 2015). There are 235 wins > 1m (215 in 2015), of which 15 wins > 10m (compared to 10 in 2015). Annual change in the sales of the group La Française des Jeux between 2015 and 2016, by type of game 12% 10,9% 10% 8% 7% 7,7% 6% 4% 2% 0% -1,5% -1,8% -2% -4% Scratching games Drawing games Dots drawing games Interctive lottery games Sport bets Annual variation, % Diagram 49. Annual change in the sales of the group La Française des Jeux between 2015 and 2016, by type of game The diagram below presents the distribution of rates on sports, offered by Française des Jeux in Nearly three-quarters of bets are bets on soccer AMIKO, Consulting and Research company, , 60

61 Distribution of rates on sports in la Française des Jeux in 2016, % 4,0% 73,0% 4,7% 8,7% 9,6% Soccer Basketball Tennis Rugby Other Sports Diagram 50. Distribution of rates on sports in la Française des Jeux in 2016, % 2018 AMIKO, Consulting and Research company, , 61

62 Key trends on the market of lotteries In September 2013, the European Parliament has voted for the "Resolution on online gambling games on the online market", which is not only aimed at regulating the online market in the European Union, but also to create clearer rules of gambling games between member States of the EU. The purpose of the resolution was the introduction of common pan-european standards of online gambling games, which will be based on respect for the principles of free trade and free distribution of services within the European Union, However, many countries still find a way to avoid their commitments to free trade within the European Union and impose various restrictions on gambling games. If there is a synonym of a successful monopoly in the European gaming sector, it is, of course, the French national lottery company, the famous La Française des Jeux, or just FDJ. Created yet in 1976 by the French government, the French national lottery, FDJ, is the fifth lottery from around the world, with a turnover of about 16bn, estimated for The most popular products of FDJ are lotteries, though since 2010 they have achieved the most of the revenues from sports bets. On the other hand, the national company trading horses, Pari Mutual Urbain (PMU) operates with horse betting in the country. In 2010, France was forced to open up their gambling games markets in accordance with the policies of the free market. Because of this pressure, they allowed online sports betting and online poker in the country, but still continued to exercise strong state control over providers. In addition to this control, the monopoly of state companies has been unconditionally protected. In 2007, the French government established the Advisory Committee on gambling games and responsible gambling games (Advisory Committee on policy issues in the field of democracy and court hearing) to build a policy of gambling games from the point of view of the requirements from the EU. In this respect, the most common article used by the French legislation on gambling games in order to justify the monopoly in the country, is the prevention of crime. According the law, gambling games is an industry with a high probability of fraud and crime, so the state monopoly on gambling games is a way of fighting aimed at elimination of the illegal gambling games market, particularly in relation to tax evasion or money laundering. Many experts in the field of gambling games in Europe argue that the risks of crime, which attracted the attention of French authorities, are overpriced. This is especially relevant now, when the French government has developed various other mechanisms of the control of the gambling games market. On the other hand, measures of protection used by the French government, more or less are able to cope with the threats of crime coming from the industry of online gambling games AMIKO, Consulting and Research company, , 62

63 The gaming sector continues its transformation with the appearance of new games, new generations of customers, accustomed to the use of digital technologies, and new places for meetings with the players. This revolution in gaming and betting is a source of opportunities for FDJ, the second largest lottery in Europe. Plans of FDJ till 2020: 88M of investments in the future development Growth of digital sales by 65% Launch of 6 lottery games of new generation Automation of logistics base Launch of FDJ Gaming Solutions that offers content and technology to lotteries worldwide AMIKO, Consulting and Research company, , 63

64 Role of online lotteries on the market Most of games of FDJ (Loto, EuroMillions-My Million, Illiko, Parion's Sports) are available via all digital channels (PC / smartphone / tablet). Application Parions Sport that allows players to make their bets via their mobile phones is very popular. In 2016, the volume of online sales of Française des Jeux amounted to 933M, growing by 62% in comparison with the previous year. Française des Jeux: Total online sales, M ,0% 180% 160% 140% ,5% 103,7% 105,7% ,6% ,5% % 100% 80% % % % % Online sales Dynamics, % Diagram 51. Française des Jeux: Total online sales, M Over the last years, the share of online sales of Française des Jeux in the total sales volume is increasing. So, in 2016 the share of online sales was over 6.5% AMIKO, Consulting and Research company, , 64

65 Share of online sales of Française des Jeux in the total sales volume, % 100% 90% 80% 70% 60% 50% 96,4% 96,7% 96,8% 96,7% 96,7% 95,9% 93,5% 40% 30% 20% 10% 0% 3,6% 3,3% 3,2% 3,3% 3,3% 4,1% 6,5% Online, % of total sales Other sales Diagram 52. Share of online sales of Française des Jeux in the total sales volume, % 2018 AMIKO, Consulting and Research company, , 65

66 State regulation of the industry France is a country of the Christian-Catholic tradition, so gambling games has long been prohibited entirely. There is a general prohibition on gambling games, but during many years there have appeared a few exceptions, gradually allowing certain types of gambling games. The national lottery is the judicial monopoly in France, which is managed by the valid operator, La Française des Jeux. In addition, La Française des Jeux also has the right to offer sports betting. Online gambling games are regulated by the government authority (ARJEL), which was established in 2010, when the French online gambling games market opened. ARJEL has full authority to issue licenses, ensure compliance with the rules of online gambling games and fight against illegal gambling games sites. In respect of lotteries in France the tax for National sports center is applied. This amounts to 1.8% of the bets (limited to M per year). Tax rate of 0.3% (in M per year and 17.7M per year in 2017) is till Social contribution in the amount of 6.9% must also be paid. It is based at rate of 25.5% of the bets AMIKO, Consulting and Research company, , 66

67 2.5. ITALY Main indicators of the market of lotteries In Italy gambling games, betting and lotteries are legitimate; providers must purchase a license for gambling games to be able to work. Italian consumers spent 113bn dollars on gambling games in 2016, which is almost three times more than the amount spent in Most of the revenue in the industry of gambling games comes from lottery games - the most popular kind of gambling games and from slot machines and table games in casino (AWP). In 2016, Gross Gaming Revenue in the gambling games industry in Italy amounted to 19.2bn, exceeding the previous year by 11.4%. GGR in the gambling games industry in Italy, bn 19,5 19,0 19,2 111,4% 120% 100% 18,5 80% 18,0 17,5 17,0 17,2 60% 40% 16,5 20% 16, % Gross Gaming Revenue, Bn Dynamics, % Diagram 53. Gross Gaming Revenue in the gambling games industry in Italy, bn The share of lotteries and AWP in the Gross Gaming Revenue in the gambling games industry in Italy in 2016 is accounted for 54.3% AMIKO, Consulting and Research company, , 67

68 Share of lotteries and AWP in the GGR in the gambling industry in Italy, % 54,3% 45,7% Lotteries and AWP Other gambling games Diagram 54. Share of lotteries and AWP in the Gross Gaming Revenue in the gambling industry in Italy, % Gross Gaming Revenue from lotteries and AWP in Italy in 2016 amounted to 10.4bn, which is 10% higher than in the previous year. GGR from lotteries and AWP, bn 10,6 10,4 10,2 10,0 10,4 110% 120% 100% 80% 9,8 9,6 9,4 9,5 60% 40% 9,2 9,0 8, % 0% GGR from lotteries and AWP, Bn Dynamics, % Diagram 55. Gross Gaming Revenue from lotteries and AWP, bn 2018 AMIKO, Consulting and Research company, , 68

69 is 14.1%. Marketing report «The world market of traditional and online lotteries» The share of video lotteries in the Gross Gaming Revenue in the gambling games industry in Italy Share of video lotteries in the GGR in the gambling games industry in Italy, % 14,1% 85,9% Video lotteries Other gambling games Diagram 56. Share of video lotteries in the GGR in the gambling games industry in Italy, % Gross Gaming Revenue from video lotteries in Italy to 2016 amounted to 2.7bn, which is 3.9% higher than in the previous year during the same period AMIKO, Consulting and Research company, , 69

70 GGR from video lotteries in Italy, bn 2,7 2,7 2,7 2,7 2,7 103,9% 120% 100% 80% 2,6 2,6 2,6 2,6 2,6 2,5 2, % 40% 20% 0% GGR from video lotteries, Bn Dynamics, % Diagram 57. Gross Gaming Revenue from video lotteries in Italy, bn 2018 AMIKO, Consulting and Research company, , 70

71 Key trends on the market of lotteries Key trends in the gambling games industry of Italy are: the gambling games industry in Italy shows growth after full legalization the economy in the country is improving, but the growth of gambling games is not slowing down The Italian public showed a strong appetite to pari. Italian consumers spent 113bn s on gambling games in 2016, which is almost three times more than the amount spent in A wider range of games, the improvement of security rules and the introduction of online gambling games, including casinos, have led to an increase in revenues in the industry. National lottery in Italy attracts great revenues, perhaps due to the exclusively high jackpots. SuperEnalotto is played three times a week, and the largest jackpot for today is 177.7M ($248M), it was won by a happy group of 70 people. In 2009, one winner gained 147.8M ($205M). Italy is struggling with the effects of the recession, disposable income has dropped by 7%. Nevertheless, the economy seems to be recovering. As a rule, when the economic condition in the country is becoming stable, the interest in gambling game is often being a bit weakened. And yet, in Italy, it seems that the demand for gambling games is growing even when the economy is becoming stable. Italy may soon have the gambling games market which is sustainable, profitable and has potential for further growth AMIKO, Consulting and Research company, , 71

72 Role of online lotteries on the market Gross Gaming Revenue for the gambling games (GGR) from the regulated online and mobile sectors in Italy in 2016 amounted to 1.03bn, which is 25% higher than in GGR from the regulated online and mobile sectors in Italy, bn 1,20 1,00 1,03 125% 140% 120% 0,80 0,60 0,40 0,82 100% 80% 60% 40% 0,20 20% 0, % GGR from the regulated online and mobile sectors in Italy, Bn Динамика, % Diagram 58. Gross Gaming Revenue from the regulated online and mobile sectors in Italy, bn Online and mobile games now make up 5.4% of the total gambling games industry in Italy AMIKO, Consulting and Research company, , 72

73 Share of online players in the gambling games industry in Italy, % 5,4% 94,6% Share of online players in the gambling games industry Share of offline players in the gambling games industry Diagram 59. Share of online players in the gambling games industry in Italy, % The Italian gambling games market has become the second largest in Europe after the Great Britain, which is considered the global benchmark for the gambling games industry. This growth was achieved due to the peculiarities of regulation of the gambling games industry in Italy. The model is constructed by means of the dynamic regulation, which gradually strengthened the basis for the development of the sector due to the blacklists and blocking of 6,000 sites. The purpose was to make legal Italian gambling games market more competitive and attractive in comparison with illegal gambling games. Data collected by the Research Institute Doha on games in Italy, show that the expenses of players on illegal sites are decreasing, and expenses in the legal sector are growing. These results are crucial for the Italian industry, which in 2016 has contributed 247M in the state budget, by 21% more than in Currently, on the online games market in Italy 84 providers operate. Eight providers have left the market over the past year, which corresponds to the previous year, although the entrance of large operators raised the concentration in the market. In 2016, the online games market in Italy has grown, including due to the growth in the industry of casino games (+ 35%) and sports betting (+ 31%), while poker games have decreased (- 5%). It is also important mentioned the permanent attention to the protection of the players, which is one of the main aspects of legal online gambling games in Italy AMIKO, Consulting and Research company, , 73

74 The Italian market has showed growth in the industry of casinos (+ 35% in 2016), reaching online GGR in the amount of 441M (43% of the total market) and sports betting (+ 31%), reaching GGR in the amount of 350M (34% of the total market). At the same time, poker has decreased by 5% till GGR in the amount of 138M (13% of the total market). The rest 10% ( 97M) of the market consists of "other games", which include lotteries and virtual bets. This category has increased by 20% in 2016 to 97M from 81M in 2015 due to almost all games, including traditional ones (bingo, horse racing, and lotteries). Structure of the GGR in online gambling games industry in Italy by type of games, % 43,0% 9,5% 13,5% 34,1% Casino Sports betting Poker Bingo, horse racing, lotteries, etc. Diagram 60. Structure of the Gross Gaming Revenue in online gambling games industry in Italy by type of games, % As for the expenses, the subsector of mobile games in 2016 amounted to 233M in GGR (+ 50%). The level of market penetration has grown to 23% compared to 19% in % of total expenditure is spent on smartphones, which have become the main channel for mobile games, compared to 57% in In 2016 the tax revenue of the government for online gambling games amounted to around 250M. The main suppliers of revenue were casino games and sports betting, which together generated more than two thirds of total revenues in the industry. The Italian gaming industry in recent years has become more attractive, and on the market new participants have appeared, such as Bet365, GoldBet, Betaland, SkyBet and StanleyBet. The news that the GGR for the sector of online gaming in the country has grew by 25%, is a clear demonstration that the Italian players show less interest in the game in the unregulated sector because they offer legal gaming industry in Italy has become increasingly competitive and attractive to consumers AMIKO, Consulting and Research company, , 74

75 State regulation of the industry The legislative framework for the regulation of gambling games: Primary legislation including clauses of the Civil code and other laws. Secondary legislation, in the form of executive regulations issued by the national gaming authority Agenzia delle Dogane e dei Monopoli (ADM). Offline gambling games and online gambling games are considered separately. In these two categories, different types of games are then regulated separately and individually through specific laws and regulations, namely: Bingo Bingo is played in special halls, bingo is regulated by Ministerial decree no. 29 of 31 January The first bingo hall was launched in Treviso in Currently in Italy there are about 250 objects. Lotto Lotto is regulated by Act 582 dated August 2, 1982 with subsequent amendments in Law 85 of 19 April These two sections of legislation were introduced by the presidential decree 303 of 7 August Instant lotteries Instant lotteries are regulated by the Ministerial decree 183 dated February 12, Draw based lotteries are regulated by Act 772 on August 4, 1955, with subsequent amendments in the Law 62 of 26 March 1990, and then by the law 200 of 1 August Online betting Online betting with fixed odds and sports betting (including exchange of rates and rates in realtime) are regulated by Ministerial decree 111 of 1 March Betting on horse races is regulated by the Decree of ADM dated July 4, Virtual betting is regulated by ADM Decree of 12 February Online bingo Online bingo is regulated by the Ministerial decree of 16 November AMIKO, Consulting and Research company, , 75

76 Online lotteries Marketing report «The world market of traditional and online lotteries» Online lotteries are regulated by the decree of ADM of 17 May Italy was the first member state of the EU, which in 2006 officially legalized, licensed and adjusted online gambling games. There are no regulatory differences between interactive gambling games for mobile gambling games and television. Both are subject to the same rules relating to the proposals for remote gambling games, which apply to online gambling games. For sports betting the tax on profit is 18%. In general, the tax regime applied to offline gambling games, is turnover-based and is charged with the total amount of revenues collected by the operator. Applicable tax rates vary from one product type to another, from 5.5% for VLT to 17.5% for NewSlots. Tax regime applied to online gambling games, is based on profit. The tax rate is 20% for different games (including poker tournaments) and casino games, card games (including poker) and bingo. The tax rate is 22% for sports betting AMIKO, Consulting and Research company, , 76

77 2.6. USA Main indicators of the market of lotteries In 2015, Americans spent $73.5bn in total for traditional lottery tickets, according to the North American Association of state and provincial lotteries. With regarding the electronic lottery games, the figure is $ 80bn. On average, adult population in the United States spend $325 per year per capita on lottery tickets. Experts say that players with low income spend much more of their income on tickets than the rich players. About 63% of the money spent on lottery tickets was used for prizes. The remaining funds were allocated to state and local authorities. Sales of state lotteries in the United States in 2016 amounted to $80.55bn that is 9% higher than in the previous year. Sales of state lotteries in the United States, $bn 90,00 109% 110% 80,00 70,00 60,00 58,82 107% 63,08 109% 68,78 68,88 70,15 73,87 105% 80,55 108% 106% 104% 50,00 40,00 102% 102% 30,00 100% 100% 20,00 98% 10,00 96% 0, % Sales of state lotteries in the United States, $bn Growth, % Diagram 61. Sales of state lotteries in the United States, $bn 2018 AMIKO, Consulting and Research company, , 77

78 Profits of state lotteries in the United States in 2016 amounted to $22.57bn that is 8% higher than in the previous year. Profits of state lotteries in the United States, $bn 25,00 22,57 110% 20,00 15,00 17,88 18,39 19,41 19,58 19,93 106% 20,91 105% 108% 108% 106% 104% 103% 10,00 102% 102% 101% 100% 5,00 98% 0, % Profits of state lotteries in the United States, $bn Growth, % Diagram 62. Profits of state lotteries in the United States, $bn Profits of state and local lotteries in the United States in 2016 amounted to $24.61bn that is 2% higher than in the previous year AMIKO, Consulting and Research company, , 78

79 30,00 Profits of state and local lotteries in the United States, $bn 109% 25,00 20,00 20,41 20,90 108% 22,54 23,67 24,10 105% 24,61 108% 107% 106% 105% 15,00 10,00 102% 102% 102% 104% 103% 102% 101% 5,00 100% 99% 0, % Profits of state and local lotteries in the United States, $bn Growth, % Diagram 63. Profits of state and local lotteries in the United States, $bn 20% of the US population regularly buys a majority of lottery tickets. Share of the U.S. population buying a majority of lottery tickets, % 20,0% 80,0% Share of the U.S. population buying a majority of lottery tickets Share of the rest of the population Diagram 64. Share of the U.S. population buying a majority of lottery tickets, % 2018 AMIKO, Consulting and Research company, , 79

80 16.2% of U.S. residents participate in lotteries 11 times per year or more. Frequency of participation in lotteries per year in the United States is represented in the diagram. Frequency of participation in lotteries per year over the past 12 months in the United States, % 55,6% 16,2% 6,1% 11,1% 11,1% did not participate 1 or 2 times 3 to 5 times 6 to 10 times 11 times or more Diagram 65. Frequency of participation in lotteries per year over the past 12 months in the United States, % 2018 AMIKO, Consulting and Research company, , 80

81 The most popular lotteries in USA are the Powerball and the Mega Ball Mega Millions. The key performance indicators of these lotteries are considered in the tables below. Powerball Number of possible combinations Odd of winning 1: Amount of money to purchase all possible combinations $ Launch date 1992 Price of the ticket 2$ The biggest prize 1,58 bln $ Table 15. Key performance indicators of the lottery Powerball. Mega Ball Mega Millions Jackpot Odd of winning 1: The biggest prize 656 mln $ Launch date 1996 Table 16. Key performance indicators of the lottery Mega Ball Mega Millions 2018 AMIKO, Consulting and Research company, , 81

82 Key trends on the market of lotteries United States of America is a country where lotteries became a cult, nowhere in the world there is such a variety of lottery games. Successful are both weekly draw based lottery games and instant scratch cards. Scratch-and-win (scratch cards) is the most rapidly growing segment of the lottery market in North America. Tickets are largely protected from going online because the age and the location of winners must be verified that can take 24 hours via Internet. In the lottery in the United States you can win not only a cash prize. The most important in the country is the question of the Green Card Lottery. Green Card is a special ID card, which entitles you to live and work in the United States. Only 25% of Americans are for allowing immigrants to obtain a green card with the Green Card Lottery, while 60% oppose. Despite the fact that 60% stated that they were "against" the Green Card Lottery, less than half of people said that they would support the proposal to terminate the program. 70% of respondents vote "Yes" for granting green cards to married couple of foreigners, 61% supported the provision of migrants with temporary residency status in the case of work in the United States AMIKO, Consulting and Research company, , 82

83 Role of online lotteries on the market 12.7% of retail sales in USA come from the Internet in Share of retail sales in USA coming from the Internet in 2017, % 12,7% 87,3% Share of retail sales in USA coming from the Internet Share of other retail sales in USA Diagram 66. Share of retail sales in USA coming from the Internet in 2017, % 17%. According to experts, by 2022 the share of retail sales in USA coming from the Internet will reach 2018 AMIKO, Consulting and Research company, , 83

84 Share of retail sales in USA coming from the Internet according to the forecast for 2022, % 17,0% 83,0% Share of retail sales in USA coming from the Internet Share of other retail sales in USA Diagram 67. Share of retail sales in USA coming from the Internet according to the forecast for 2022, % 79% of the US population has made purchases online. Share of the US population making online purchases, % 79,0% 21,0% Share of the US population making online purchases Share of the US population not making online purchases Diagram 68. Share of the US population making online purchases, % 2018 AMIKO, Consulting and Research company, , 84

85 At the same time, 51% of US residents have made online purchases. Share of the US population making online purchases via mobile devices, % 51,0% 49,0% Share of the US population making online purchases via mobile devices Share of the US population not making online purchases via mobile devices Diagram 69. Share of the US population making online purchases via mobile devices, % networks. 15% of US residents have made online purchases using mobile devices via links in social Share of the US population making online purchases via links in social networks, % 15,0% 85,0% Share of the US population making online purchases via links in social networks Share of the US population not making online purchases via links in social networks Diagram 70. Share of the US population making online purchases via links in social networks, % 2018 AMIKO, Consulting and Research company, , 85

86 State regulation of the industry A reasonable approach to legislative regulation of gambling games activities in the United States is already benefiting for the American State and society. In the United States of America legislative regulation of gambling business is in competence of the authorities of each state. The questions of determination of the types of gambling games, of organization and holding of which is permitted in the boards of the States, as well as the age of the participants of gambling games are administered by the States. The Federal government has intervened in the regulation of gambling games only several times. In some States, only the indigenous population of America Indians can only be engaged in. Legal gambling business is one of the most important sources of revenue of the States. However, this does not prevent from the prosperity of the black market also. Local taxes are to be paid not in all States, in some of them there are simply absent. Therefore, residents of the States of Washington, Nevada, Texas and California need to regularly pay only Federal tax. Other States establish such rates, as they want, on average these numbers range from 3 to 11 percent. The highest tax is in the state of New Jersey % AMIKO, Consulting and Research company, , 86

87 2.7. CANADA Main indicators of the market of lotteries Canada is known for its tolerant attitude to many issues, including in the gambling games business. Casinos in Canada are legalized since Around this time, the government has issued legislative acts and established the Kahnawake Gaming Commission, also the gaming Commission in the provinces. Compared with other countries with legalized casinos Canada cannot be called as the gambling game capital. Although the gambling games develop quite successfully there. As of 2016 in Canada, there are operating the following gambling games establishments: 114 casinos; 12 tracks for horse racing; 1 bookmaker office; 8 bingo halls. Most casinos are located in the provinces of Alberta and Ontario there are respectively 31 and 32 operating establishments there. Least of all are in the Yukon and in the Islands of Newfoundland, Labrador and Prince Edward. In these States there are by 1 operating casinos there In 2016, the volume of lottery sales in the provinces of Canada made up 10.36bn Canadian dollars, which is 10% higher than in the previous year AMIKO, Consulting and Research company, , 87

88 Sales of provincial lotteries in Canada, bn Canadian dollars 12,00 160% 10,00 8,00 6,00 7,73 10,40 135% 89% 9,29 10,31 10,41 111% 101% 9,45 91% 10,36 110% 140% 120% 100% 80% 4,00 60% 40% 2,00 20% 0, % Sales of provincial lotteries in Canada, bn Canadian dollars Growth, % Diagram 71. Sales of provincial lotteries in Canada, bn Canadian dollars The volumes of lottery sales in the provinces of Canada are presented on the diagram. Sales of lotteries in Canada in 2016, by province (in bn Canadian dollars) Atlantic 1,18 British Columbia 1,19 Western canada 1,48 Quebec 2,73 Ontario 3,79 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 Diagram 72. Sales of lotteries in Canada in 2016, by province (in bn Canadian dollars) 2018 AMIKO, Consulting and Research company, , 88

89 In 2016, the profits of provincial lotteries in Canada amounted to 3.33bn Canadian dollars, which is 3% lower than in the previous year. Profits of provincial lotteries in Canada, bn Canadian dollars 7,00 6,00 6,42 274% 300% 250% 5,00 200% 4,00 3,00 2,00 2,28 2,69 118% 87% 2,34 2,99 3,43 3,33 115% 97% 150% 100% 1,00 47% 50% 0, % Profits of provincial lotteries in Canada, bn Canadian dollars Growth, % Diagram 73. Profits of provincial lotteries in Canada, bn Canadian dollars Profits of lotteries of Canada by province are presented on the diagram AMIKO, Consulting and Research company, , 89

90 Profits of lotteries in Canada in 2016, by province (in mln Canadian dollars) Atlantic 287,73 British Columbia 431,56 Western canada 506,58 Quebec 1 050,58 Ontario 1 050,08 0,00 200,00 400,00 600,00 800, , ,00 Diagram 74. Profits of lotteries in Canada in 2016, by province (in mln Canadian dollars) When visiting a casino, 8% of Canadians constantly buy lottery tickets. Frequency of purchasing lottery tickets in casino in Canada, % 13,0% 8,0% 21,0% 39,0% 19,0% Always Most often Occasionally Rarely Never Diagram 75. Frequency of purchasing lottery tickets in casino in Canada, % 2018 AMIKO, Consulting and Research company, , 90

91 Key trends on the market of lotteries Places for running bingo Of these, most institutions are located in the province of Ontario 75. Canada allocates a separate category of gambling games establishments the so-called establishments with Electronic Gaming Machine (EGM). Here are, for example, bars, lounge rooms with interactive terminals, halls with bingo and slots. Most of these establishments are located in Quebec 1854 places. It is worth noting that the vast majority of institutions with EGM are bars. There are providers of electronic keno. The province of British Columbia can show the highest number of such places Most of horse racing tracks are located in Ontario 87 institutions. They are: 66 teletheatres; 17 large tracks; 4 small. Lottery places are the most common in Ontario places where you can buy lottery tickets. Slightly behind is Quebec with places. Exactly places with lottery tickets are the most common in Canada. They are in all provinces, even those with the most restrictive laws. Most of places to play poker are in the province of British Columbia. 17 poker rooms are situated there. Establishments devoted only to sports bets, are found only in Ontario as many as two places. In other provinces there are none at all AMIKO, Consulting and Research company, , 91

92 Role of online lotteries on the market The province of British Columbia in July 2010 has opened an official online casinos for its residents. Thus, it became the first Canadian province to legalize gambling games on the Internet. In 2011, the province has launched a poker room. In December 2010, Quebec has introduced the online poker room and website with the games in the casino style. Manitoba has legalized online casinos in January All of the lottery companies of the named provinces that have opened poker rooms, allied in one network. Due to this, players from different provinces can play at one table online. So now, online gambling business in most Canadian provinces in partially legalized: online lotteries of the government are permitted. In some provinces private online lotteries are also permitted. Other online gambling games are not recognized as legal, while offline they are quite available for people from 18 or 19 years old AMIKO, Consulting and Research company, , 92

93 State regulation of the industry Since 1985, the provincial governments have exclusive jurisdiction over the management of gambling games. Thus, the provincial governments are the operators and regulators of gambling games activities (other than in relation to betting rates on horse racing which exist under shared jurisdiction with the Federal authorities). Since only the provincial governments can control gambling games within their jurisdiction, the provinces have enacted their own legislation providing for the licensing and regulation of games. Although the specifics of the legislation on the control of games varies from province to province, there are some general provisions. Bingo Bingo falls under the definition of a lottery scheme: Provinces directly lead and manage bingo halls. Charitable or religious organization can own provincial licenses. Lottery In addition to provincial licenses to charitable or religious organizations, only provincial governments can legally offer lottery products. There exist provincial lotteries and nationwide lotteries permitted by the cooperation of the provinces. Each province sets its own rules and licensing procedures in the implementation of its public policy objectives. Due to provincial government policy priorities the type and scale of available games vary from one to another. For example, while traditional lotteries are allowed in all provinces and territories, not each province permits slot machines or casinos. Participation in gambling games by minors is not allowed in any province of Canada. Accordingly, even visiting playgrounds on land is strictly limited to patrons which are over the age of 19 years. There is no licensing regime of online gambling games. The provinces can directly offer online games within their jurisdiction. Most provinces have established legal agents to act as "management and control" in their name. The most common form of the state agent is the Crown Corporation created in accordance with the legislation on the control of the game to "conduct and manage" lottery, casino and other gaming services in the province, including online games AMIKO, Consulting and Research company, , 93

94 2.8. CHINA Main indicators of the market of lotteries Total sales of official lottery products in October 2017 rose by 11.3% compared to the same period of the last year and amounted to $5.6bn. In October 2017 sales grew in 29 of 31 provinces in the continental China, which are allowed to sell lottery tickets. In Guangdong, the largest provincial market of this industry, the volume of lottery sales increased by 9.6% compared to the same period of the last year and amounted to $559M. Sales of sports lotteries has increased by 17.1% (to $2.9bn), while sales of lottery tickets with cash prizes increased by 5.8% (to $2.7bn). Both these sectors led to the increase in total lottery sales in China. The total amount of revenue from them during the first 10 months of this year to October 31 amounted to $52.6bn, which is 7.7 % more than in the previous year. Sales of lotteries with cash prizes increased by 4.9% (to $26.7bn) and revenue from sports lottery products increased by 10% and amounted to $25.9bn. At the end of November 2017, in China there were sold lottery tickets for more than 38.55bn yuan ($5.9bn). This is at 11.8% more than in the previous year (4.07bn yuan), reported the Ministry of Finance of the PRC. In 2016, the sales in the industry of sports lottery and lottery with cash prizes amounted to bn yuan, which is 7.3% higher than in the previous year AMIKO, Consulting and Research company, , 94

95 Welfare and sports lottery sales in China, bn yuan 450,0 160% 400,0 136,6% 382,4 367,9 394,6 140% 350,0 118,0% 118,3% 309,3 123,6% 120% 300,0 250,0 200,0 150,0 162,3 221,6 261,5 96,2% 107,3% 100% 80% 60% 100,0 40% 50,0 20% 0, Lottery sales in China, bn yuan Growth, % 0% Diagram 76. Welfare and sports lottery sales in China, bln yuan In the structure of sales of lottery tickets in China the lotteries with cash prizes dominate, their share in 2016 amounted to 52%. At the same time, throughout the considered period, the share of sports lotteries in total sales is increasing AMIKO, Consulting and Research company, , 95

96 Structure of sales in the lottery industry in China by types, % 100% 90% 80% 70% 60% 60% 58% 58% 57% 54% 55% 52% 50% 40% 30% 20% 40% 42% 42% 43% 46% 45% 48% 10% 0% Sales of sports lottery Sales of welfare lottery Diagram 77. Structure of sales in the lottery industry in China by types, % In the 2016, the volume of sales in the industry of lottery with cash prizes amounted to bn yuan, which is 2.5% higher than in the previous year AMIKO, Consulting and Research company, , 96

97 Sales of welfare lottery, bn yuan 250,0 140% 132,0% 200,0 150,0 127,8 118,2% 116,9% 151,0 176,5 206,0 116,7% 201,5 97,8% 206,5 102,5% 120% 100% 80% 100,0 96,8 60% 50,0 40% 20% 0, % Sales of welfare lottery, bn yuan Growth, % Diagram 78. Sales of welfare lottery, bn yuan In 2016, the sales in the industry of sports lottery amounted to bn yuan, which is 13.1% higher than in the previous year AMIKO, Consulting and Research company, , 97

98 Sales of sports lottery, bn yuan 200,0 188,2 160% 180,0 143,3% 176,4 166,4 140% 160,0 140,0 117,8% 120,2% 132,8 132,8% 113,1% 120% 120,0 110,5 94,3% 100% 100,0 93,8 80% 80,0 60,0 40,0 20,0 65,5 60% 40% 20% 0, Sales of sports lottery, bn yuan Growth, % 0% Diagram 79. Sales of welfare lottery, bn yuan In 2015, the volume of issued lotteries in the industry of charity lottery was 861 units, which is 3.6% lower than in the previous year AMIKO, Consulting and Research company, , 98

99 1 050 Marketing report «The world market of traditional and online lotteries» Welfare lottery issuing units, unit 99% 98,4% ,1% 98,0% % % 96,4% % ,0% 95% % Welfare lottery issuing units, unit Growth, % Diagram 80. Welfare lottery issuing units, unit 93% 2018 AMIKO, Consulting and Research company, , 99

100 Key trends on the market of lotteries China has released the first welfare lottery in In 29 years China has become one of the most important lottery markets in the world, herewith total sales of the nation has grown with CAGR of 41% from 1987 to In particular, lottery sales continued to rise for 10 consecutive years from 2005 to Lottery sales increased nearly 10 times in 11 years from bn yuan in 2004 to bn yuan in Meanwhile, lottery sales in China amounted to nearly 10% of global lottery sales in 2010, compared with less than 5% in 2005, reflecting its growing significance for the world market. In 2014, the total amount of lottery sales in the Chinese market was about 20% of the total world lottery sales, setting a new record. China has become one of the largest lottery markets in the world. Trends for 2016 are as following: CTG (including lottery, lottery of high-frequency and lottery based on matches), as a large lottery product with the largest market share, has demonstrated stable and sustainable growth in the lottery market. VLT has become a strong driver of growth for the rapid development of the lottery market. Lottery of KENO type turned out to be an exciting addition to traditional market of CTG. In particular, the welfare lottery 开乐彩 / Keno which works on the united system, is rapidly developing and will maintain the momentum. With the development of mobile phones, the Internet and electronic payments, the sales generated through new media channels, including mobile phones and the Internet has shown explosive growth AMIKO, Consulting and Research company, , 100

101 Role of online lotteries on the market In China, there are about 400 companies that specialize in online lotteries. Their revenues reach 85bn yuan ($13.8bn). The Ministry of Finance of China, together with seven other ministries and administrations issued a statement that it intends to systematize the activities of online lotteries and to prohibit online lottery which not received the permission of the authorities. Online lotteries will receive permission from several ministries. This is due to the "extensive violations" in this area: some companies were engaged in fraud. It is no exaggeration to say, it is rare to see someone paying paper money in China. China's share in the global retail sales of e-commerce is about 40%. China's share in the global retail sales of e-commerce, % 40,0% 60,0% China's share in the global retail sales of e-commerce Share of other countries in the global retail sales of e-commerce Diagram 81. China's share in the global retail sales of e-commerce, % Share of money spent on online shopping in Asia, arrived from China is 60% AMIKO, Consulting and Research company, , 101

102 Share of money spent on online shopping in Asia, arrived from China, % 60,0% 40,0% Share of money spent on online shopping in Asia, arrived from China Share of money spent on online shopping in Asia, arrived from other countries Diagram 82. Share of money spent on online shopping in Asia, arrived from China, % Share of residents of China who used a mobile phone to make purchases is 77%. Diagram 83. Share of residents of China who used a mobile phone to make purchases, % The development of the Internet economy, or as the state Council of the PRC calls the strategy "the Internet plus", is giving fruits. 731 million of Chinese this number of users was voiced in 2016 are engaged in online trading, promote business, pay for utilities, meet each other the online 2018 AMIKO, Consulting and Research company, , 102

103 swallowed with the head: a phone in hand, head is down, almost whole life is centered in the smartphone and two or three mobile apps. Meanwhile, the cyber fraudsters are not asleep. Thus, only in 2016, there have been solved 83 thousands of cases and arrested more than 19 thousand people accused of cybercrimes; law enforcement officers managed to return more than 360 million dollars. According to the Ministry of public security of the PRC, insiders in various companies "untie the hands" for the criminals; insiders sell personal information of citizens AMIKO, Consulting and Research company, , 103

104 State regulation of the industry The only forms of legalized gambling games in China are the two government-approved lotteries: Welfare lottery. Is controlled by the Center of lottery issue in China, which is governed by the Ministry of civil affairs and authorized by the State Council to issue lottery tickets since Sports lottery. Is controlled by the Center of administration of sport boats of China, which is governed by the General Department of sports and authorized by the State Council to issue lottery tickets since The State Council of PRC may authorize the release of the two types of lottery and is also the Supreme body to grant rights to issue lotteries. The Ministry of Finance is responsible for managing, regulating and supervising the national lottery industry. Regulation between mobile gambling games and interactive gambling games on television is characterized in that the interactive gambling games on TV are strictly prohibited. Mobile gambling games are regulated by the measures for administration of telephone lottery sales (measures for the sale of telephone lottery). The only acceptable form of mobile gambling games is the phone lottery. Winnings from welfare lottery and sports lottery are subject to 20% income tax. Scheme 1. State regulation of the lottery market in China 2018 AMIKO, Consulting and Research company, , 104

105 Regulation of the cryptocurrency More recently, China dominated on the markets of bitcoins, it accounted for more than 90% of world trade. But in September, China's Central Bank banned the ICO and the exchange of cryptocurrency for the citizens of the country. China believes cryptocurrency is a speculative instrument. Beijing feared the social chaos that could occur due to losses of private investors in the financial market. After the ban the Chinese services has moved its operations overseas. Despite some limitations, the Chinese cryptocurrency market is one of the largest in the world AMIKO, Consulting and Research company, , 105

106 2.9. SOUTHERN KOREA Main indicators of the market of lotteries State policy on suppression of the gaming industry in South Korea prior to 2008 reduced the volume of lottery sales, but in 2008, the total sales of the lottery began to increase again. In 2011, the launch of the lottery for senior citizen has led to another boom in lottery sales. In 2016, the volume of lottery sales in South Korea amounted to $3.38bn that is 9.3% higher than in the previous year. Lottery sales in Korea, $bn 4,00 140% 3,50 3,00 122,0% 2,68 103,4% 2,77 2,81 2,85 101,5% 101,5% 3,09 108,3% 3,38 109,3% 120% 100% 2,50 2,20 80% 2,00 1,50 60% 1,00 40% 0,50 20% 0, % Lottery sales in Korea, $bn Growth, % Diagram 84. Lottery sales in Korea, $bn In 2016, the volume of the lottery Fund in South Korea amounted to $1.45bn that is 2.6% higher than in the previous year AMIKO, Consulting and Research company, , 106

107 Lottery Fund in Korea, $bn 1,60 1,40 1,20 128,6% 1,05 105,8% 1,11 1,27 114,9% 1,35 1,41 106,0% 104,9% 1,45 102,6% 140% 120% 100% 1,00 0,80 0,81 80% 0,60 60% 0,40 40% 0,20 20% 0, % Lottery Fund in Korea, $bn Growth, % Diagram 85. Lottery Fund in Korea, $bn 56,5% of South Koreans buy lottery tickets. Share of Koreans buying lottery tickets, % 56,5% 43,5% Share of Koreans buying lottery tickets Share of Koreans not buying lottery tickets Diagram 86. Share of Koreans buying lottery tickets, % 2018 AMIKO, Consulting and Research company, , 107

108 60.0% of winning the lottery in South Korea goes to the winner. Distribution of lottery winnings in South Korea, % 60,0% 40,0% Share of the prize for winner Share of the winnings used to fund social programs Diagram 87. Distribution of lottery winnings in South Korea, % 2018 AMIKO, Consulting and Research company, , 108

109 Key trends on the market of lotteries Lottery players in South Korea buy on average 14.2 tickets every year, that is about one per every four weeks, according to government data. The Ministry of strategy and finance conducted a survey which showed that more than half of South Koreans - about 56.5% - have bought a lottery ticket at least once. Of those polled 1,000 respondents, over 93% said that they spend less than 10,000 RUB ($8.90) on the purchase of a lottery ticket Role of online lotteries on the market The volume of online sales of lottery tickets in South Korea in 2016 increased by 9.5% and amounted to $3.1bn. Online sales of lottery tickets in Korea, $bn 3,50 116% 3,00 2,50 114,3% 2,42 2,47 2,60 2,65 2,83 3,10 109,5% 114% 112% 110% 2,11 108% 2,00 106,8% 106% 1,50 102,2% 105,3% 104% 1,00 102,0% 102% 100% 0,50 98% 96% 0, % Online sales of lottery tickets in Korea, $bn Growth, % Diagram 88. Online sales of lottery tickets in Korea, $bn 2018 AMIKO, Consulting and Research company, , 109

110 The volume of sales in the industry of Internet lottery in South Korea in 2016 increased by 29.2% and amounted to $36M. Sales of Internet lottery in Korea, $M % ,8% % ,9% 129,2% 160% 140% 120% 25 93,2% % 20 80% 15 66,6% 72,2% 60% 10 40% 5 20% Sales of Internet lottery in Korea, $M Growth, % 0% Diagram 89. Sales of Internet lottery in Korea, $M 2018 AMIKO, Consulting and Research company, , 110

111 State regulation of the industry The Korean lottery Commission sets the types of lottery products and their prices, but it entrusts private lottery operators to issue, operate and sell lottery products. Currently, as the third of the licensed lottery licensee of Korea, Nanum LOTTO Co., Ltd. will integrate and manage 4 lotteries (online lottery (Lotto), Scratch off Lottery, Pension Lottery, Internet Lottery) until 1 December Scheme 2. Structure of the lottery industry in South Korea 2018 AMIKO, Consulting and Research company, , 111

112 Regulation of the cryptocurrency The financial services Commission of South Korea (FSC) has called the activities of crypto burses (cryptocurrency exchanges) as "unauthorized fundraising". Due to the lack of a unified regulatory system, the FSC does not consider cryptocurrencies as financial instruments. Cryptocurrency exchanges will be obliged to comply with the standards for the protection of the rights of consumers. For each asset the user must be provided a separate deposit account. In addition, to improve the transparency of the exchange cryptocurrency exchanges are required to implement effective KYC procedure (Know your customer procedure). The regulating document will also include measures to prevent the laundering of money through cryptocurrency exchanges AMIKO, Consulting and Research company, , 112

113 3. MARKET OF MOBILE ONLINE LOTTERIES 3.1. CHARACTERISTICS OF CONSUMERS In the developing world, as more and more consumers have access to smartphones, tablets and Wi-Fi, their ability to deal with not taxable activities and fill their downtime with simple, but useful or helpful tasks will naturally expand. Although ownership of smartphones and usage of productive applications is relatively high worldwide, the levels of adoption vary. Countries, where consumers continue to demonstrate especially high rates, include China, South Korea, Turkey and South Africa; in these countries the usage of smart phones is essentially universal. The global players participating in the lottery once a week and more often, as well as not-players, say they use their smartphones or tablets "on public transport during my trips to / from work." The lotteries already innovate to attract people's attention and appetite for the game in the micro-moments of stagnation. However, the time of stagnation is not just simple for lotteries. Seventy-four percent of weekly players and lottery players agree that "fun should be to learn new things as simple as just fun." (Agree with this statement essentially equal are both players and non-players within countries). The exception is the USA. On this trend is WaitSuite a collection of applications, which argues that open new opportunities for "micro-teaching", for example, when users are waiting for connection to Wi-Fi or updating their . The online lotto industry is full of opportunities: only 5% of the current worldwide lottery industry, which is worth $300bn, play online. Companies that can fully digitize and build online and mobile presence will be able to capture a significant part of this market and dominate on it. On the market there are changes in how people gamble, especially due to the increasing presence of mobile and tablets. For example, gambling via mobile phones among consumers of lottery in the society has increased from 13% to 18% between 2015 and Studies have also shown that the online games expand area of presence: if earlier the main audience was people aged from 18 to 34 years old, currently they are widely distributed also among people aged from 35 to 54 years. A typical online consumer represents a sustainable future consumer for the lottery industry. Digital lottery, particularly its mobile component, is a means to increase the demand for lotteries and can provide a platform that meets a wider range of needs and preferences AMIKO, Consulting and Research company, , 113

114 So digital lottery represents a huge potential for growth, and it is the area that effectively develops in many markets AMIKO, Consulting and Research company, , 114

115 3.2. MARKET CONDITION Digital lottery is the renewal of the lottery, its actualization, created to provide a platform which meets a wider range of player's needs and preferences. The oldest online lotteries are now in the age of more than two decades. In Europe there are at least a dozen lotteries operating in the Internet more than a decade. In North America, only 15% of the lotteries offer digital sales channels. Share of lotteries in North America that use online sales, % 85,0% 15,0% Share of lotteries in North America that don't use online sales Share of lotteries in North America that use online sales Diagram 90. Share of lotteries in North America that use online sales, % In Europe, 75% of lotteries offer digital lotteries, although in digital lotteries, the performance varies greatly. Large lottery markets such as Italy and Spain, have low sales (about 4%) on digital channels, while in other European countries, upper level of digital capacity is from 30% (UK) to 50% (Finland). In the middle layers of European countries, an average is about 8-11% AMIKO, Consulting and Research company, , 115

116 Share of lotteries in Europe that use online sales, % 75,0% 25,0% Share of lotteries in Europe that use online sales Share of lotteries in Europe that don't use online sales Diagram 91. Share of lotteries in Europe that use online sales, % Some of these trends can be attributed to cultural customs and market factors. In Italy, for example, where there are concerns about fraud and government tracking, only about 3% of retail sales are online (compared with 17% in the UK, 10% in France and 15% in Germany). And despite the fact that the Italians use mobile phones as often as in most developed countries, the regular lottery players in the country prefer to buy tickets offline. Spain has a low level of online retail sales (of 4.8%). In Finland, on the contrary, the lottery was one of the first products available online and the lottery was the driving force behind the development of e-commerce in the country AMIKO, Consulting and Research company, , 116

117 3.3. FACTORS AFFECTING DEMAND According to the experts of IGT, the growth in online sales is closely linked to the growth in the total retail of e-commerce. They believe that for every percentage point of growth in electronic Commerce we have the 2.48% growth in the online lottery sector. The study does not explore the factors underlying this correlation, but perhaps when society becomes more adapted to online interaction, the desire to participate in the lottery increases. Thus, in the United States, where the prevalence of electronic Commerce is 8.2%, there is a great potential for growth in this segment. Specific qualitative factors related to the operation of the digital channel - for example, quality of mobile offers, number of products, accessibility and availability of products - have a limited impact, in terms of consumer appeal, with the exception of ease of registration of the player in the interactive mode, which is a significant factor. Some lotteries require players to make multi-step enrollment process such as completing an online form, providing the physical identity of their personality. It has been proven that this solution leads to a refusal to participate up to 50% of potential players. Other lotteries are allowed to authenticate potential players online, in one-step process, and this leads to much greater success. Ease of access also covers other variables outside the registration process, including payment options and e-wallet and management. Players are expected to provide the same conditions and payment options for lottery, as for any other online purchase. Some jurisdictions are limited by the rules regarding payment options for online payments in the sector of lotteries, which can lead to nonparticipation of the player due to inconvenience AMIKO, Consulting and Research company, , 117

118 3.4. VOLUME AND DYNAMICS OF THE MARKET The market for betting and lotteries is a large segment in the modern economy. As for 2017, it is estimated at $415bn. According to various expert estimates, online betting and online lotteries amount to about $47bn. Revenue of online and offline gambling games, $bn , ,2 364,7 353,5 359,3 367, , ,1 35,9 39, , offline online Diagram 92. Revenue of online and offline gambling games, $bn The share of lotteries and bets in the global gambling games market is estimated at 58%. According to Statista, by 2018, the market size of gambling games / lottery in the Internet will grow to 52.98bn, as people continue to adapt to technology and online entertainment activities AMIKO, Consulting and Research company, , 118

119 At the same time, the annual growth of the online segment is about 9.5%. 100% Share of online gambling games in the total revenue, % 98% 96% 94% 7,3% 7,7% 8,2% 9,0% 10,1% 10,9% 11,4% 92% 90% 88% 86% 92,7% 92,3% 91,8% 91,0% 89,9% 89,1% 88,6% 84% 82% offline online Diagram 93. Share of online gambling games in the total revenue, % The profit of online casinos, as well as offline sector grows annually. In accordance with the study of H2 Gambling Capital, the profitability of the online platform in 2010 accounted for $6.24bn, and in 2014 was already $8.7bn. Representatives of the Press Agency of France said that the profitability of virtual games in the period from 2010 to 2014 has increased by 28%. In this regard, the market has seen a steady increase in revenues from mobile gambling games: since 2011 it has been steadily growing, and in 2016 already amounted to 32.7% (originally 14%) of the total income from online gambling games. Analysts predict that by the end of 2017 the percentage of usage mobile phones in the segment will amount to 35.1%. The market size of online lotteries is estimated to $3.85bn that is about 8.8% of the total online gambling games market. Subcategory of online lottery currently amounts to about $4bn per year and it is expected that the market volume will grow at a rate of 10-12% per year. Currently, the lack of transparency is a major factor slowing its growth AMIKO, Consulting and Research company, , 119

120 Structure of the global online gambling games market, % 4,5% 5,0% 6,3% 8,8% 26,8% 48,6% Bingo Logical Poker Lottery Casino Betting Diagram 94. Structure of the global online gambling games market, Share of lotteries in the global online gambling games market 2018 AMIKO, Consulting and Research company, , 120

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