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New German Regulations Give Much Focus on Age Verification

Niji Narayan

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New German Regulations Give Much Focus on Age Verification
Reading Time: < 1 minute

 

The progress of legalising online gaming across Germany has been patchy, but there was a breakthrough on 12 March 2020 when the latest GlüNeuRStV was approved by the German heads of state. It acts as a compromise between states wanting the market to be open and those wanting gambling to be more restricted.

This treaty will open up the online market to all products and verticals, specifically poker and virtual slots, with the legislation set to come into force on 1 July 2021. It will, therefore, significantly liberalise the market, subject to strict conditions concerning player protection.

Ahead of July 2021, a transition period was agreed to enable all existing operators and the German Länder to adapt to the new legal framework. This period began on 15 October 2020 and will be used to clarify existing and forthcoming mandates, including those on age verification. However, it’s important to note the industry must comply with the new laws as of 15 October (with a few exceptions deferred to 15 December).

Age verification has been a hot topic in Germany since an investigation by the Bavarian Consumer Centre highlighted the ease at which under-18s could access five major online gambling sites. To get a license in Germany under the new regime, online gambling operators will need to demonstrate a robust age verification solution.

The risks of failure to demonstrate a system of age and identity verification, are significant. It will likely result in a licence application being rejected. For current operators in the German market, it could lead to the revocation of their license and fines of up to €500,000.

Central Europe

The Right RTP for the German 5.3% Turnover-taxation?

Niji Narayan

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The Right RTP for the German 5.3% Turnover-taxation?
Reading Time: 4 minutes

By: Robert Lenzhofer, CEO & Co-Founder at Hölle Games

So, you may have seen a poll I have published recently with the title: “If/when Germany introduces the 5.3% turnover tax, what RTP rate is best suited considering both game-play and effective tax-paid?” If you haven’t seen it, here is the poll again for reference:

https://www.linkedin.com/feed/update/urn:li:activity:6790660730564825088/

There are a few ways of looking at this, but I think the key take-away is that the industry this poll represents is fairly evenly split between above 90% RTP and below 90% RTP.

The tax explained

 First, to ensure we are on the same page, a quick explanation of the tax proposed:

Currently a 5.3% tax on turnover has been proposed and a draft-legislation does exist. I won’t go into the politics and the thinking behind this, but rather try to analyze the numbers.

A 5.3% tax on every bet being placed on an online slot means an operator can not offer an RTP over 94.7%. At 94.7% RTP, the operator would break even exactly on a bet-level, but obviously would lose money as marketing, employees and general operation have to be financed somehow. Considering financial overhead in any operation, that means the maximum RTP a casino is technically able to offer while avoiding bankruptcy is probably around 93% or more likely at 92%. This is the top ceiling and at the same time too high to be profitable.

Now, there is a bit of uncertainty and I’m also not entirely sure if the number to calculate against is 5.3% or rather 5.033%. The tax is 5.3% on turnover, meaning a 1 EUR bet causes a tax of 5.3 cents, which totals to 1.053 EUR. The tax-portion of 1.053 EUR is less than 5.3%. 100*5.3/(100+5.3) = 5.033 resp. 5.033%. I do calculations here in this document based on 5.3%.

How to balance RTP and profitability

We’ve established above that 93% or 92% is the top ceiling, but where is the bottom?

The table below shows how a Slots-operator will be taxed, calculated into the GGR-equivalent %-age number and cross-referenced with RTP. For reference, many other jurisdictions in Europe offer a GGR-based tax-rate of around 20%. As you can see from the table below, the 5.3% tax-rate on turnover wouldn’t be so bad, if players would accept 80% RTP. At 80% RTP, the GGR-equivalent tax-rate is 26.50% and thus a competitive tax-rate.

The coloring I have done here may be slightly biased, especially in terms of RTP so please take with a grain of salt. But if you roughly accept that the red-area you want to avoid on the RTP and on the GGR-% side, then you end up with an RTP-bandwidth between 84% and 91% to play with.

Further, and again granted you accept the coloring, an operator obviously wants to find an RTP in the green and a GGR-% in the green. Here we arrive at 88% and 89% RTP.

Now, a lot has been written that players will not accept such low RTP’s as say 84%. There are counter-arguments made that in land-based slots the RTP is exactly at that level and actually 88% is on the higher-end in land-based casinos.

On the other hand, for many market-participants the number “9” is a psychological blocker. Players, Affiliates and a couple of Slots-Studios I speak to feel very anxious offering product below 90% as this number still feels somewhat close to the industry-average of 94 to 97%. 89% sounds very different than 90%, although it is “just” 1% in RTP dropped.

Sportsbook vs. Casinos

It will be interesting to watch if Sportsbook or Sports-led brands will choose a differing RTP-rate than Pure-Play Casinos. A Sportsbook can more easily stay on a higher RTP and just pause all short-term expenses (bonus, marketing, etc.) and focus on cross-sell. A pure-play Casino will have to look a lot more closely on bottom-line and in my opinion will have a hard time offering e.g. 90% RTP-Slots as the GGR-equivalent tax-rate is 53%.

Game-Mechanics?

 Will there be new Game-Mechanics invented to combat this problem? Looking at the table above again, the second column states how many spins a player on average can make until 1 EUR is spent depending on the RTP-Level. At 95% RTP this is 20 spins. Now, if a Game-Mechanic can be invented that provides a low mathematical RTP while at the same time provides a similar amount of real spins, then this could be a solution to the problem.

Conclusion & in my opinion

The above explanation is in no way complete – there are actually interesting studies which analyze how much an RTP is “felt” by the player and there is probably very good data the land-based industry has to offer.

But, to move away from being neutral, here’s what I personally think: The reality will be that everyone will push the RTP down and experiment with the lowest acceptable RTP as this maximizes their income. As such, come 1st of July, we’ll see a lot of RTP’s experimented with. Imagine you are a pure-play casino and you can provide a Game-Mechanic that feels good to the player and has a nice session length, while staying at or below 40% GGR-equivalent-tax. I believe things start to fall apart financially for an operator at 40% tax-rate. If you own your own media-assets and have good deals with your suppliers and run a tight operation then a 40% tax is possible to do really well in Germany. That means, the average-RTP across the portfolio will have to be around 87–88%. I think you can mix in 91% games into the portfolio just so that is part of the portfolio too, but the majority of revenue of the white-market in Germany will in my opinion come from Slots around 88% RTP. And since some games will be mixed in at 90/91% you can expected some slots to be mixed in at 84/85% rate as well.

Update 07/05/2021:

I didn’t mention in this article two other potential solutions. One is directly taxing the customer on the bet and the other is directly taxing the customer on a win (paying the tax-authorities on a bet-level, but collecting funds/tax from players on a win) like currently most sportsbetting companies do in Germany. These solutions also lower the effective-RTP-rate to the customer (just charged at a differing touch-point).

The main issue with those solutions is that an operator ends up with an equivalent-GGR taxation of around 57% which isn’t sustainable. Here are some calculations of these alternative solutions: DE 5.3% Taxation Calculations

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Central Europe

6 in 10 Germans play video games

George Miller

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6 in 10 Germans play video games
Reading Time: 2 minutes

 

More than half of Germans play computer and video games. Overall, 58 per cent of the population between the ages of 6 and 69 reach for the console, PC or smartphone to plunge into digital worlds. In the Covid-19 year of 2020 alone, around 5 per cent more people in Germany took up playing computer and video games. These are the numbers released today by game – the German Games Industry Association, based on data collected by the market research company GfK. Participation is high across all age classes and genders. However, the 50- to 59-year-old segment is the largest group of players, in which about 1 in 5 currently plays computer and video games. This group and players in the 60–69 age class together make up one third of all German video game players. These ‘silver gamers’ are in part responsible for the continually rising average age of players in Germany – currently 37.4 – over the last several years.

‘The video game phenomenon has long been embraced by society as a whole,’ says Felix Falk, Managing Director of game. ‘But never before have so many Germans played as do today. In the last twelve months, the total number of video game players in Germany has grown by 5 per cent, a significant jump. During the shutdown phases in particular, games provided millions of people with great entertainment, a welcome diversion and also a way to stay in contact and have fun with family and friends. In this way, computer and video games made an important social contribution while also winning over millions of enthusiastic new players.’

About the market data
Please note: for purposes of better international demographic comparability, for the first time, only people between 6 and 69 years of age were taken into account in the analysis. This adjustment was made for data up to and including 2017.
The market data is based on statistics compiled by the GfK Consumer Panel. The methods used by GfK to collect data on Germany’s video games market are unique in terms of both their quality and their global use. They include an ongoing survey of 25,000 consumers who are representative of the German population as a whole regarding their video game purchasing and usage habits, as well as a retail panel. The data collection methods provide a unique insight into the German market for computer and video games.

game – the German Games Industry Association
We are the association of the German games industry. Our members include developers, publishers and many other games industry actors such as esports event organisers, educational establishments and service providers. As a joint organiser of gamescom, we are responsible for the world’s biggest event for computer and video games. We are an expert partner for media and for political and social institutions, and answer questions relating to market development, games culture and media literacy. Our mission is to make Germany the best games location.

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Central Europe

Century Casinos Extends Closure of its Polish Casinos

Niji Narayan

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Century Casinos Extends Closure of its Polish Casinos
Reading Time: < 1 minute

 

Century Casinos Inc. has announced that its Polish casinos would remain closed through June 6, 2021, subject to potential extensions, to comply with extended quarantines issued by the Polish government to contain the spread of COVID-19. The Company previously expected the Polish casinos would reopen on May 8, 2021.

The COVID-19 situation continues to evolve rapidly, and it currently appears that due to the pandemic’s current scope it will adversely impact the Company at least through the first half of 2021.

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