Gains for iGaming Checkered by Operator Exodus in the Czech Republic

The Czech Republic needs to adapt their new regulation model to translate strong iGaming performance into overall market gains.

Last week revealed a good news-strange news scenario in the 2017 Czech market figures released last week.

Contrasting Gains

An overall minimal revenue gain in the gaming market seemed surprising in the face of the strong rise in online gambling revenue of over 50%.

Czech Ministry of Finance figures for 2017 indicated total revenues of CZK39.8b (US$1.77b), a gain of 1.1% from 2016 in the face of overall spending on gambling rising 14.1% to CZK224b.

The gains in online gaming nonetheless did not translate to overall gains for the Czech Republic, which began allowing and regulating iGaming in the country with the revision of the country’s gambling act in 2016.

The Online Contribution

The fact is online gambling jumped 56% year-on-year to CZK8.3b ($370m), responsible for a contribution of more than one fifth of the overall gaming market in the Czech Republic.

The vertical contributing most heavily was fixed-odds sports betting, which saw a total rise in 217 of nearly CZK1b to reach just short of CZK6.2b.

The next largest contributor on the pole for 2017 was online casino, which brought in just over CZK2b to the Czech market, with live casino third at a CZK120m contribution.

Online lotteries brought in CZK276m, compared to a decline in the contribution of land-based lotteries down CZK500m to CZK6.1b.

Conflicting Disincentive

The relative lack of gains from the overall sector may have to do in large part to some changes made in the Czech market structure that took effect January 1^st of 2017. The updates imposed stiff taxes on foreign licensees, resulting in many operator withdrawals who were discouraged by new individual vertical taxes of 23% on sports betting, and 35% for slots, compounded by a 19% corporate tax and further new restrictions on online bonus offers.

Outlook

The Czech government is claiming a healthy purge of up to 90% of illegal operators, but if they want to keep this purge from claiming more legitimate licenced operators on the ledger, they will have to find a way to ease restrictions on foreign operators to add more revenues and streams to the overall till. Let’s hope the operators that began trickling back at the end of 2017 have found more hospitable conditions in 2018.