Hallo Deutschland: Is Novomatic Withdrawal to Become the Norm in Germany?

Published January 19, 2018 by Lee R

Hallo Deutschland: Is Novomatic Withdrawal to Become the Norm in Germany?

The Germany regulation situation might be going from bad to worse after losing a top member.

From the quagmire that remains German regulation, Austrian gambling technology giant Novomatic doth exit.

The Exodus Factor

The withdrawal took place at the end of December, another stark reminder of the need for clarity in the jurisdiction, and a harbinger of what’s to come if said clarity does not emerge.   

Seeds of Discontent

The seeds for withdrawal initially emerged in September, when Novomatic cancelled plans for a 5 billion euro initial public offering on the Frankfurt bourse out of concern for the impact of new regulations introduced in gambling halls in the key market of Germany.

Ramifications

With almost 40% of Novomatic’s sales generated from gambling equipment and the vast majority of the remainder from operating gambling halls, the greater implication is that the many companies which offer land-based gambling equipment in Germany are going to tread with increasing trepidation. In other words, general confusion regarding regulation in Germany appears to be categorically discouraging individual product manufacturers. 

Organisational Trepidation

A spokesman spoke to the nature of his organisation’s cessation of offerings to German online casinos that use the equipment for real-money gambling thusly:

“Unfortunately there are many providers which continue to place copied gaming content unlawfully on the German market without having relevant agreements with us,” further attributing the problem to German rules being currently “unclear.”

Insufficient Gains

The loss of one of Germany’s largest land-based operators would appear to loom large to the local market. However, the problematic status of regulation has left the gains disproportionately small for the company itself. 

Second in Line

Despite Novomatic’s prominent stature, the new regs also were projected a few months back to shrink Novomatic’s land-based presence by 30%, making Novomatic the latest to follow other an exodus that already included Gauselmann Group.

Outing Operators?

The withdrawal of slots being offered through Gauselmann’s Merkur Gaming subsidiary has been linked to the naming of the company in something called the Paradise Papers, consisting of files leaked to expose the connections of German operators to tax havens. 

In said papers, relationships of Gauselmann’s to internationally licensed German-facing online casinos were revealed, which threatened to put Gauselmann at odds with existing federal regulations in Germany prohibiting online casino gambling.

Unclear Regulations Stigmatize

Clearly, a market that is unclear can demonize market operators. The lack of clarity in its present from dates back originally to 2012, when Germany adopted a new federal treaty on gambling. The finding that the proposed German regulation model was incompatible with European Union rules on trade in goods and services at the time has yet to be resolved five years later. 

Outlook Bleak For Now

The task remains tall, but leaking findings of violations in the German market is not a good way to ingratiate new entry, making a continued exodus seem more likely than effective resolution in the current environment. 

See also

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