Central Europe

A Balanced Take on Optimal RTP for New Turnover Taxation in Germany

Published

3 years ago

May 19, 2021

Reading Time: 4 minutes

What should be the optimal return to player (RTP)? This is a hotly debated question in the German gambling industry following the changes in the turnover taxation that are scheduled to come into force from 1 July 2021.

While several figures and many theories have been advanced, we found particular LinkedIn post by Robert Lenzhofer, Co-Founder and CEO of Hölle Games, particularly well-balanced and insightful.

We are reproducing the post with minor changes here, with permission from the author. You can find the original post here.

Over to Mr. Lenzhofer now…

I have published a LinkedIn poll 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?”

After one week and 120 votes from industry experts, the poll showed the following result:

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

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.

Central Europe

NOVOMATIC is Austria’s Second Most Valuable Brand Company

Published

2 days ago

July 1, 2024

Niji Narayan

Reading Time: 2 minutes

For the 21st time, the European Brand Institute has presented the most valuable and sustainable brand companies in Austria. The international gaming technology group with more than 25,300 employees worldwide and activities in more than 120 countries secured the top positions in both the EBI’s Brand Value and Sustainable Brand Ranking.

With a brand value increase by +8.7% to EUR 3.745 billion, NOVOMATIC took an excellent second place in the brand value study and also recorded the largest increase in value within one year among the country’s top 10. Once again this year, only Red Bull ranks ahead of the Lower Austrian global player.

Significant factors for the brand value assessment were not only the high level of innovation, but also the international expansion course, sales growth and the comprehensive corporate responsibility and ESG programme, which is confirmed by international ESG rating agencies. Against this background, NOVOMATIC was also able to impress in the Sustainable Brand Ranking, in which the company took third place for the first time. This ranking underlines NOVOMATIC’s contribution to sustainable economic development in Austria.

“The renewed top position in the Brand Value Ranking 2024 is confirmation of the long-term success of our global brand strategy, which has enabled us to sustainably consolidate our leading position on the international markets. The rise to third place in the Sustainable Brand Ranking is particularly pleasing and shows that we are also setting new standards in the area of social and ecological responsibility with our comprehensive ESG commitment,” said NOVOMATIC Executive Board Member Stefan Krenn.

The Austrian Brand Value Study, which is based on the annual “trend-TOP500 of Austria’s top-selling companies” and identifies those Austrian corporate brands with more than 45% of their shares in Austrian hands, evaluated a total of 180 Austrian brand companies from 16 sectors in 2024. The brand value is determined in accordance with the international standards ISO 10668 and ISO 2067.

The top rankings in the Austrian Brand Value Study and in the Sustainable Brand Ranking confirm NOVOMATIC’s position as one of Austria’s leading brand companies. The gaming technology group is thus once again setting a strong example for sustainable business practices.

The post NOVOMATIC is Austria’s Second Most Valuable Brand Company appeared first on European Gaming Industry News.

Central Europe

Bragg Gaming Continues Global Expansion, Powers Kingsbet.cz Launch with an End-to-End iGaming Solution

Published

2 weeks ago

June 17, 2024

Niji Narayan

bragg-gaming-continues-global-expansion,-powers-kingsbet.cz-launch-with-an-end-to-end-igaming-solution

Reading Time: 2 minutes

Bragg Gaming Group has launched its full turnkey solution with Czech land-based casino operator Kings Entertainment A.S. (Kings). Kings will operate their online business in the Czech Republic under the brand Kingsbet.

Under the terms of the agreement signed between the two parties, Bragg will provide Kingsbet with Player Account Management (PAM) technology, exclusive content from Bragg studios, aggregated online casino content via the Bragg HUB and a fully localised sportsbook integration in partnership with Altenar.

Bragg provides Kingsbet with an all-in-one solution with powerful automation and marketing tools to seamlessly run its casino and sportsbook operations.

Bragg’s FUZE player engagement toolset for casino and sportsbook is also included, helping boost acquisition, conversion and retention with tools such as Free rounds, Missions, Quests, Journeys, Recommendation engine and Jackpots.

Kingsbet will additionally be supported by managed marketing and operational services delivered by Bragg.

The agreement and subsequent launch is the latest in a string of deals that Bragg has struck to provide its technology solutions to operators across global regulated iGaming markets, and is the Company’s second PAM and turnkey partner in the Czech Republic.

Bragg Group Chief Executive Officer Matevž Mazij said: “We are proud to be chosen to support Kings Entertainment, a leading European entertainment, casino and poker brand with our full-service turnkey solution as they transition their market leading Czech operations online.”

“The new regulations make this an exciting time to be in the Czech market,” Mazij added.

David Vaněk, Chief Executive Officer of Kingsbet, said: “Over the past 8 months, both teams worked very hard to prepare the launch of “kingsbet.cz” ahead of the EURO championship. I’m proud that we are the first licensed betting and gaming operator in the Czech Republic who have undergone a rigorous and very demanding licensing process and are currently the sole operator fully compliant with the new Gambling Act, effective as of January 2024.

“Kingsbet will offer players ‘The King’s experience’ in sports betting and casino, and we plan to launch a Live casino product by the end of this year. Bragg’s platform will enable us to enter the Czech market with powerful tools and a highly competitive product offering.”

Founded in 2003, Kings Entertainment operates three land-based casinos: the Kings Rozvadov, Admiral Rozvadov and Hilton Prague properties. At Kings casino in Rozvadov, known as the biggest poker arena in Europe and a premier gaming destination, a variety of poker tournaments including W.S.O.P. are held attracting more than 500,000 visitors per year.

Kings has a 40% share of the Czech land-based casino market and now has ambitious plans to expand into online gambling, an expansion which will be supported by Bragg technology and expertise.

The Czech online casino market is projected to achieve approximately $1 billion in gross win in 2024, according to H2 Gambling Capital. This figure represents growth of 30% on a year-over-year basis from 2023’s figures.

Under previous Czech gambling regulations, operators were only able to offer online RNG games explicitly licensed under the Czech Gambling Act.

Following pressure from operators, this list was widened to include live dealer games (live casino), an amendment which came into force on January 1, 2024.

The inclusion of live dealer games was one of a number of amendments made to existing Czech gambling laws, the most wide-ranging of which was the introduction of a new streamlined licensing regime for operators.

The post Bragg Gaming Continues Global Expansion, Powers Kingsbet.cz Launch with an End-to-End iGaming Solution appeared first on European Gaming Industry News.

Central Europe

GR8 Tech Opens New Hub in Warsaw, Poland

Published

3 weeks ago

June 12, 2024

George Miller

gr8-tech-opens-new-hub-in-warsaw,-poland

Reading Time: 2 minutes

An award-winning iGaming platform provider, GR8 Tech, opened its newest hub in Warsaw, Poland, on June 6, 2024. As a company committed to a remote-first model since the pandemic, GR8 Tech continues to support its diverse international staff by offering flexible and comfortable working conditions. In addition to assisting in home office arrangements, the company also provides local hubs in target locations where employees are concentrated and hiring activities are underway.

These hubs, available in several locations across Europe, including Cyprus, the Czech Republic, and, from now on, Poland, offer employees the opportunity to work in an office-like environment if they choose. This initiative is part of GR8 Tech’s ongoing efforts to ensure that its employees have the best possible working conditions in any location they choose to work from—efforts that have been recently recognized with the “Best Workplace 2024” title by SiGMA Americas Awards.

The new Warsaw hub will serve as a convenient workspace for the 80+ specialists already located in Poland and all new employees joining the company. It will also be available to any GR8 Tech employees traveling internationally who require a professional environment to work from.

The opening of the Warsaw hub aligns with GR8 Tech’s broader strategic activities across Europe and specifically in Poland. Recently, GR8 Tech participated in the largest Polish IT festival, Code Europe, held on June 10-11 in Krakow, as the technology partner, with GR8 Tech’s Chief Talent Officer, Tetiana Davydova, holding a talk on “Mastering the Science of Negotiation: Secrets to Successful Dialogue in Tech” at the event. GR8 Tech will also participate in the Devoxx conference in Krakow on June 19-22 as a partner. The company’s Deputy CTO, Pawel Grzegrzolka, will hold a talk on “Integrating quality gates in IaC”.

To learn more about GR8 Tech and its upcoming activities, visit the company’s website and join its communities on LinkedIn and Facebook for business-related topics or Instagram for the highlights of the GR8 work environment.

About GR8 Tech

GR8 Tech is an international iGaming provider of high-performance Sportsbook and Casino platform. Holder of the “Best Workplace 2024” title by SiGMA Americas, “Best Online Sportsbook Provider 2024” by SiGMA Eurasia, and, most recently, “Rising Star Provider of the Year” by Affpapa iGaming Awards.

GR8 Tech’s flagship product, GR8 Sportsbook, renowned for its exceptional event coverage and robust feed, manages heavy user loads with real-time anti-fraud processing and advanced margin management capabilities. Complementing the Sportsbook, GR8 Tech’s portfolio includes the GR8 Casino platform and vital standalone products like CRM, payment gateway, player account management, etc.

Focused on the personalized approach and lifetime partnership, GR8 Tech perfectly alleviates iGaming operators’ challenges by delivering customized, scalable solutions that evolve with business growth.

The post GR8 Tech Opens New Hub in Warsaw, Poland appeared first on European Gaming Industry News.