Central Europe
A Balanced Take on Optimal RTP for New Turnover Taxation in Germany
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.
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Evoplay, the award-winning game development studio, has made its debut in the Czech Republic through an exclusive collaboration with leading operator Fortuna.
As part of the agreement, 39 of Evoplay’s top-performing games, including popular titles like Penalty Shoot-out and The Greatest Catch, are now available to Fortuna customers in the Central European country.
The collaboration not only introduces Evoplay’s diverse portfolio to the Czech market but also solidifies the company’s commitment to expanding in key territories.
Fortuna, a Fortuna Entertainment Group (FEG) brand, is a prominent online casino operator in the Czech market, and the partnership offers Evoplay a solid platform to reach more local players, supporting both companies’ growth objectives.
The strategic move marks a significant milestone for Evoplay, as it becomes the studio’s inaugural partnership in the market with plans for further expansion.
Ihor Zarechnyi, CBDO at Evoplay, said: “Breaking into the Czech market with an exclusive partner like Fortuna underscores our strategic vision for regulated markets. We’re thrilled to bring our diverse content offering to Czech players and are confident this collaboration will yield outstanding results.”
Myke Foster, Group Head of Commercial Gaming Operations at FEG, said: “This partnership reflects our commitment to delivering best-in-class entertainment and exceptional gaming experiences to all FEG customers, with Evoplay providing a broad content portfolio proven with players around the globe.”
“We are thrilled to be the first operator to take Evoplay’s titles live in the Czech market, and we anticipate a new level of engagement among our local audience.”
The post Evoplay enters Czech market with exclusive Fortuna collaboration appeared first on European Gaming Industry News.
Amusnet proudly announces its strategic partnership with Kajot Intacto, a prominent Central and Eastern European gaming market operator. This collaboration aims to enhance players’ gaming experience by combining Amusnet’s cutting-edge offerings and diverse game portfolio with Kajot Intacto’s established market presence and expertise.
“At Amusnet, our focus is on enhancing player engagement and satisfaction, and our partnership with Kajot Intacto exemplifies this dedication. By utilizing the operator’s established market presence, we can effectively introduce our diverse portfolio of games to a wider audience in Slovakia. As we begin this collaborative journey, we are committed to evolving our offerings and remaining at the forefront of market trends, ensuring we meet the needs of players now and into the future,” said Irina Rusimova, Chief Commercial Officer at Amusnet.
“We are pleased to announce the addition of Amusnet as a valued game provider for our players. Renowned for its classic games enhanced with innovative features, Amusnet aligns perfectly with our commitment to delivering quality gaming experiences. Notably, the most popular game at Kajot Intacto is 100 Burning Hot, which exemplifies Amusnet’s signature style and underscores our dedication to offering engaging content to our player base,” said André Kruf, Sales Director at Kajot Intacto.
On Kajot Intacto’s platform, Slovak players can find some of Amusnet’s top-performing games, such as Hot Deco, 20 Golden Coins, Great 27, 100 Power Hot, Extra Crown, 100 Super Hot, 100 Burning Hot, Aztec Forest, Fruits & Gold, 20 Hot Blast and other top-notch titles like Secrets of Sherwood, Candy Palace, and Drops of Water.
The post Amusnet Partners with Kajot Intacto appeared first on European Gaming Industry News.
NOVOMATIC has underscored its clear commitment to sustainability by installing the Group’s largest photovoltaic system. More than 4,600 solar panels have been installed on the roof of the headquarters in Lower Austria, covering a total area of 20,000 m2 and ceremoniously commissioned in the presence of Lower Austrian Governor Johanna Mikl-Leitner, NOVOMATIC’s Executive Board and the mayor of Gumpoldskirchen, Ferdinand Köck.
The PV system, with a size equivalent to three football pitches, will produce around two million kilowatt-hours of electricity every year, thereby enabling the company to meet a substantial portion of this location’s annual energy needs. In addition to being used in the offices and production facilities, this green electricity will also find its way into the company’s dedicated charging stations for its fleet of e-vehicles. It is a similar situation with international subsidiaries in countries such as Germany, Italy, Spain, Romania, North Macedonia, Bosnia, Poland, South Africa and Australia, which are already meeting substantial portions of their electricity needs from dedicated PV systems.
State Governor of Lower Austria, Johanna Mikl-Leitner, emphasizes “Lower Austria is a pioneer in efforts to develop the use of wind energy and photovoltaics. Half of all the wind power produced in Austria and a quarter of all the country’s photovoltaic electricity already comes from Lower Austria today. We can do this because many companies do their bit to ensure the green and sustainable future of the state’s economic engine, investing in the development of renewable energy sources. Thank you for this investment and the trust placed in the economic hub that is Lower Austria.”
“The completion of the Group’s largest photovoltaic plant is not just a key milestone in the sustainability strategy of NOVOMATIC AG, but it also means we have sent a clear signal of our intentions to foster a strong and efficient energy future. After all, it is only by taking responsibility that business success can be guaranteed in the long term,” says the Executive Board of the NOVOMATIC AG Group.
Installing the new PV system on already built-up areas helps NOVOMATIC to consistently reduce its carbon footprint, and enabling it now to save more than 1,100 tons of CO2 emissions every year, the equivalent of 90,500 trees compensating for CO2. The concept of “Going Green” is firmly anchored in the company’s comprehensive ESG program as Europe’s leading gaming technology group. In addition to its work to expand the use of photovoltaics across the Group, the company is also focusing its attention on monitoring resources and expanding e-mobility, all with a view to permanently cutting international CO2 emissions.
The post NOVOMATIC builds the Group’s largest photovoltaic system in Lower Austria appeared first on European Gaming Industry News.
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