LA DEBACLE


The newly regulated French betting market ended up being a flop


It came as no surprise that the newly regulated French betting market ended up being a flop although few would have thought that it would have failed in such a spectacular manner, particularly when France's legal poker business has been such a success.

THE SEEDS OF THE DEBACLE were sown early on when the French chose not to learn from the mistakes of others, in this case, the Italians who went through the process of moving from prohibition to liberalisation a decade earlier with disastrous effects, and ploughed on with legislation that everyone with knowledge of the industry warned them was bound to fail.

How did the French manage to make such a mess of things?

You do not have to be a top economist to know that applying a tax substantially higher than virtually anywhere else in Europe was not going to bring bookmakers flocking to apply for licences, especially in a country where football - the main product for betting - has less of a following than elsewhere. Furthermore, the high level of taxation ensures that the odds currently on offer to the French public have to be far less competitive than those available elsewhere. Back in 2000, the Italians set betting duty at 17 percent of turnover and sent dozens of companies into liquidation and succeeded only in guaranteeing substantial returns for overseas operators targeting that market. It was years before the penny dropped and tax rates fell substantially.

In France, creating the conditions where newly licensed operators need to ask the permission of (and then pay one percent of turnover to) sports bodies in order to price up events was also going to 'stick in the craw' of companies who had fought against the principle for decades. A decade earlier, the Italians too thought of doing this, but promptly abandoned the idea when M. Leblanc, the organiser of the Tour de France, told them that he thought taking bets on the cycling event was immoral. As a result, Italy's punters were not able to make bets on which chemically-enhanced competitor would finish ahead of another. The authorities soon realised the error of their ways and no longer asked sports bodies for permission to offer betting on their events.

However, the French have gone even further than their neighbours when it comes to protecting local businesses. Liberalising the online sector, whilst maintaining the monopolies of Pari Mutuel Urbain (PMU) and Franзaise des Jeux (FDJ) for offline betting on horses and sport, never stood a chance of remaining unchallenged by somebody in the gaming sector. However, although Stanleybet and Zeturf did lodge a legal challenge, it was actually France's own competition authority that flagged up the incompatibility of an offline monopoly with a liberalised online market when it is obvious that those with a territorial presence have an in-built advantage over those with no means of promoting their products on the high street apart from through expensive billboard advertising.

So, with over half a year of activity in the market, how much did France's online punters stake on sportsbetting? According to Jean-Francois Vilotte, Head of Gaming Authority at the ARJEL, quoted in La Tribune on Friday 21 January, by December 31, 2010, turnover reached €448 million, of which €83 million was bet on the FIFA World Cup. Despite the millions spent by new operators on advertising, and the huge level of attention given to the opening of the market by the media, the monthly average works out at around Ђ65 million, compared to Ђ100 million turnover in Italy where GDP, Internet access and PC ownership are all substantially lower.

So where from here?

With several large operators such as Ladbrokes reversing out of the market, other big names notable by their absence and plenty of licensees such as Betclic bemoaning the conditions under which they operate, there appears little optimism that things will improve. However, with the law enabling a modification of the regulations after 18 months of trading, and the competition authority requiring answers over the position of the PMU and FDJ, as well as the requirement to contract with sporting bodies, it appears that change will come sooner rather than later, despite opposition from legislators.
 
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