Preparing for launch: How the industry got ready for German regulation

Unlike most other territories, the date of the State Treaty on Gambling’s implementation on 1 July did feel as if it heralded a new dawn for the German betting and gaming market.

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Unlike most other territories, the date of the State Treaty on Gambling’s implementation on 1 July did not feel as if it heralded a new dawn for the German betting and gaming market.

Some operators were already up and running, through the transitional regime that began in October last year. Others were already offering sports betting. Others have simply delayed their launches as a result of an uncertain and opaque regulatory framework.

At a time when a new federal regulator is not yet established, what can operators do to prepare when the only certainty is uncertainty? The second part of WRB Europe’s spotlight on Germany examines the work undertaken in the lead-up to the implementation of the new regulatory model.


Dr Joerg Hofmann, Head of the Gaming & Betting Law Practice Group, Melchers Law Firm


Luka Andric, managing director, Deutscher Sportwettenverband

Joe Saumarez Smith, chairman, Eyas Gaming

Jovana Popovic-Canaki, managing director, Masterpiece Gaming

So first, could you just give a comment on the difficulty of setting up a slots business. With so little guidance on the rules, it’s almost impossible to advertise because we need to consider the transitional regime does not formally legalise the offerings, toleration and advertising for illegal games of chance, meaning non-licenced games of chance is prohibited. This is only possible upon granting of a licence whenever this may be so I'm keen to learn what you say.

Joe Saumarez Smith: It's a difficult environment and actually if you look at the regulatory regime in the abstract if there had been no grey market or pre regulated market and the German consumers didn't really know what a good offering looked like, it would be much easier. However, the reality is that there's been 15 years of German customers playing online with slot sites that offer a very good return to player and very good bonuses. If you now have a regulated site and you stick to all the rules, which you have to otherwise you lose your license or you don't get granted your license, then your offering is going to be much worse than the black market. So the question for us is really, first of all, is the black market going to be cracked down on at all? And at the moment there doesn't seem to be any sign at all of anybody suggesting that they will go after the black market and we know that there are some very big black market operators who are making 20 million euros a month EBITDA.

So when we launch into the markets we will have less content, it will be on a far lower RTP to the players and we won't be able to do any bonuses. It’s going to be very difficult to find any of the customers because we can only advertise online from very limited times of day. We can't do any radio, we can't do any TV. Trying to find customers is going to be very tricky. We will do search engine optimisation, we will do what we can, but it really is like having both hands tied behind our backs and our legs tied together as well and that's just not a very satisfactory position for trying to enter a market.

We’re also trying to refine our financial models at the moment, but there was one point when our original financial model basically showed that the bigger we got the more money we lost which is really not a great situation to be in. We have to enter the market, but it will be slow and steady. Establish yourself, your brand and hope that the tax rates and the regulations change, and there’s more crack down on the black market. Otherwise, it’s probably the worst possible market in Europe, even worse than the French market.

With all the challenges you have on all the technical sides, with all the platforms and software that needs to be adjusted to the German requirements plus the change of RTP - that takes time, so be availability of games is not really as it should be right now.

Joe Saumarez Smith: If you look at who's produced games, Novomatic have done a lot of games, but they said that they're going to use them exclusively so it's not available to the general market. Red Tiger have put out about 30 games with lower RTPs, Microgaming has about 8.

The Book Of are the dominant slots in Germany and they do not work at a lower RTP or the player experience is much worse. So, it's just going to be probably 10% of the content that was there, maybe less. It's unsatisfactory for customers and it drives them to the black market if they had an experience with a pre regulated operator.

I wouldn't be surprised if they don't just seek out somebody who can provide exactly the same sort of experience.

Nevertheless, the industry's preparing for a licensing regime and applying for licenses hoping that the regulatory environment will be improved.

If you're trying to get answers you can read the minimum requirements just published by the regulator. It's not hard to get immediate responses due to the fact that the capacity of the new authority is very limited the momen t.

Luka, what is your advice? Who could operators contact if they need answers if they need advice for the entry into the German market?

Luka Andric:  Well, apart from talking to your lawyers and trade associations like us, the best piece of advice is try to seek direct contact with the regulatory authorities. Unfortunately, it is not very straightforward at the moment because you've got divided responsibilities. Say for sports betting it is responsible, but if you're applying for an online casino / online poker license you have to apply in Saxony-Anhalt, having said that, this new regulatory authority that we're talking about has been setup, but it's not actually in charge of the process because it's only got a handful of staff.

They’ve set up a specific email address and we encourage them to put an FAQ section on the website. We as a trade association are also trying to channel questions that our members have to this authority to get feedback, but the best advice would be to get in touch with the responsible authority directly, and if in doubt, talk to your lawyers and your trade association.

We also provide a forum where operators applying for these licenses can talk about their experiences and interpretations of legal rules.

My first experience when I tried to get someone on the phone, I spoke to someone who was really open-minded and tried to assist. 

Of course, there are so many contradictive regulations in the industry. So many left open questions. We have to think about regulators, technical infrastructures to safe storage systems. It's hard to find your way through and I think we need some time. 

What we need is to offer this sort of dialogue Jovana mentioned earlier in our first session. I think this is really key to get this done.

Luka Andric: One thing that has occurred to us over the past couple of days is that not even the authorities in the different lands seem to know exactly what the other land is doing; we've seen examples where people have asked for certain contracts that were supposed to be issued and these contracts didn't exist yet. There seems to be a lack of communication between the authorities. We're now two weeks into the process and we hope that it will improve quickly.

We've also seen the authorities tend to be lenient if and when certain obligations cannot be fulfilled. There are extensions to deadlines & so on if you can reasonably show that what they've been asking for is impossible or very difficult to reach within the short time frames that they setup.

It's interesting to learn from a real-life example. You're going to launch your product and you're really analysing regulation and you set your goals very high, tell us how would you plan to launch a new brand?

Jovana Popovic-Canaki: Absolutely the goals have to high right? Because you shoot for the moon and even if you miss it you land among the stars!

But I'm sorry to disappoint you because launching a new brand in the German market even in this complex time doesn't really differ that much from launching and branding in any other regulated market, except be prepared for the complexities and be prepared for all of the obstacles that regulation and compliance brings with it. Other than that I'm more than happy to share a portion of the recipe for launching a new & successful brand.

In my opinion, there are a few ingredients worth mentioning. It all starts with the brand name; it needs to be very close to the audience that you have chosen to be your target market. The name has to be catchy and it really needs to fit the market. I truly believe that we have fulfilled this mission with excellence in our brand Jet One.

Then after that it all comes down to the visual. Visuals have to be eye-catching and also bring up the appropriate emotions within the audience.

Last but not least, is the tonality. It's very important when communicating your values to the broader public because the public needs to relate to the value, so they can relay the brand itself.  These 3 ingredients make up a brand identity and it is in my opinion what differentiates you more than anything else that is out there.

One other thing to mention is localisation, this cannot be neglected. At Masterpiece Gaming for example, we have chosen the path of sponsoring sports league clubs in Germany and we really get close to the player, to the fans, to the ones who give their heart and soul for their local club.

There are of course many other ingredients but as with anything in life we have to be balanced and you shouldn't be afraid of testing things, experimenting and knowing your numbers. This is what matters at the end of the day because knowing that allows you to bring that perfect golden mix and brings you to the stars and even to the moon. Joe, now we know how it works, but what is the perfect timing for a product launch in Germany for slot machines, probably online poker as well?

Joe Saumarez Smith:  I think it's really tricky because most of the people who are there aren't actually a huge number of new brands launching. Most people were in the pre regulated market and had just changed their product to reflect that and already have a customer base.

I would’ve liked to have been live on the 1st of July but we just didn't have enough information and in fact we're not even certain we could legally operate if you're a slots only offering. Jovana can be in the market because she's Sports Betting but I can't actually work out whether we are actually allowed to be live with a slots only offering and nobody can tell me. If you're a poker only offering, I think you've got the same problem. It's interesting to hear Luka say that the regulators are being pragmatic about it, but if you're part of a big company they like certainty so it's hard for big companies to say ok we'll take the risk, particularly when it's their home market. I would hope that there will be a sensible move towards relaxing some of some of the restrictions on things like affiliates, on some of the gambling advertising, the timing.

I think they’ve got the right intentions. I just think the way they're doing it is not very sensible, but I suspect that in 3 years time it will be much easier to launch a new brand into the market than it is now.

Keen to learn more about Germany’s re-regulated gaming market? Europe’s biggest opening of 2021 to date will be discussed by an expert panel at iGB Live! The show runs from 28 September to 1 October, and will feature the session Embracing regulated igaming: Germany focus – register here to book your place.

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