Sports Betting The Italian Experience Roberto Quattrini Buenos Aires, April 27th, 2011
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 2
Lottomatica Group: Stucture The Group is directly controlled by De Agostini SpA (~60%), operating in the editorial business for over 100 years and, more recently, in the media and financial sectors Lottomatica Group GTECH Lottery Gaming Solutions GTECH G2 Italian Operations Leading global gaming group in the world with in-house capabilities to deliver a full suite of products and services across the value chain 3
Lottomatica Group: Overview Leading gaming operator active in: Traditional lottery (including online) Instant lottery Sports betting Gaming solutions Interactive channels Commercial services WORLDWIDE GROUP PRESENCE Growing with strong fundamentals Revenues EBITDA Market Cap Gaming customers 2.3bn (+6% vs 2009) 0.8bn (+4% vs 2009) 2.2bn* 100+ (~60% of world lotteries) Countries 50+ Retailers / PoS 400,000+ Group presence Employees ~7,700 * March 2011 4
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 5
The Italian Gaming Market The Italian market games is managed either by a monoconcessionaire or by multi-concessionaires Lottomatica Group is present as concessionaire in both modalities 2000 1993 2004 2007 1996 2008 2003 Year of concession Multi-concessionaires: Continuous/Daily competition Mono-concessionaire: Competition at Tender and/or Award Lottomatica concession 6
The Italian Gaming Market: Evolution In 2010 total market grew double-digit, reaching over 60bn Government Take was 8.7bn Wagers 2001-2010 60.9 54.4 Skill Games, bn 25.1 27.5 CAGR 17.5% 35.3 42.2 47.6 Gaming Machines Instant Lotteries Sports betting Bingo 14.3 15.5 15.0 Horse and Pools SuperEnalotto Lotto Source: AAMS 12010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Exceptional Market Growth Driven Mainly by Regulation, Innovation and Portfolio Expansion 7
The Italian Gaming Market: Reasons Of The Evolution Growth is due to some Key Variables, allowing and favoring constant decrease of illegal gambling in favor of legal gambling Market regulation Growth of remote gambling Gaming portfolio innovation New Sales Distribution Model Key Success Factors Instant lotteries and gaming machines Payout increase Tax reduction 8
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 9
Betting Overview: Types of Game POOL / PARI-MUTUEL All bets of a particular type are placed together in a pool The concessionaire takes no risk Payoff is calculated by sharing the pool among all winning bets Used mainly in gambling on horse and dog racing and other sport events (e.g. Totocalcio, Totogol) The game offer is the same in each PoS Key fundamentals: retailer competence and game / system offer FOSB Wagering against odds: players know in advance the winning amount The bookmaker takes risk and can have a loss The non-cautious wager increase can compromise the remuneration system The player look for the best odd and is then less loyal Key fundamentals: efficient and attractive game environment, immediate winning payment, PoS distribution, odds settings and risk management ITALIAN BETTING KEY VARIABLES TAX PAYOUT Horse Sports Horse Sports POOL / PARI-MUTUEL 11.5% 33.9% 72.5% 54.5% FIXED ODDS ~4% ~80% 10
Betting Overview: The Product Value Odds and Quotes VS Competitors Key % Pricing Odds Management Settings and Changes Product portfolio Product Value Odds Release Timing Events Plan Types of Bet Risk Profile Fraud Prevention Risks vs Volumes trade off 11
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 12
Betting in Italy: the Timeline Until 1998 1998 2006 Dec 2006 Sport pools were the only regulated games in Italy FOSB introduction: ~700 betting shop licenses granted Bersani Decree: reorganization of the betting sector and enlargement of land based licenses Conclusion of the international tender process: 5,621 PoS based rights granted to 130 operators H2 2007 The Betting collection started 4Q 2008 First remote gambling (web) concessions granted 13
Betting in Italy: the New Regulation Betting Two types of land based licenses: specialized betting shops (2,300 sports betting and 500 horse racing) betting corner (4,400 sports betting and 9,500 horse racing) Admission requirements: Game operators authorized by States other than Italy Specific turnover of at least 1.5m in 2004-2005 430m earned by the Italian Government from the auction process Foreign operators: Intralot, Coral Bet, William Hill and Codere License duration: 9 years Web remote gambling Leaders of the Italian Market: Bwin, Microgame, Lottomatica, Snai, Sisal, Cogetech And Party Gaming Games admitted: Fixed Odds and Pari-mutual Betting Instant Lottery Skill Games Bingo License duration: 9 years 14
Betting in Italy: Market Evolution CAGR 1998-2010: -21% Wagers CAGR 1998-2010: +37% 7 6 Bersani tender: 5,621 new sports betting of which 4,340 sports betting corners 5.2 5.5 6.5 6.2 6.2, bn 5 4 3 4.4 3.9 4.0 4.6 4.4 4.5 4.6 4.7 2 1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sports Betting Pool Games National Horseracing Horse Betting The New Regulation Process gave boost to the sports betting market increasing its size by more than 50% during 2008 and almost doubled in the last 3 years 15
Betting in Italy: FOSB Market Evolution 5 4 Fixed Odds Sports Betting Trend: Payout and Taxation Remote gambling introduction Bersani network introduction 100% 80%, bn 3 2 60% 40% 1 20% 0 2003 2004 2005 2006 2007 2008 2009 2010 Total Wagers (, bn) Payout (%) Tax (%) 0% As from 2003 Payout Has Shown an Increasing Trend, in Inverse Relation to the Variation of the Tax rate Applied on FOSB 16
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 17
Lottomatica Positioning Market Trend Positive market trend: 4.4bn wagers in 2010 vs 4.0bn wagers in 2009 (+10%) 800+ horse racing licences awarded in March 2009 LTO Trend The largest sports betting network: 1,300+ PoS The largest on-line customer base: 700K+ betting accounts Progressive growth: over 20% market share Leading operator in the internet segment: 24% market share 18
Lottomatica Positioning: Execution 2008 Jan: live betting start Feb: extended business opening hours Mar-Jun: new interactive channels Jul: Horse Race Licence acquisition Aug: Totosì acquisition Nov: retail acquisitions completed; negotiation started with further targets 2009 Mar: Horse racing betting start Jun: Horse race License acquisition Jul: first betting shop dressing completed Oct: Totosi Betting Platform integration 2010 Feb: new restyling for iphone mobile application Mar: further betting shop/ corner licences acquisition under way Jun: launch of new Simply Better Coupon Oct: Final Betting Shop dressing completed 19
Lottomatica Positioning: Market Share 2010 35 30 25 20 15 10 5 0 34.0 20.6 10.3 Total Sports Betting 8.5 6.2 5.0 3.3 3.8 Lottomatica #2 in the market SNAI LTO SISAL MICROGAME INTRALOT EUROBET COGETECH BWIN/GD OTHERS 8.3 30 25 20 15 10 5 0 25.2 24.1 Interactive Sports Betting 12.6 12.2 9.5 4.6 1.1 0.7 Market leader thanks to Totosì contribution MICROGAME LTO SNAI BWIN/GD SISAL EUROBET COGETECH INTRALOT OTHERS 10.1 Sources: Agicos; Lottomatica Scommesse internal analysis Service providing Totosì Lottomatica Scommesse S.r.l. 20
Lottomatica Positioning: The Competitive Arena Highly crowded market environment 21
Lottomatica Positioning: Key Activities and Success Factors Aggressive PoS network deployment Challenging deployment program: Strict deadlines Early start of critical activities Early start of PoS involvement Focus on PoS setup: Innovative contract Dressing Terminals Field support activities: PoS training Contact center Focused Adv communication Brand identity: More attractive, involving and visually pleasant Clearer and more self explanatory Targeted advertising campaign using all relevant media: Newspapers Sat-TV WEB Rotor panels on soccer fields Organization and IT system empowerment Build-up of betting specific knowhow: Skilled professionals hired Set-up of dedicated unit with young, motivated and fully trained people Brand new inhouse betting management IT system: Continuous upgrading in place 22
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 23
The Better Brand: Creation A new brand Comparison with Competitors It s direct, dynamic, strong, attractive, with a bright green that looks like a football ground No doubts It says directly that you can bet on sport soccer is an evergreen sport, everyone likes it, the balls are a reminder of games and fun... It s a brand for those who love sports.. without being experts Market researches showed a strong positioning of the Better brand: More attractive, involving and visually pleasant Clearer and more self explanatory 24
The Better Brand: Improvement Two years after its launch, the Better logo changes: the reference to Lottomatica is taken out of the logo and is positioned inside a payoff, meeting a standard common to the on-line business Simplified logo, more flexible for use on materials keeping its key features Pay Off (It s safe, it s Lottomatica) 25
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 26
Lottomatica Betting Model Strong commitment to responsible gaming and social responsibility G4 certification Sales network Leverage its existing sales network Innovative business model based on corners in existing shops Advanced retailers and shop management New dedicated shop project Responsible gaming and company reliability Betting Offer Tailor made product portfolio Increased Betting Offer and services In house management of core processes Fully integrated technology Betting Operations and Process Mkt, Comm. & ADV Activities Massive advertising and communication plan Tailor made in store initiatives 27
Sales Network: Corner and Agency CORNER Negative perception of existing traditional betting shops Leverage on Lottomatica distribution network through: Selection of performing PoS Sales and support services to the retailers Tailor made/full branded shops layout Reorganization of the shop layout in functional areas State of the Art technology Strong investments in marketing & communication AGENCY New, distinctive, comfortable and modern layout New and easy to read Monitoring System Full Branded Better Slot dedicated areas Smoking and Non smoking areas New Organization of shop layout in well defined and private environments to accommodate every customer s needs: 28
Sales Network: The Better Corner SALES AREA COUNTER EXTERNAL TV PRELIMINARY OPERATIONS The Better Corner concept has allowed the overall market to gain new and profitable customers, increasing its size and making betting in Italy more popular and accessible than ever before 29
Sales Network: PoS Selection Betting Network Performance vs Average Lottomatica Gaming PoS Network (Index) 300 237 222 200 100 +137% +122% 126 +26% 155 +55% 100 = average LTO network performance 0 LOTTO G&V NEWSLOT COMMERCIAL SERVICES Betting PoS have been chosen among the most performing LTO PoS 30
Sales Network: Better Betting Shops 31
Sales Network: Retailers Management SALES AGENTS Over 150 agents distributed all over Italy Weekly customers visits More than 50.000 yearly visited retailers LOTTOMATICA COMMUNICATION & PROMOTION Incentive plans Monthly newsletter Dedicated website area Road shows Training Pop materials LOGISTICS 2,5-3,0 monthly delivery (tickets, ne wsletters, brochures and POS materials) RETAIL CHANNEL CONTACT CENTER More than 11.000 contacts a day for a total of 3 millions contacts for year Commercial, a dministrative, technical areas covered The ability to develop a selected network of shops covering all the national territory, and to actively support it with promotions and incentives has been a major factor in the success of Lottomatica 32
Sales Network: Retailer s Dedicated Website Latest product developments Latest news Customised Statements Training Section 33
Sales Network: Retailer s Commission Package Competitive and balanced retailer s commission pack, based on a mix of: Commission on turnover Bets with 5 or more betting selections: the commission is straight calculated on the turnover at 10% taking out void and refund bets Commission on profitability Single bets up to fourfolds: the commission is based upon the Net Win, calculated sharing the margin (50-50) between Lottomatica and the retailer Wagers 20% 80% (events >4) Retailer commission 50% 50% (events >4) Retailer commission Case A Case B Safeguarding quality bets and containing liability levels 34
Betting Offer: Product Portfolio in Italy The composition of the product portfolio relates to the selection of the betting events and bet types on which betting is allowed In Italy Bets on Singles count for about 25% of total wagers while the remaining 75% is on Multiple bets! - Turnover Distribution per Sport - - Turnover Distribution per Bet Type - Italian punters are particularly keen on soccer, which accounts for more than 90% of the total turnover. Sport Share As for Multiple Bets, the average T/O distribution per Bet Type shows a very strong preference by punters to simple bets (max two or three outcomes). SOCCER 90.95 % Multiple Bets Share BASKET 3.75 % TENNIS 2.55 % VOLLEY 0.85 % F1 0.45 % MOTOCYCLING 0.41% ICE HOCKEY 0.25% BASEBALL 0.23 % CYCLING 0.15 % 1X2 53.00 % Double Chance 15.00 % Under / Over 13.00 % Goal / No Goal 7.00 % Team to score (Home/Away) 4.00% Correct Score 3.00% OTHERS 5.00% RUGBY 0.09 % OTHERS 0.31 % 35
Betting Offer: Sports Betting Program Country Soccer Other Sports Non Sport Events Argentina 1 st Div. Austria 1 st Div., Austria Cup Brazil 1 st Div. Belgium 1 st Div., Belgium Cup Denmark 1 st Div., 2 nd Div., Denmark Cup Finland 1 st Div., Finland Cup France 1 st Div., 2 nd Div., France Cup Cycling, Basketball England Premiership, Championship, Community Shield, England Cup, League One and Two Germany Bundesliga, 2 nd Bundesliga, Germany Cup Greece 1 st Div. International Champions League, UEFA Cup, Intertoto, European Champ., European Champ U21, World Cup, World Cup U21, American Cup, Copa Sudamericana, Friendlies, Summer Events, Copa Libertadores, Toyota Cup Formula1, Moto GP, Moto 250cc, Moto 125cc, Rugby, Superbike, Rally, Olympic Sports Film Oscar Mtv Music Awards Italy Serie A, Serie B, Serie C1, Coppa Italia Basket 1 st and 2 nd Div., Cycling, Volley 1 st Div., Handball Big Brother, Treasure Island, Italian Song Contest- Sanremo, Miss Italy, Japan 1 st Div. Netherland 1 st Div., 2 nd Div., Netherland Cup Norway 1 st Div., 2 nd Div., Norway Cup Portugal 1 st Div., Portugal Cup Scotland 1 st Div., Scotland Cup Spain 1 st Div., 2 nd Div., Spain Cup Cycling, ACB Sweden 1 st Div., 2 nd Div., Sweden Cup Switzerland 1 st Div., Switzerland Cup Turkey 1 st Div. USA 1 st Div. Baseball, NFL, NHL, NBA Other Ukraine 1 st Div., Romania 1 st Div., Czech Rep. 1 st Div., Mexican 1 st Div., Chilean 1 st Div.; Irish 1 st Div., etc 36
Betting Offer: Live Betting Distributed officially in Jan 2008 via internet Proposed to the retail network in June during the European Championships Live Betting distribuiton per sales channel About 98% of Live Betting is wagered through the Web and PoS 68,65% 29,69% 1,18% 0,24% 0,24% Mobile Pdv Telebetting Totem Web Single bets Live VS. Single bet Non Live 52,83% WEB RETAIL 89,77% 47,17% 10,23% Single bets live Single bets non live Single bets live Single bets non live 37
Betting Offer: Retailers Training Training sessions are regularly planned on a monthly basis according to retailers needs. The objective is to convey detailed knowledge in Sports Betting to our Retailers with the aim to reach a very good understanding of the business and keeping up with the latest betting propositions Prizes are awarded to those Retailers who have shown the best understanding and have passed a knowledge test successfully! 38
Betting Offer: Promotional Coupons sent to PoS 39
Betting Offer: Product Marketing COUPON PRESS Every single special initiative is promoted to the public through the Press, the Web and tailored made Coupons for the Point of Sale 40
Betting Offer: Bonus on Multiple Bets Better Better gives out a 5% bonus on all multiples, regardless of event/market type and time, with more than 4 events (up to 20 events per betting slip) With this bonus type, a 20 folders accumulator will double customers winnings making this proposition particularly appealing! N. BONUS ON MULTIPLE Bonus Grid for Multiples 41
Betting Offer: Bonus on Multiple Bets Totosì Totosì gives out a 3% bonus on all multiples, regardless of event/market type and time, with more than 3 events (up to 20 events per betting slip) Bonus Grid for Multiples 42
Betting Offer: Happy Hour Bonus Promotion As for the Happy Hour Bonus initiative, within a certain time Frame - every weekend from 5:00 pm to 8:30 pm - Lottomatica gives out an extra percentage on accumulator bets on top of the standard Bonus on multiples For example fivefolds and upwards on Saturdays and Sundays: Standard Bonus (4:00 pm) 5% Happy Hour Bonus (5:05 pm) up to 10% Happy Hour Promotion N. OF MATCHES ACTUAL BONUS HAPPY HOUR BONUS ON MULTIPLES 43
Betting Offer: Simply Better Coupon The SIMPLY BETTER Coupon has been created in order to facilitate the betting approach to a brand new customer base * Subject to change A selection of the most popular 20 betting events System Bets: up to 20 events accumulators 5 most popular bet types Home Draw Away Double Chance Under/Over Goal/No Goal H/D/A 1st Half Minimum Stake*: 2,00 44
Marketing, Communication and Advertising: Local Newspaper 45
Marketing, Communication and Advertising: Trade/Sport Newspapers CORRIERE DELLO SPORT Odds Betting proposal Simply Better Odds 46
Marketing, Communication and Advertising: Sky TV Partnership 47
Marketing, Communication and Advertising: Advertising Campaign: Field Rotors 48
Marketing, Communication and Advertising: Internet Advertising Campaign 49
Marketing, Communication and Advertising: Internet Betting Box World championship betting odds communication by a betting box on sport web portals and possibility to bet directly BETTING BOX Unselected Selected 50
Marketing, Communication and Advertising: TV Spot SPOT 1 SPOT 2 51
Betting Operations and Process: Kit of Macro-processes Main macro-processes supporting the fixed odds betting business operations: Betting Closure Odds Compiling Online Betting Account Risk management Content Management Betting Opening Lottomatica managed inhouse all the processes regarding betting operations from back-office to frontend The processes are supported by fully integrated information systems Front end activities (Retail and Interactive channels) are managed separately, but operations are based on common back-office and risk-management operations and systems 52
Betting Operations and Process: Risk Profile Factors increasing risk profile Factors reducing risk profile Competitive key % pricing Odds in line with the market (competitor, BetRadar) Timely Odds Release (First for Prices!) Live Betting Risk Increase Cautious odds release timing % of Multiple bets vs % of Single bets Risk Reduction Loose application of Betting Procedures Tools, know-how Risk Manager, Betting Procedures 53
Responsible Gaming and Company Reliability Lottomatica gambling website compliant with Responsible Gaming standards: proof of address age verification self limitation tools for players data protection controls value of wagers displayed information and golden rules to help players keeping their play safe In December 2008 Lottomatica.it successfully received G4 certification, the Global Gambling Guidance Group The G4 standards exceed any current jurisdictional or regulatory standards in individual countries 54
Agenda Lottomatica Group Italian Gaming Market Betting Overview Betting In Italy Lottomatica Positioning The Better Brand Lottomatica Betting Model Sales Network Betting Offer Marketing, Communication and Advertising Activities Betting Operations and Processes Responsible Gaming and Company Reliability Conclusions 55
Conclusions: Latam Current Status LATAM COUNTRY FOSB MAIN OPERATORS ARGENTINA X - BOLIVIA X - BRAZIL X - CHILE Polla Chilena (Xperto) COLOMBIA X Intralot (Etesa) ended 2009 COSTA RICA X - ECUADOR X - MEXICO PANAMA X - PARAGUAY X - Grupo Caliente, CIE and Apuestas Internacionales PERU Intralot (Te apuesto) URUGUAY La Banca VENEZUELA X - Sources: GBGC 2010, Gambling Compliance, internal sources Countries that operate FOSB 56
Conclusions: Italy Sports Betting Attractiveness 5 4 Italy FOSB Trend Post Bersani Decree Payout and Taxation 5 4.4 3.9 4.0 4 100% 80%, m 3 2 2.5, bn 3 2 60% 40% 1 1 20% 0 0 0% 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 2010 Traditional Online Total Wagers (, bn) Payout (%) Tax (%) 57
Conclusions: Latam Sports Betting Attractiveness Government and operators can exploit a huge potential that is now handled by the illegal market Positive consumer attitude Illegal market to be converted State budget additional income Business operator increasing profitability 58
Conclusions Fixed Odds Sport Betting requires a comprehensive business approach: NO SINGLE SUCCESS FACTOR but sales, marketing and risk management are essential If thinking to enter/invest in Fixed Odds Sport Betting, minimize errors and mistakes, asking for: Guidance Consulting Implementation Assistance 59
THANK YOU! GRACIAS! roberto.quattrini@lottomatica.it 60