Spain a pain for gamblers

Online gaming companies have big, and potentially costly, decisions to make on whether to stick to their core markets or crack 'social gaming' and Bwin's recent investment in Spain shows its desire to be involved.

The Spanish government needs every penny it can raise at the moment to avoid sinking into a Greece-style debt mire. So, as part of its regulation of online gaming, authorities in Madrid are charging companies vast back taxes in order for them to operate legally in the country in the future. Earlier this month, Bwin.party announced its would pay up to €33m (£25.4m) to discharge its obligations.

But is it worth it? Sportingbet 's third-quarter results showed that its operations outside Australia are suffering, particularly in Spain and Greece - the two markets that are currently regulating gaming and, coincidentally, whose economies are in freefall. These markets make up a combined 20 per cent of Sportingbet's total net gaming revenue and punters in both countries are clearly suffering; for example, total numbers of bettors fell by only 6 per cent, in spite of the closure of the Spanish language website, but average bet size crashed by a third. Sportingbet's obligation to the Spanish taxman was €17.2m (£13.7m), a proportionately bigger hit than for Bwin.party. The first licences could be issued on 1 June, in time for the European football championships.

Whatever the ultimate outcome in Spain, the industry's strategic priority is how it cashes in on the boom in social gaming, fuelled by the likes of Facebook, to attract the next generation of punters. More interesting from a corporate perspective, is how much money is being invested by gaming companies in social media and e-gaming. Bwin.Party, for example, topped its Spanish tax bill with a $50m (£32m) investment in social gaming, which included $23m to buy assets from software services and e-gaming companies Velasco Services and Orneon. How serious Bwin.Party is about cracking the market is clear from the additional €5m-€10m in additional costs the company is prepared to incur in 2012 and 2013.

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