In recent years the Italian gaming market, with an estimated turnover of €88bn, has evolved at an extraordinary rate. A €60bn increase in 10 years has propelled Italy to the top spot in Europe for volume of business and per capita spending, an expansion that has been made possible thanks to cutting-edge regulation.
In the last 15 years, in terms of gaming regulation, Italy has been one of the most active countries in Europe. The Italian model amounts to a concession-based environment, and one that is open to national and foreign operators through public tender procedures. The regulator, the Italian Customs and Monopolies Agency (ADM), is the guarantor of the industry’s legality and security, and its efforts have made Italy a virtuous example in the fight against illegal and irregular gaming operators.
On the other side, ADM has created the conditions for the development of significantly more operators choosing to enter the market with long-term investment plans. Nowadays, the Italian gaming market is a consolidated environment, attracting an increasing number of foreign investors.
To fully understand Italian gaming market trends and the industry’s possible future development, European CEO spoke to Fabio Schiavolin, a manager with 20 years of experience in the sector and CEO of Snai Group. Starting his career in 1996 at CIRSA, Schiavolin co-founded Cogetech in 2004, a joint venture with Gtech Corporation, which immediately gained fame as one of the most dynamic and solid operators in the AWP network.
Schiavolin led the company for more than a decade and, under his leadership, Cogetech grew exponentially, thanks to its close-knit, young and dynamic team. Integrity, strength and passion helped the company to expand, and it soon came to be known among Italy’s major players. By 2006, Cogetech was in a position to respond to increasingly complex customer requirements and entered the business of added value services and convenience payments with Paymat Servizi, a secure and efficient technological platform fully developed in-house. This path of growth recently bore witness to an important milestone when, in November 2015, Cogetech merged with Snai, the sports and horse racing betting leader in Italy with 110 years of history. This new group, which has great plans for further development, was entrusted to Schiavolin.
Starting at the end, how did the Snai-Cogetech merger come about?
The merger is not the end, but rather the beginning of a new story. In November 2015, Snai Group completed the acquisition of Cogemat Group in a non-cash operation, in which former Cogemat shareholders entered into the new Snai Group shareholder structure.
This combination, one leader in sports and horse racing betting, the other strong in the gaming machines business and in retail betting, has created the biggest public gaming company in Italy, listed on Milan stock exchange. The merger between these two entities has created a group leader in the Italian gaming market, with pro forma revenues in 2014 of over €960m, total deposits in betting amounting to approximately €1.5bn, a market share in gaming machines of over 15 percent (with more than 70,000 units) and a network of approximately 19,000 sales outlets. The thinking behind the merger was to combine the strengths of the two and give life to a group able to play a starring role in the industry, both in Italy and abroad.
Over the last 20 years, the gaming market in Italy has undergone profound changes. The regulator has driven the transition from more traditional video games placed in bars and betting at horse tracks, to sport and horse racing fixed odds betting
How has the gaming sector changed over the years in Italy?
Over the last 20 years, the gaming market in Italy has undergone profound changes. The regulator has driven the transition from more traditional video games placed in bars and betting at horse tracks, to sport and horse racing fixed odds betting, bingo, online gaming, slot machines and VLTs. Through this evolution process, new players, including international ones, have entered the market and the steady distinction between offline and online gaming has increased.
Today, gaming machines account for 55 percent of market wagers, followed by lotto, lotteries and scratch cards (€17bn), cash casino games (€12.5bn) and betting (€7.8bn), which is growing strongly with contributions from online, and, in the bottom positions, bingo (€1.6bn) and skill games – such as poker tournaments (€0.7bn). This growing complexity means operators must deal with new challenges.
In this context, the new Snai Group enjoys a significant advantage; it represents the perfect synthesis of experience and dynamism, which, in the space of a few years, has allowed the firm to become a leader in its field.
In what key ways does Italy’s gaming market differ from others in Europe?
With its concessions environment, Italy has been a pioneer in gaming regulation since 1999, and has been seen as an example by other countries over the last 10 years. The legislator’s efforts have guaranteed the integrity of the market and the certification of its products, and have created, through the mechanism of long-term concessions, the stable conditions that are essential for the development of solid and competitive players. These efforts have been made to fight the illegal gaming phenomenon, which constitutes a real cancer that produces negative effects for the state, companies
and citizens.
In what way has the legislator intervened to regulate the sector?
Due to the complexity and sensitivity of gaming, the sector needs to be regulated in a manner that takes into account the requirements of social protection and the sector’s industrial and economic value to state coffers. Effectively, state regulatory initiatives can be divided into two main areas: regulation of illegal gaming operations and introduction of new gaming offers.
In the first area, we can mention the long and highly challenging AWP regulation (2004-05), which gave Italian operators the chance to successfully adhere to a clear legal process. In the second area, we refer to in-game betting and VLTs, which have been driven by technological innovation. Today, the gaming sector in Italy has a complex and continuously evolving architecture, with guaranteed public and treasury interests balanced with consumer protection.
What trends are being recorded in the Italian market?
From the demand point of view, in recent years the Italian gaming market has reached a level of maturity in different product lines. Regarding the online sphere, the average spend by Italian players in 2015 was essentially stable compared to 2014, with a significant acceleration registered in the second semester, confirmed by initial 2016 data.
This dynamic is the result of opposing trends: on one side, spending related to sports betting and slot games has increased; on the other side, poker and bingo have suffered. From the industrial perspective, the biggest innovation was the entry of foreign operators, already active in the dotcom environment. This led to a growth of 37.5 percent in online yield, mainly related to sports betting.
In the physical market, we are all working to optimise distribution networks with ever more incisive actions, focused on controlling systems. In terms of supply evolution, I expect that in the near future, players will move to a real omnichannel experience, thanks to technological integration between physical, mobile and online gaming. In the forthcoming years, we will also witness a steady growth of live bets, due to the extended use of devices owned by the player to choose, compose and conclude the bet. Information, odds, statistics and news must be immediately accessible, leaving, as a result, more room for entertainment; with the mobile sector, new technologies will guarantee greater simplicity and speed in payment systems, consistent with security. Our aim is to ride these trends, building a user experience that responds precisely to all of our
customers’ expectations.
How do you see your leadership improving the sector’s competitiveness?
I proudly recognise that my killer application is my outstanding team. I founded Cogetech and, since the very beginning, I have chosen people ready to contribute to the start-up phase and able to move successfully to the consolidation process. You can’t reach a market-leading position without a market-leading team.
If I were to list some of our business drivers, I would mention the customer-oriented strategy, partnerships, innovative offer, and dedication to responsible gaming. From the perspective of the offer, Cogetech has always stood out due to its innovative products and high quality, and for its fast and efficient customer service. We decided to concentrate on every detail of the process, and we have been able to create a cohesive and competent group. We focused on the reliability of our commercial management, the variety of the range of products offered, and a consistently high technological level. The expertise and professionalism of the employees are the true added value of this company, young and, at the same time, solid.
Aware that we are operating in a very particular industry, we do not focus only on the offer, but also invest a great deal in spreading a culture of responsible gaming. Cogetech’s aim has always been to guarantee the possibility of gaming in complete safety, indeed this is an integral part of the company’s mission. Our action in this area has not, however, been limited to initiatives targeted at customers. Even Cogetech’s employees, collaborators and managers need to be kept in the loop, and frequent training courses are organised to increase awareness among all stakeholders.
Cogetech has also promoted concrete training and development programmes throughout its network of operators. Since 2011, the Global Gambling Guidance Group, an international organisation dealing with issues linked to responsible gaming with cutting-edge rules and protocols in Europe, has granted Cogetech’s website (www.iziplay.it) international certification for responsible gaming.
What are your plans for the future?
Following the merger, Snai Group is ready to lead the Italian market. The overall yield in all segments is around €10bn, of which €3.4bn is for VLTs and €4bn for AWPs. One of our strengths will be our widespread presence in the territory, with more than 1,000 stores.
We will also focus on technological innovation; we want to expand the offer of entertainment products and propose new games that are more intuitive. The experience of gaming will be the differentiating element, together with digital interaction.
Finally, leading a strong public group in Italy, which combines the peculiar aspects of two similar yet, at the same time, different entities will allow us to assess new partnership opportunities, both at national and international level. This is one of the main benefits of the merger between Snai and Cogetech. Thanks to this integration, we have the expertise, the critical mass and the resources not only to be the leader in Italy, but also to launch projects for growth abroad.