Lottery first: The changing face of the Dutch gaming landscape

Lottery first: The changing face of the Dutch gaming landscape

Wednesday, February 8, 2017
Alan Littler: ‘It will be interesting to see what innovative lottery products enter the market’

The wind of change is blowing through the Dutch gaming industry. Yet while much attention has been focused on the recent passing of the country’s remote gaming bill and its soon-to-be-privatised casinos, key developments have already taken place in the Netherlands’ lottery sector, as a newly introduced licencing procedure paves the way for new market entrants.

The Netherlands was thrust under the industry spotlight throughout 2016, as the wheels were set in motion for large-scale changes across the country’s casino and remote gaming sectors.

On July 7, the Dutch Lower House passed a landmark bill to regulate online gaming in the country for the first time. The bill, which passed with a comfortable majority, followed several years of lobbying and research efforts, as various stakeholders fought to bring the Netherlands’ gaming legislation into the 21st century.

Elsewhere, discussions continued to focus on the country’s state-owned casino operator, Holland Casino. The group is due to be privatised before the end of this year, paving the way for new entrants in the land-based gambling sector. This privatisation is to be accompanied with new competition in the market, as Holland Casino will be forced to divest four of its current 14 casinos to bidders, while two additional land-based permits will become available.

As industry observers continue to trace the fast-moving developments in this country of 17 million people, Alan Littler, gaming lawyer at Amsterdam-based Kalff Katz & Franssen Attorneys at Law, was quick to note that the lottery sector is the forerunner of change to the Netherlands’ gambling industry, instead of the casino or remote gaming sectors, as previously expected.

“Much of the focus on the Netherlands in recent times has been on the opening of the remote gambling market, which should take place in early 2018,” Littler told TotallyGaming.com. “However, change has already arrived for good cause lotteries in the Netherlands – or ‘non-incidental’ lotteries as they are technically referred to.”

Littler, who serves as a member of the International Association of Gaming Advisors (IAGA), noted that the Dutch Gaming Authority – the Kansspelautoriteit – recently awarded five new lottery licences for the period between 1 January, 2017, and 31 December, 2021. “Significantly, there is a new kid on the block amongst the established names, in the form of Lottovate,” he said.

“The de facto monopoly enjoyed by the Nationale Postcode Loterij, BankGiro Loterij and VriendenLoterij, along with the Stichting Samenwerkende Non-profit Loterijen, came to an end following a decision of District Court of Amsterdam in May 2016.”

According to Littler, the court ruled that the gaming authority’s reliance on the Ministry of Security and Justice’s ‘Policy Rules for Games of Chance Licence Applications’, of October 2014, did not justify the restriction to EU law freedoms which resulted from restricting the number of licences to four. “The Gaming Authority decided not to appeal,” he noted. “Consequently, a transparent licence allocation procedure was introduced, enabling new market entrants.”

Discussing the Dutch court’s landmark decision to grant Lottovate a lottery licence in the context of the country’s soon-to-be-enacted remote gaming bill, Littler said: “In principle, licences are valid for periods of five years and there is no cap on the number available. Whilst the forthcoming regime for remote games of chance excludes online lotteries, holders of a ‘non-incidental’ lottery licence can also offer their lottery services via the internet. Indeed, the model licence makes clear that no particular sales channel is obligatory, thus suggesting that tickets could be sold exclusively via the internet.

“It will be interesting to see how much interest there is for such licences, in terms of prospective operators with domestic roots and those with relevant experience from abroad. A key point of the Ministry of Security and Justice’s position in its letter to parliament of July 2014, in which reforms to the lottery sector were sketched, was to provide scope for new initiatives in this sector.”

He added: “No definition of a lottery is given in the model licence, other than that the offer must not be of the same form as a lottery for which an exclusive licence is reserved. No more than 69 ‘lotteries’ can be offered by each operator per year under such a licence, so that lotteries maintain their ‘low frequency’ character. Nevertheless, the general explanation accompanying the model indicates that this will not necessarily remain the status quo.”

While Littler stated that the existing established lottery brands will “undoubtedly maintain a large market share in the coming five years”, the potential for new entrants to the market may indeed set a new precedent for the sector – not only in terms of consumer choice, but also the good causes and organisations tasked with pursuing public interest objectives.

“According to the model, licenced lotteries must be operated on a non-profit basis, with 50 per cent of revenues going to good causes. However, each lottery will remain free to determine which good causes it contributes to, and how the funds are spread amongst those beneficiaries.”

He added: “It will be interesting to see what innovative lottery products enter the market and the extent to which supply of new products and consumer demand results in change. Equally, lotteries can also compete in terms of how much they distribute to individual good causes and under which conditions, as set by the lotteries themselves.

“To what extent will good causes, as beneficiaries, respond to ‘choice’ between operators-as-benefactors and shape the market alongside consumers buying tickets? Scope for innovation must prevail here too.”

Totally Gaming says: According to the Netherlands Gaming Authority, the country’s land-based gaming sector grew 4.5 per cent in 2015, compared to the previous year. Total GGR increased by €104m to €2.34bn, with all verticals reporting growth. Lotteries represent the largest sector within the Dutch land-based industry, taking a 46 per cent market share. Following the introduction of the new lottery licensing procedure, industry observers will be watching the Netherlands closely, as the greater potential for competitive forces takes root in this previously hegemonic market.

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