Abstract
If you look at adult spend per head, currently it is €158. To get in the top 30 nations that we currently rank at H2, adult spend per head is around €176. And in comparable markets in Europe, you're looking at the United Kingdom at €295, Denmark at €300, Sweden at €328, and so on. So, potential there. In terms of Gross Gambling Revenue expressed as a percentage of national Gross Domestic Product, the global average is 0.43%. And currently the German market is at 0.33%. There is still room for growth there. Spain is at 0.59%, Italy 0.2%, 0.8%, sorry, and Greece at 1.3%. But then the percentage online, which is probably where a lot of today will be focused, is very low at 27%. The comparable countries in Europe are looking at roundabouts. Denmark is 62.8%, Czech Republic 65%, the United Kingdom 65.5%, and Sweden is 67.4%.
At this moment there are some areas of underdevelopment in terms of the market. The next slide shows where we are forecasting the growth. These are numbers for 2026 in terms of our short-to-medium term estimates. The growth is actually good in terms of the impacts of the new regulation. But we would say it's not remarkable. It's probably steady growth. We're looking at reaching a total market size of 16.2 billion by 2026. It is currently 14.9 billion.
That's all gambling, betting, gaming, and lotteries. I can certainly give you breakdowns of those. That's a compound annual growth rate (CAGR) of 1.2% over the next five years, the global sector is currently trending at 3% CAGR, or almost three times as much. What is interesting in particular is that we have pulled out what is projected to happen to the land-based numbers and the online numbers.
The land-based sector is very much flatlining as a sector, some even declining; slight decline of growth there, particularly in betting, onshore betting, and in the lottery sector. However, the online sector is growing at 7.8% CAGR, which is almost six times as much as the land-based sector and the percentage online, moving up from that 27% to 35%. So really moving up from a fifth of all gambling being online to a third in over the next five years. Lastly, there is a lot of talk about the channeling rate as a measure of the success of a market. At the moment, it is channeling at around 61%, 62%.
As the new regulatory period bites in, that will grow to up to 85% by 2026. But it is worth saying that is still significantly below other European countries. We recently did a small study in the summer, which looked at the most successful, although the regulatory frameworks where there is an optima market balance are seeing channeling rates over 90% to 95%. Some initial measures: two slides on how we're seeing the market at the moment and where it's projected to grow in 2026.
We've looked into that report, always keen to see different projections out there because you remember we were suggesting it's about 60%, 61%, 62% at the moment. However, if you look into that figure, it actually includes the land-based sector, which is obviously irrelevant in terms of the channeling rate. If you strip that out, it talks about a channeling rate of about 55%, which is very similar to ours at around 61%, 62%. In fact, the answer to your question in this particular case is we think we're pretty similar to many of the other projections out there, but if anyone can tell us differently, please do let us know.
Payment blocking currently is handled by the Ministry of the Interior in lower Saxony. This responsibility will then shift to the new authority, which is also based in Saxony-Anhalt, where we currently have the state administrative office handing the license application proceedings and supervisory talks in an interim procedure until the new procedure takes over.
There will be some changes. First of all, the new authority will be headed by two coaches, Mr. Benter and Mr. Schwanke, two experienced regulators. One is coming from Schleswig-Holstein, the other one from Hamburg. And many people are familiar with the gambling committee, the Glücksspielkollegium, which is involved in almost every decision making at the moment. If any licenses were to be granted, be they sports betting, virtual slots, or online poker, the final decision at the moment would be made by the gambling committee, including other tax like guidelines for advertising and bet type list, all these things.
We have 16 regulators as members of that committee, because every regulator is representing his own German state. These processes of decision making are pretty much delayed as we can see. The gambling committee will stop being involved at the end of this year. A new administrative board will be established on a more political level–on a state chancellery level, taking over tasks such as providing guidelines, politics for the new application of regulatory means, and regulatory goals by the new authority.
I personally expect that decision making will then be easy, and we will have a greater outtake decision-making proceeding with the authority. It also means that the regulators who are currently responsible for certain types of supervising or in license applications will no longer be responsible. That means that the regional council in Darmstadt currently handling the sports betting license application proceedings will then stop working on sports betting issues nationwide. This responsibility will also be taken over by the new super regulator as well as virtual slot machine licensing and online poker licensing, and every other sector in the industry. That's why I call it a super regulator. It's like the gambling commission, it serves on behalf of Germany in total, but it is an institution that is located in Saxony-Anhalt and based on the industry treaty.
After 1st of July for both verticals, sports betting as well as the casino type games such as virtual slots and online poker, second license requirement was established. An operator would have to apply for the license to operate these games of chance, the virtual slot games and online poker or online poker, as well as seek permission for every single gain.
And if you are applying for let's say 3 or 500 games, that means you need to get the permission as a second license for all of these games that you like to offer as an operator. If you don't do so, this will be regarded as offering illegal games of chance. So that makes it a bit more complicated and delays the process of granting the license. It's a technical procedure, I would say because I do not see any issues in approving these games. These are standard games. They have been approved in other jurisdictions. This is something that can be one of the reasons why it takes so long to get the licenses. You are asking about the status of the license application procedure. I know that there are new case handles with the state administrative office in Saxony-Anhalt. They are trying to put some pressure in finalizing the applications.
There is more and more communication among the authority and the applicants. To my knowledge, first license applications were finally reviewed and the usual procedure is that the authority sends recommendation to the gambling committee. Whenever they meet, which is frequently, as often as once a month during a circular resolution, they have to decide whether to grant that license or reject it. They need to find a majority of two-thirds, meaning 11 votes in favor or against the decision.
As we can see, it takes one delay after the other because it's not easy to find that majority vote since there are different categories of regulators. There are very reluctant conservative ones, and then more liberals. At the moment today, the committee is meeting, discussing a few timely topics, including first licenses to be granted to virtual slot machine operators.
If so, this would only be very few, but the authority intends to do this as soon as possible in the near future. You cannot predict the timing because it's all about the gambling committee, which is the biggest hurdle time wise.
If you look at sports betting, we also have 3 different types of licenses. First, those that are old licenses granted on 9th of October in 2020, followed by a couple of other licenses. And they need to be extended because they will expire this year and they need to be expanded as of 1st of January, 2023.
The regional council in Darmstadt that has the experience in processing these requests is still responsible, and the authority told the industry, please send us your submissions, all the complete documents with your request by 30th of April latest so that they can really review the documents and can grant the license involving the gambling committee of course until the year is over.
This sounds easy. The second category is those who are applying for a new license, which is then only under the current law of the current industry treaty. All the extensions will certainly also adopt the new industry treaty law. It is something that goes parallel.
And finally, we have something in the middle, applications pending, which started under the old law after 2020, but before 30th of June. It is another decision being granted, for various reasons these are still pending. We are hoping that the authority will be able, with the support of the gambling committee, to make decisions regarding these pending applications.
It sounds easy, but we've got some hurdles here as well. Because most recently we realized that 1st of July was the date when the second license regime was established, not only the license to operate and offer these games of chance and to broker them, but also the permission for every single batch that an operator needs to seek approval for.
That's new. That's a difference to what was applicable in 2020 and first half of 2021. Operators generally need to apply for an approval of every certain bet type. We've seen a new list of permissible bet types or bets published by the regional council some weeks ago. It was a proposal that had been drafted by and put together by the gambling committee as well. It took them months because it was very controversially discussed and the result is more than a compromise to satisfy the most reluctant regulators.
If you look at it, you will see in particular for live gaming, depending on the specific scope of operators, it is between 60% and up to 80% of the bets being removed. For the bets demanded by punters and players at the moment, this could be a disastrous effect for channeling the traffic in Germany.
I think it is very counterproductive in terms of reaching out to players spending their money on a regulated environment. I think it's support for the black market operators. Therefore, the discussion came up among the industry and the authorities to deal with this matter. Again, there are talks amongst the authorities at the moment. If I look at my estimate regarding the gambling committee, I would say there is not much hope that they will change their mind. And I predict this would lead to another wave of litigation to get it settled. But at the moment, you cannot tell something about the timeframe and the final result of this and these bet types, or the list of permissible bets only applies to soccer, to football in Germany; all the other sport events and types of sports are not mentioned.
The regulators have to follow up with that. At the moment, there is nothing in sight that will amend these lists. This is really a big hurdle and challenge for the industry, which was completely unexpected. Under the old law, you applied for and got a license. You submitted your catalog of bet types and applied for approval. So far, there has never been a decision rendered by the authorities because they were all waiting for this list, which took more than one and a half years and it remains to be seen what the outcome will be.
This is something that was taken off from the license application regime of the Interstate Treaty as we know for virtual slots and online casino. It is something the lenders, the German federal states, and all the 16 states can make a decision on. They can choose to opt in favor of a monopoly structure, meaning they could offer these games, these online casino games by themselves, probably by using a state-owned company. This could be a lottery company, land-based casino operator, or some other entity, or they could also vote in favor of issuing these licenses to private operators.
This could be a tender because the number of licenses available for private operators is limited by the number of existing bricks-and-mortar licenses in that particular state. To give you an example, if you look at the state of Hesse, there are three land-based, three bricks-and-mortar casino licenses granted. The number of online casino licenses would be limited to three licenses available. At the moment, we heard that some states have already made that decision. I think it's Bayern, Brandenburg. Thuringia most recently just completed the notification a few weeks ago.
And what did I miss? Saxony, I guess those are the four states saying we want to do it on our own. We want to support the monopoly idea, whereas North Rhine-Westphalia and Schleswig-Holstein already passed their law, which was published a couple of days ago in order to offer these tenders for private operators to apply for such licenses.
So far, these would be the interesting states for the industry. There will be five licenses available in North Rhine-Westphalia. I think it's the same in Schleswig-Holstein. Regarding the other states, we need to wait and see how they decide. There probably is a majority opting in favor of monopoly structures, but I cannot predict. For the industry, interesting states are those that offer private licenses, but we need to understand these licenses are limited to the territory of that particular state. We've had these situations, like in Schleswig-Holstein. It's ring-fenced, although states can sign agreements for mutual support and cooperation under certain circumstances.
I will not touch on this because it goes too much into detail. For the software suppliers, it is also interesting to find opportunities to cooperate with state-owned operators if they need technical support. This is feasible and permissible. It is another chance for doing business in those Länder [i.e., states] with respect to online casino licenses. Finally, to conclude, I don't think it is a safe legal platform we are discussing because whenever you are going to offer a monopoly and exclude private operators, you need to justify the monopoly. Typically the argument is that the private operators are not able to reach the goal of regulation or whatever it is, as good as the state itself.
In this case where the law itself says that private operators obviously have the same capacity to reach these goals, when it's just up to the discretion of the state whether it wants to use plan A or plan B, it might be questionable. But the future will see if there's litigation or not. It's at least something that is let's call it interesting in structure.
Operators on the internet have to establish and operate a technical system at their own expense, which correctly records all the data required for the performance of gaming supervision, stores them, and enables electronic control at all times, including direct access by the supervisory authority. The authority will use these data for supervision and for scientific research. Furthermore, each operator has to establish an algorithmic system for early detection of players at risk of gambling addiction. The algorithmic system has to be scientifically evaluated by independent researchers at the expense of the operators.
And finally, each operator has to connect to the exclusion database of the Regional Council of Darmstadt. This Council, the Regierungspräsidium Darmstadt, which is also responsible for sports betting licensing until the end of the year, will remain in the future responsible for the exclusion database OASIS.
In the State Treaty of 2021, the common guidelines for permitted advertising are regarded as administrative regulations that do not need to be included in the State Treaty itself. Specifically, a ban in principle, except in cases of explicit permission, was changed into a system with specified exceptions.
Content related and auxiliary provisions regarding the design of advertising for public gambling will be laid down in the permit according to the new advertising guidelines. The type and extent of advertising for public games of chance may not contradict the objectives of the State Treaty. The advertising may not be excessive. Special features of the respective game of chance may be emphasized when advertising individual games of chance. Of course, advertising may not address minors, as misleading advertisement is prohibited. In advertising, the results of games of charts must not be depicted as being influenced by the player.
Games of chance may not be presented as a solution to financial problems. Advertising on telecommunication systems is prohibited according to article five of the State Treaty. Radio, this means broadcast and television and internet advertising for virtual slot machines, online poker, and online casino games are not permitted between 6:00 AM and 9:00 PM daily.
Of course, this results in many problems because you cannot shut down the internet during this time. And this time period, 6:00 AM till 9:00 PM, daily accounts as well for internet advertising. Advertising of an umbrella brand that offers these games is not allowed during this time. Unless for example, sports betting is edited as explained. This is explained in detail in the legal explanations of the State Treaty. Advertising for sports betting is not permitted on the broadcasting channel immediately before or during the live broadcast of sports event. Advertising of games of chance in sports venues is only permitted in the form of umbrella brand advertising on jerseys and boards and similar advertising media.
It is important to know that for the first time, affiliates are covered in the State Treaty. According to article five, payment depending on turnover, deposits, or stakes may not be agreed upon or paid for advertising for games of chance in which bar players are not allowed to participate, in particular in the form of affiliate things.
The State Treaty makes a distinction between those games where bar players may take part and those that they are not allowed to take part. Advertising and sponsoring for illegal games of chance are prohibited. And this might be important, but if you remember what Joerg Hofmann just told us, if under an umbrella brand illegal games are offered, advertising for the umbrella brand is prohibited and regarded as illegal advertising. So, if you offer illegal or not approved slot and you advertise for your umbrella brand, that is advertising for illegal gambling.
In the comprehensive legal explanation of the State Treaty, it is further more stressed that advertising should channel demand toward legal offers. Now, in the end, I will give you a little overview of what will be in the future. If we look at the jurisdiction of the European court of justice, advertising may not be excessive and is strictly limited to what is needed to steer consumers toward the permitted games of chance. Contrarily, the German federal administrative court has a stricter position. Advertising must not encourage the undecided and motivate them to participate in games of chance. Only those persons who have already decided to play games of chance may be approached with advertising. This is the point of view of the German federal administrative court.
In the past, advertising by the state monopolies has kept German courts very busy. This has resulted in a rather strict jurisdiction. This jurisdiction did not take into account the different risks of addiction of different forms of games. It remains to be seen whether the gambling authority and the jurisdiction will stick to the principles of the last decades that advertising may only inform about the availability of a game, but may not incite, encourage, or invite to gamble. Furthermore, it remains to be seen whether and how the jurisdiction will differentiate between advertising of a state monopoly and advertising of private companies with a license. You can be sure advertising was and will be one of the most popular topics in courts. Thank you.
Furthermore, reference to telephone advice or offering independent help with a uniform nationwide telephone number has to be put on the homepage. Additionally on the home page should be information about the self-exclusion procedure, self-test advice on responsible gambling, information on the exclusion of minors, and the payout quota. The name of the permit holder and other information have to be given on the homepage and have to be described in the social concept.
An important distinction is made between the social concept for an offer in the internet and for an offer in a touristic venue. The social concept of providers offering games in the internet has to be evaluated scientifically at their cost. For those internet offers already in place such as the charity lotteries, the gambling authorities have asked for a scientific evaluation of the effectives of the social concept after one or some cases, even after several years. Organizers of casino games on the poker and virtual slots machines on the internet as well as organizers and brokers of sports betting on the internet must use an algorithm-based automatic system for early detection.
This system has to be based on scientific evidence and, together with the measures that must be undertaken for reasons of prevention, is described in the social concept. Finally, I would like to stress that for a scientific evaluation of this algorithm, three aspects are important. Which data are used for the system? How are the data combined and when and what measures are used for intervention? Thank you, Willem.
Accordingly, the request providers will make for soft advertising rules is justified. But Joerg Hofmann already told us that financial transaction, the homepage, IP blocking, and financial blocking will be introduced. And then of course it has a higher cost to offer illegal offers. Therefore, it's a kind of equilibrium. On one side, the incentive to play legally, and on the other side, the incentive to play illegal and to offer illegal.
I think it would be much better to focus on player protection, not on the scope of the offering, but on education, on monitoring the player behavior, a sound social responsibility concept. I think that the solution will suffice if it reaches the player because he or she plays within that license and supervised environment.
I would like to quote your Dutch regulator, Willem, Mr. René Jansen who is the head of the Dutch gaming supervision authority, the Kansspelautoriteit. They just published their annual report. It was the first assessment of the consequences of new regulation in Holland, in the Netherlands. He points out four factors of why the black market in the Netherlands has fortunately become increasingly smaller. First one is the legal offerings, players prefer to play in a legal environment. Second one he said, is at the same time it's attractive offerings. That's something that I would like to highlight.
The third one is intensified action against unlicensed illegal operators as an effective measure, which is very important to the whole industry. That applies at the moment for licenses waiting for the ideas of regulators, how to conduct enforcement in Germany as well. And finally he said it's controlled advertising for legal gambling products. There was this discussion about reducing advertising opportunities in the Netherlands. He said we need it. We need to inform the players and we need to do it in a way that reaches out to players. I think this is something we can learn from and we should consider for our own regulation.
We do think there'll be a correction when the new regulator is operational from January 2023. And as Joerg and Tilman said previously, there are a number of ways that the onshore market will become a lot more attractive to the players. But the final thing I'd say on it is at 85%, which is still a level that is not in the top 15 in terms of channeling rates across the whole of Europe come 2026. So there is room for eradicating the offshore market even more by getting that equilibrium, as you say, that optimum market regulation.