As with other sectors of the gambling market in Germany, the development of the casino sector has been limited by the strict regulations and exceptionally high tax rates and duties. There is no direct regulation of the German casino industry at the national level. Each of the sixteen lander has its own gaming board that sets their own tax, location and ownership requirements. However, the Minister of Internal Affairs is responsible for licensing and the Minister of Financial Affairs oversees the state gaming boards. (Source: GBGC Report.) Today, Germany has a total of 84 casinos in operation which among them house approximately 8,000 gaming machines. There are 25 casino operators. Together they produced €956 mil of gross gaming revenue (GGR) in 2001, with table games accounting for €220m and slot machines for €736m. Casinos in Germany employ approximately 4,700 people and in addition there are about 3,000 additional employees working in casino-related professions (hotels, restaurants, etc.) In 2003, German casino GGR accounted for €958.673 million.
About half of German’s casinos are owned and operated by the lander, and the balance are owned and operated by private sector firms. The German casino industry in 2003 generated a total of just over €1 billion in GGR of which approximately 70% came from slot machines.
There are generally no restrictions that determine where casinos may be developed, except in Bavaria where they have to be located in spa or tourist resorts. German casino licenses are typically granted for a term of between five and fifteen years. German casinos are permitted to advertise their properties but, although alcohol and refreshments are permitted within gaming areas, no other entertainment may take place on casino premises and credit must not be used to play any games. Casino taxation is generally the same for both tables and machines in Germany and tax rates are fairly high.
In the former West Germany, it is usual for new properties to be taxed at around 60% to 70% of GGR for the first two to five years after they open before they are transferred to a higher rate of gaming tax. These can be as high as 92%+ of GGR for the most profitable casinos. A lower tax rate could also be applied during an economic ressesion. Across Germany the rates for state-controlled casinos are generally in the region of 5% to 10% lower than those in private hands. Some Lander transfer between 1-10% of the levy to charities. In addition, some of the Lander demand a fee for the issuing of a license in a region of €10,000-20,000. Depending on the location, the requirements for non-gaming-related investments can reach €5 mil.
Machine Gambling Outside Casinos
There are currently approximately 196,000 gaming machines in operation across Germany making it the third largest European gaming machine market behind the UK and Spain. According to PTB (Physikalisch-Technischen-Bundesanstalt = Physical-Technical Federal Agency) statistics, some 66,483 new licenses for gaming machines with payout (Amusement with Prize, or AWP machines) were issued in 2004. Since not all licenses issued lead to the sale of machines, the actual market volume is smaller. The number of gambling machines sold, rented and leased in 2004 not only for testing purposes but for long-term deployment was approximately 59,000 – which represents a decrease of 3.7% as compared with the previous year. GGRs from gaming machines in Germany were €2.335 billion in 2003.
Sales have been relatively flat during the past decade and, in addition to competing against other forms of gambling, the German slot machine industry has been hit by structural changes in the catering trade. Sales in bars and restaurants fell by 5% during 2003 impacting devices located in these sites. Consequently bars and restaurants share of the non-casino gaming machine market has fallen to 60%.
The decrease in the number of AWP-machines between 1999 and 2004 is primarily a result of the structural change experienced in the catering trade, which triggered the capacity decrease. Since the mid-1990s – despite generally favorable economic circumstances – the gross revenues of operating companies have increased by only 10.4% between the years of 1996 and 2004. This has not proved sufficient to compensate for cost increases associated with increases in VAT, the increases in amusement tax, and general rates of inflation. As a result, the German slot machine industry has been lobbying the federal government for a wide-range structural amendment to the nation’s gambling laws that reflect modern gaming trends in other countries.
There are four categories of lawful betting in Germany: two types of Toto (Erge billioniswette and Auswahlwette) and two types of ODDSET (Kombiwette and Top-Wette). Racing associations can provide Toto and individual bookmakers can offer odds betting. In addition, there are four small companies that have betting licenses in Eastern Germany, though government is looking for a way of eliminating them as they are left from the pre-unification period.
According to the German Betting Association estimates, internet betting could reach 1600 million Euro sometimes in the future. They also estimated that private sports betting companies had a turnover of about 1500-1600 million Euro in 2005. This was mainly due to exporting betting services to other European countries.
Turnover is relatively small for a country the size of Germany. Official statistics for 2002 show a total handle of just €311.36m, the equivalent of just €4.42 per adult member of the population.
All German off-course betting, horseracing and sports, is taxed at 16.67% of turnover, the highest rate in Europe. As a result, foreign bookmakers will establish sales points in Germany, but because their servers are abroad, they are not subject to the German tax. For example, the UK’s Tote has 74 Tote betting terminals located in agencies across Germany with the money going into the UK pools as part of the Attheraces deal, where this principle would apply. The UK’s Satellite Information Services supply 150 German shops with pictures of UK racing.
The horseracing shops are heavily reliant on fixed odds betting on racing from abroad, particularly from France and the UK. The latter has become increasingly important as there is a danger of the loss of the domestic all-weather winter racing programme. The Dortmund and Neuss tracks have been alternating weekend/day in recent years but both cancelled a number of Saturdays during early 2004. Sunday racing is still profitable but Saturdays are not and German bookmakers are unhappy at the prospect of paying the same amount for one meeting per weekend instead of two.
The average stake per bet is €6 on horses and €11 on sports, with the average shop turnover being quite high due to the lack of competition. The Betting Association estimated that on average people bet 8 Euros per person. Margins in the horserace betting shops are calculated on a basis of 26% but they also charge a 15% manipulative cost on top to cover tax; however, those operators with an East German license do not have to pay the tax though they still charge the 15% manipulative cost. Both horseracing and sports betting shops are allowed two slot machines.
Bingo is a part of the lottery license in Germany and it is run by 16 lander individually and not by central government. There are two types of bingo: Tele-bingo and the usual Bingo. While bingo is popular on some German public television channels, live games have never been licensed. Under Germany’s gaming laws, live bingo can only be offered by lander lottery companies. Spielbank commenced plans to launch a live bingo game in 1999 but it took two years to complete the administration required to establish a suitable joint venture with Berlin lottery. The game proved to be popular and was expected to generate €2m in taxes during 2003.
Media Gambling Services
Gambling by media (prize winning games on radio and television) is allowed in the editorial context. It must serve an informative and entertainment role for viewers and listeners, and provide an additional incentive to watch a programme. Participation is normally by postcards, e-mail or telephone. Since 1 April 2005, there is in effect a prohibition of generating income by premium rate telephone numbers by public broadcasters, in particular if connected with gambling. In addition, it is a criminal offence to organise unauthorised lotteries.
Some German public television channels offer Bingo to their viewers. Two TV lotteries have received permission to operate across all 16 lander. These have a charitable role and usually finance a specific social project as well. Any other aims of media gambling are prohibited in principle.
Furthermore, there are two private lotteries that are run by television stations, where both of them received permission from the 16 lander to operate nationwide. They are “Place under the Sun” on the ARD channel and “Action of Human Being” on the ZDF channel. These programmes produce financial support for specific special purposes, such as raising money for people with disabilities.
ARD is a union of the broadcasting authorities of the German lander and of the German international radio service. Together they run “the first” German TV station and a number of digital TV programmes. Each of the broadcasting authorities of the lander also operate a regional TV programme, so called “the third” as well some radio programmes. According to DeSIA, during the year 2005, private radio stations had over 2 billion Euro turnover. In the first 3 month of 2004, there were 42 million premium phone calls made. DeSIA estimated that at least 20% of the whole gambling participation amounts to media gambling.
Small charitable lotteries are common in Germany. They are often run on a local level and collect money for a specific purpose, such as for example, restoring the local football grounds. The reason why there is no information available on charity gambling in Germany is that many of the lander do not require them to obtain individual licenses and therefore there are no licensing procedures from which the information could be obtained.
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