Central Europe
A Balanced Take on Optimal RTP for New Turnover Taxation in Germany
What should be the optimal return to player (RTP)? This is a hotly debated question in the German gambling industry following the changes in the turnover taxation that are scheduled to come into force from 1 July 2021.
While several figures and many theories have been advanced, we found particular LinkedIn post by Robert Lenzhofer, Co-Founder and CEO of Hölle Games, particularly well-balanced and insightful.
We are reproducing the post with minor changes here, with permission from the author. You can find the original post here.
Over to Mr. Lenzhofer now…
I have published a LinkedIn poll recently with the title: “If/when Germany introduces the 5.3% turnover tax, what RTP rate is best suited considering both game-play and effective tax-paid?”
After one week and 120 votes from industry experts, the poll showed the following result:
There are a few ways of looking at this, but I think the key take-away is that the industry this poll represents is fairly evenly split between above 90% RTP and below 90% RTP.
The tax explained
First, to ensure we are on the same page, a quick explanation of the tax proposed:
Currently a 5.3% tax on turnover has been proposed and a draft-legislation does exist. I won’t go into the politics and the thinking behind this, but rather try to analyze the numbers.
A 5.3% tax on every bet being placed on an online slot means an operator can not offer an RTP over 94.7%. At 94.7% RTP, the operator would break even exactly on a bet-level, but obviously would lose money as marketing, employees and general operation have to be financed somehow. Considering financial overhead in any operation, that means the maximum RTP a casino is technically able to offer while avoiding bankruptcy is probably around 93% or more likely at 92%. This is the top ceiling and at the same time too high to be profitable.
Now, there is a bit of uncertainty and I’m also not entirely sure if the number to calculate against is 5.3% or rather 5.033%. The tax is 5.3% on turnover, meaning a 1 EUR bet causes a tax of 5.3 cents, which totals to 1.053 EUR. The tax-portion of 1.053 EUR is less than 5.3%. 100*5.3/(100+5.3) = 5.033 resp. 5.033%. I do calculations here in this document based on 5.3%.
How to balance RTP and profitability
We’ve established above that 93% or 92% is the top ceiling, but where is the bottom?
The table below shows how a Slots-operator will be taxed, calculated into the GGR-equivalent %-age number and cross-referenced with RTP. For reference, many other jurisdictions in Europe offer a GGR-based tax-rate of around 20%. As you can see from the table below, the 5.3% tax-rate on turnover wouldn’t be so bad, if players would accept 80% RTP. At 80% RTP, the GGR-equivalent tax-rate is 26.50% and thus a competitive tax-rate.
The coloring I have done here may be slightly biased, especially in terms of RTP so please take with a grain of salt. But if you roughly accept that the red-area you want to avoid on the RTP and on the GGR-% side, then you end up with an RTP-bandwidth between 84% and 91% to play with.
Further, and again granted you accept the coloring, an operator obviously wants to find an RTP in the green and a GGR-% in the green. Here we arrive at 88% and 89% RTP.
Now, a lot has been written that players will not accept such low RTP’s as say 84%. There are counter-arguments made that in land-based slots the RTP is exactly at that level and actually 88% is on the higher-end in land-based casinos.
On the other hand, for many market-participants the number “9” is a psychological blocker. Players, Affiliates and a couple of Slots-Studios I speak to feel very anxious offering product below 90% as this number still feels somewhat close to the industry-average of 94 to 97%. 89% sounds very different than 90%, although it is “just” 1% in RTP dropped.
Sportsbook vs. Casinos
It will be interesting to watch if Sportsbook or Sports-led brands will choose a differing RTP-rate than Pure-Play Casinos. A Sportsbook can more easily stay on a higher RTP and just pause all short-term expenses (bonus, marketing, etc.) and focus on cross-sell. A pure-play Casino will have to look a lot more closely on bottom-line and in my opinion will have a hard time offering e.g. 90% RTP-Slots as the GGR-equivalent tax-rate is 53%.
Game-Mechanics?
Will there be new Game-Mechanics invented to combat this problem? Looking at the table above again, the second column states how many spins a player on average can make until 1 EUR is spent depending on the RTP-Level. At 95% RTP this is 20 spins. Now, if a Game-Mechanic can be invented that provides a low mathematical RTP while at the same time provides a similar amount of real spins, then this could be a solution to the problem.
Conclusion
The above explanation is in no way complete – there are actually interesting studies which analyze how much an RTP is “felt” by the player and there is probably very good data the land-based industry has to offer.
But, to move away from being neutral, here’s what I personally think: The reality will be that everyone will push the RTP down and experiment with the lowest acceptable RTP as this maximizes their income. As such, come 1st of July, we’ll see a lot of RTP’s experimented with. Imagine you are a pure-play casino and you can provide a Game-Mechanic that feels good to the player and has a nice session length, while staying at or below 40% GGR-equivalent-tax. I believe things start to fall apart financially for an operator at 40% tax-rate. If you own your own media-assets and have good deals with your suppliers and run a tight operation then a 40% tax is possible to do really well in Germany. That means, the average-RTP across the portfolio will have to be around 87-88%. I think you can mix in 91% games into the portfolio just so that is part of the portfolio too, but the majority of revenue of the white-market in Germany will in my opinion come from Slots around 88% RTP. And since some games will be mixed in at 90/91% you can expected some slots to be mixed in at 84/85% rate as well.
SOFTSWISS, a global tech supplier of software for the iGaming industry, along with its employees, has actively aided communities affected by the recent flooding in Southern Poland.
In September, Storm Boris brought devastating floods to Central and Eastern Europe, causing widespread damage. Torrential rains left thousands of homes submerged, severely impacting numerous cities in Poland, the Czech Republic, and Romania. In Poland, the southern regions were hit the hardest, with dozens of towns requiring urgent evacuations and support for affected communities.
To provide immediate relief, SOFTSWISS made a financial donation to the Wielka Orkiestra Świątecznej Pomocy, a well-known Polish charity organisation. SOFTSWISS has two development offices in Poland, allowing employees to quickly join the relief efforts and offer their assistance during the flood.
Under the company’s coordination, Polish employees packed boxes of over 100 kilograms of essential items, including food, hygiene products, and necessities such as matches, candles, and batteries. SOFTSWISS handed these supplies to Caritas Polska, a charitable organisation spearheading relief efforts for the affected areas.
Earlier this year, SOFTSWISS also organised a large-scale charity and awareness campaign to support flood-hit regions in Brazil.
“Unfortunately, natural disasters happen, and we don’t want to stand idly by. We strive to help in any way we can. This aligns with one of our core values, We See People, which applies not only to our employees. We always see the people beyond the business, and I believe our ESG initiatives reflect this,” said Natalia Perkowska, Deputy Chief HR Officer at SOFTSWISS.
The aid campaigns in Poland and Brazil are part of SOFTSWISS’ broader global strategy focused on social responsibility and sustainable development (ESG). The company also dedicates to long-term social and environmental projects, with notable initiatives such as participation in World Environment Day, Pink October, Movember, and various environmental protection efforts.
Recently, SOFTSWISS was recognised as The Best Employer of 2024 at the SBC Awards.
About SOFTSWISS
SOFTSWISS is an international technology company with over 15 years of experience in developing innovative solutions for the iGaming industry. SOFTSWISS holds a number of gaming licences and provides comprehensive software for managing iGaming projects. The company’s product portfolio includes the Online Casino Platform, the Game Aggregator with over 23,500 casino games, the Affilka Affiliate Platform, the Sportsbook Software and the Jackpot Aggregator. In 2013, SOFTSWISS revolutionised the industry by introducing the world’s first Bitcoin-optimised online casino solution. The expert team, based in Malta, Poland, and Georgia, counts over 2,000 employees.
The post SOFTSWISS Steps In to Assist Southern Poland After Severe Flooding appeared first on European Gaming Industry News.
Relax Gaming, the iGaming aggregator and supplier of unique content, has enhanced its European presence by making its debut in Switzerland with leading operator Grand Casino Luzern and its online platform, mycasino.
This partnership with Relax will see the supplier’s award-winning portfolio of games including Banana Town, Money Train and Wild Chapo now available to Swiss players with more titles to follow.
Founded in 2019, mycasino is operated by Grand Casino Luzern, a renowned casino operator in the heart of Switzerland.
The country’s leading online casino boasts a cutting-edge offering with exclusive titles regularly being added, as well as seamless deposit and withdrawal functionality. With its commitment to safety, innovation, and superior customer experience, mycasino offers a secure and enjoyable online gaming experiences for Swiss players.
The Swiss market marks the twenty-third global jurisdiction that Relax Gaming now operates in after passing the stringent regulatory processes and obtaining approval from Federal Gaming Board (FGB).
This is Relax’s latest step in extending its reach across Europe with further plans to increase its footprint with additional partnerships planned over the continent in the near future.
Martin Stålros, CEO of Relax Gaming, said: “Our continued growth across the globe is something we are all incredibly proud of. The Swiss market presents many interesting opportunities and I believe we have the right content to appeal to the passionate audience.”
Alexia Smilovic Rønde, Chief Regulatory Officer at Relax Gaming, said: “Entering the Swiss market through our prime partnership with Grand Casino Luzern marks another significant step in expanding our presence in high-profile regulated markets.
“Switzerland is truly a staple of European jurisdictions and is known for its high regulatory standards, which we are pleased to have successfully met. We will be looking forward expanding our presence in the coming months.”
Wolfgang Bliem, CEO at Grand Casino Luzern, said: “The partnership with Relax Gaming marks an important step for mycasino.
“Their innovative approach and diverse game portfolio perfectly align with our commitment to maintaining our leadership in the market. We’re thrilled to be the first online casino in the Swiss market to partner with Relax Gaming and continue providing top-tier entertainment to our players.”
Established as one of the industry’s leading B2B suppliers, Relax Gaming was awarded GGA’s Product Launch of the Year in February 2023 for Dream Drop Jackpots. Money Train 3 names the 2023 CasinoBeats Game Developer Awards amongst its 6 Slot of the Year titles, while the brand also won the award for Skill Games Supplier at the 2023 EGR B2B Awards along with the Innovation in Mobile award at the 2023 SBC Awards.
Relax Gaming provides more than 4,000 online casino games, from its high-performing proprietary slots to a significant, varied library of content from hand-picked third-party studios via its partnership programmes.
The post Relax Gaming partners with Grand Casino Luzern to launch in Switzerland appeared first on European Gaming Industry News.
Partnership marks studio’s first foray into Hungarian market
Independent slots studio Thunderkick has launched its games with Vegas.hu, an online casino operated by Las Vegas Casino (LVC) Diamond, marking its debut in the Hungarian iGaming market.
Hungary is the third new market entered by Thunderkick in 2024 – following the announcement that its games would go live in Canada and Colombia – highlighting the provider’s commitment to targeted global expansion.
Vegas.hu is a pioneering platform having become the first legal online casino established in the country in 2017 and has since established itself as one of the most successful and highest-grossing brands in Hungary.
The partnership, which commenced in early August, saw a collection of Thunderkick’s games integrated onto Vegas.hu, including fan-favourites Midas Golden Touch 2, Beat the Beast: Dragon’s Wrath, and Gods of Rock! Reborn.
The game developer has already reported early success among its titles, with this strong performance emphasising the quality of Thunderkick’s product portfolio, which continues to resonate with players across the globe.
Fredrik Ekholm, Head of Sales at Thunderkick, said: “We are dedicated to enhancing Thunderkick’s presence on our home continent, and the debut of our slots in Hungary reaffirms this.
“Since becoming the nation’s first regulated online casino, Vegas.hu has built a reputation as an industry leader, and we are excited to partner with the prestigious brand as we look to expand our European player base.”
Brigitta Szenczy, Head of Gaming and Studio at Vegas.hu, added: “At Vegas.hu, we have a history of providing exciting gaming experiences to Hungarian players through a portfolio of best-in-class titles.
“Thunderkick’s cutting-edge slots are sure to resonate with Vegas.hu players as we continue diversifying our content offering.”
The post Thunderkick enters Hungary with LVC Diamond brand Vegas.hu appeared first on European Gaming Industry News.
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