Croatian Betting Sector Under Pressure
The first Croatian bookmakers appeared in the early years of the last decade. As expected in a nation crazy for sports, sports betting became an instant success. Many businesses wanted a piece of this new market and many new betting chains opened, usually under foreign ownership. In this new, competitive market, operators first tried to win business with more favourable odds and then later, when it became too expensive to continue this pricing policy, with new shop openings. This lead to Croatia having one of the highest densities of betting shops per capita in Europe. However, with high fixed costs, many of those businesses were turning a loss, but stayed in the business hoping to move into profit on the back of rising betting handle. And then came the economic crisis and in just 18 months, the Croatian betting industry was decimated, losing 25% of its operators.
Today there are nine chains in the market, with only five of them profitable. Seven operators have experienced a decline in revenues in the last two years. In 2010, the year of a FIFA World Cup, all but three companies recorded lower revenues. As the crisis is persistent in the country and unemployment remains high in 2011, it is expected that a year without a major football competition will mean lower revenues yet again. So we expect consolidation of the market or further closures. Some owners are also interested in selling their shops. But it is hard to find a buyer in such a market.
One of the examples of the not-so-profitable investment is Fortuna. Then called Favorit, it was acquired by Czech investor Penta in 2007 and soon re-branded. However, when Fortuna went public in late 2010, it divested the Croatian chain, selling it for ‚Ç¨1 to one of its subsidiaries to avoid it bringing the share price down. Fortuna is up for sale now and there is an interested, but undisclosed buyer.
The most successful operator in the Croatian market is Super Sport, which started off as the third-placed operator in the market and slowly worked its way up. Super Sport is the uncontested market leader with around 1/3 of the market.
Hrvatska Lutrija, the national lottery monopoly, came late to the betting market but secured an 8% market share mostly thanks to its large retail network.
The three aforementioned operators are the only ones currently offering Internet betting, which was allowed from the start of 2010. The other operators have decided not to join in due to the high costs of the licence (around ‚Ç¨0.4m per year, three times more than the retail licence). Again, Hrvatska Lutrija was late to join the market, starting in September 2010. The other two operators launched their offering in June, in time for the FIFA World Cup.
First results from the lottery show that in the first three months the lottery had 9,613 players over the Internet. Betting was the most popular product where Internet sales accounted for 14% of overall sales, while the relevant percentage ranged between 0.5% and 3.7% for lottery games.
It seems that due to high costs and small volumes licensed Internet play will not be a saviour for Croatian bookmakers. Fortuna has recently started advertising their Maltese site, which is cheaper for the Croatian players as it does not charge the 5% betting tax that Croatian bookmakers charge. It remains to be seen whether the Croatian regulator will react to such an attempt to circumvent the domestic law by one of its own licensees.