German’s tax reform for online gambling industry results in a setback for gambling giants and leave an IPO worth $285 of a gaming company, Perform Group at risk. According to the new tax slab, gaming companies required to pay 16.7% of gross bet as tax back to the state, which is deplorable to key market operators including Bwin.Party and Perform group. This news made a negative impact on stocks of gaming operators. German market leader, Bwin.Party Digital Entertainment’s share prices crash nearly 23% in just two days trading, which has major 23% revenue share from German market. Betfair, another major operator, face stock plunge too by more than 4% with these reforms.
According to some industry pros, online gaming industry works at a margin around 10% to 12% and if these tax reforms, scheduled to be in force from next year, made mandatory to follow. It would almost be impossible to run the legitimate gaming business. Operators will have to change the odds to counter the tax loss, which eventually is an unattractive option for new gamblers. Even the state government is at risk of not finding any private bidder for any of its seven probationary gaming licenses; it planned to grant this year. Actually, this will end the monopoly of state government on Germany online gaming market, i.e. from coming 2012 state government plans to accord some gaming license to the private operators for a period of five years, on the pilot period.
After these licenses, private operator can compete with state runs gaming monopoly. Licensing terms also enable them to advertise their gaming business within stadiums, kicking off a big advertise market, particularly in the German football league, where an online sportsbook maker can display their advertisements.
Major Setback for Bwin.Party
After US bans in 2006, German tax reforms are the major setback for Bwin.Party digital entertainment plc, which is formed by merger of Bwin and Partygaming. According to Bwin.Party spokesman, these changes do not comply with EU laws, and they would make it unfeasible for Bwin.Party to run a profitable business in Germany.
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