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Bwin talks about the Czech online gambling market

One of the most recognized names in the EU online betting industry, bwin Interactive Entertainment AG (WBAG:BWIN) continues to operate in the Czech Republic through a loophole.

Bwin talks about the Czech online gambling marketThe Czech law forbids local betting company to take real money wagers online, but it says nothing about foreign Internet betting ventures. Below is an interview with the company's attorney Jindøich Rajchl, by Mrs. Irena Fuková:

Q: Can you give me some financial data about bwin in the Czech Republic?

A: The company doesn’t publish data for individual countries. It publishes its overall revenues and its overall number of clients. Currently, the company has more than 3 million clients worldwide. It’s number one on the European online betting market.

Q: Bwin’s headquarters in Austria reported a company loss, after tax and minority interests, of E 539.6 million for the financial year 2006, against a profit of € 6.4 million for the previous year. What’s behind the loss?

A: It was because of the investment in company Ongame, which bwin acquired. Ongame is the third biggest operator of online poker operating Web pages such as This investment has a long-term recoverability.

Q: Where does the company operate?

A: When you're on the Internet it is always hard to say where exactly the company is operating. Bwin has 21 language versions and is mainly focused on continental Europe, as in Great Britain the betting market has a long tradition and has already been divided up. Bwin, however, has decided to enter the British market through an already announced acquisition. There are negotiations between bwin and London-based Sportingbet, which is the European number two [in online betting]. If [the negotiations] are successful, a market giant will appear.

Q: In how many of these 21 countries do you have licences to operate?

A: We only have licences in countries where it’s possible to get one. In the Czech Republic, the problem is with the Ministry of Finance. They tell us our business is illegal as we don’t have a licence, but at the same time they say they’ll never permit online betting.

Q: What’s the situation like in other countries?

A: The constant problem is the conflict between individual countries’ internal legislation and European legislation. The EU has basic principles saying there is freedom of movement of capital. Based on this, the ECJ in Luxembourg stated any company headquartered in one EU-member country with a license in the state of its origin is allowed to provide its services without requiring further permissions in other EU countries. Countries, however, don't respect this.

Q: Which countries take the toughest line toward online betting?

A: France, for instance, is very aggressive. In Germany the situation is different from state to state. If you look at [German football club] SV Werder Bremen, which we have a sponsorship contract with, then you see that if the team plays in Stuttgart the team can have the bwin logo on its strip, whereas when it plays in Munich it can’t. The European Commission (EC) has already initiated discussions with the most problematic countries such as France, Germany and Italy, asking these countries to explain why they regulate the online betting market. But, for instance, in non-EU state Turkey we had to end our online betting activities as they are prohibited.

Q: Wasn’t part of one ECJ verdict a statement that it’s in the competency of individual states to regulate gambling?

A: That’s a clear misinterpretation of the Ministry of Finance. Any limitation of the market is possible only if it’s in the public interest. The court clearly stated what the public interest is. And it said the country is allowed to assess whether the limitation [of online betting] is in harmony with the public interest. But it’s impossible for the state to create its own new public interest criteria, for instance the necessity to pay taxes in the country.

Q: The ministry frequently argues that there’s inadequate control of underage online betting. What do you say to this?

A: It’s a purpose-built argumentation of the ministry that hides the main reason [for why they are against online betting], which is state budget incomes. I have to say we have better guarantees in [the age control area] than some betting offices. If you want to obtain your prize you have to send a copy of your passport or ID card. Another thing is we don’t accept cash and younger people don’t have credit cards. In Czech betting offices nobody asks after a person’s age or identity. In addition, nobody regulates the slot machines, which any child can play. We can only ask why as last year the income of the state budget from these slot machines was Kč 50 billion, which is five times more than the income from the whole betting business. Furthermore, I don’t know any person addicted to sports betting, but I know many people addicted to slot machines.

Q: How can you judge, since you operate in a different sector?

A: We did a study of preventing addiction with Harvard University [Massachusetts, U.S.] and we’ve observed this matter carefully. Furthermore, we don’t intend to damage our clients. There is a limited sum which they can put in and lose. For instance, the monthly limit in the Czech Republic is € 5,000. We’re also able to limit different clients in various ways. We can be very interactive. If the client bets regularly, we send an e-mail with questions the client has to answer. If we conclude from the responses that there’s some sort of addiction, we’re able to work with the client further.

Q: How frequently do you come across such a client?

A: Infrequently. Sports betting isn’t addictive. Ninety percent of our clients bet small amounts once a week. Of course, if the frequency increases, we’re able to help the client by limiting his betting or even stopping it.

Q: What about the fact that those who bet with your company actually behave illegally and could be punished under Czech law?

A: If there is any legal proceeding against any citizen of the Czech Republic I’m ready to represent the person personally for free and to guarantee a victory in the court proceeding–even at the European Court of Justice if necessary. My certainty derives from the fact that so far all such initiatives [of the Ministry of Finance] have been postponed by police and state attorneys. Today, only one such civil proceeding is taking place. (Editor’s note: according to the Ministry of Finance, a person can be fined up to Kč 50,000 for taking part in online gambling.)

Q: What is the major source of bwin’s income?

A: It's definitely sports betting, which has quite a long tradition in Europe. Last year for the first time, the turnover from live betting exceeded fixed odds betting [in Europe]. Live betting means that you can bet during a match for several things such as whether a particular tennis point is about to be won or not.

Q: What are the differences in betting based on nationality?

A: Traditionally South European nations bet the most. Greeks follow their heart more, whereas, for instance, Czechs follow rather their minds. I always give the example of if [Greek football club] Olympiacos C.F.P plays Barcelona, half of Greece will bet on Olympiacos, whereas if [Czech football club] AC Sparta Praha plays Barcelona, I won’t know of any Czech person betting on AC Sparta Praha.

Q: What is bwin’s client potential in the Czech Republic?

A: Some 400,000 people. It’s typically 4 percent of the population [in a European country]. You can immediately subtract all women, as the bwin executive says–96 percent of men bet and 4 percent of men bet on the credit cards of their women.

Note: Original article - click here. Interview segment reprinted with permission from Czech Business Weekly.


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