Online Sports Betting Industry:
Our view, our beliefs, our value added
Quentin Toulemonde
OSBI Consulting
January 2011
1
Agenda

Sports Betting Industry: history and figures

France’s legal framework and its challenges

How we can help
January 2011
Quentin Toulemonde
OSBI Consulting
2
Sports Betting has been around for long…

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Sports betting is “as old as the hills”.
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The first widely acknowledged piece of evidence goes back to the Greeks and the Olympic Games.

King George II organized the first national lottery in the UK (18th century)
In 1865, the “Pari Mutuel” form appears in France.

Michel Oller, a French entrepreneur, sold tickets on racetracks, which allowed punters to bet on the
winning horse.

Bets are pooled on a “winner-takes-it-all” basis.

Oller remunerated himself by levying a small percentage on the overall pot.
“Pari Mutuel” became legally authorized in France in 1887.

In 1927, British and American governments followed this example.

PMU (“Pari Mutuel Urbain”) was founded in 1930.
Nowadays, online bookmakers usually manage a wider portfolio.

Online bookmaking rose in Northern Europe during the 90s, with names such as Betsson and
Unibet.

Activity portfolio may now include sports betting, poker, horse racing, bingo, etc.
January 2011
Quentin Toulemonde
OSBI Consulting
3
… and is now a worldwide industry
Total amount bet in all forms of games
Games of Chance are often split between 3
poles

Sports Betting in its widest form (i.e.,
including Horse Betting).

Games, such as Bingo, Scratch cards,
Slots, etc.

Poker.
300
250
200
€bn

150
100
50

2012E
2011E
2010E
2009P
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
1999
Sports Betting represents a major activity.

The worldwide market is expected to grow
at a 4.7% CAGR between 2009 and
2011.

Online Sports Betting is twice as
important as Online Poker, on a
worldwide basis.
1998

Source: H2 Gambling Capital
Breakdown of online stakes by game (2010)
These figures hide strong geographical
preferences.

Sports Betting accounts for 26% of bets
made in the UK…

Whereas it reaches 78% in Asia.
Poker
20%
Sports betting
42%
Games
38%
Source: H2 Gambling Capital
January 2011
Quentin Toulemonde
OSBI Consulting
4
France ranks 6th worldwide and is statistically
categorized as a “poker lover”

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The USA rank first, thanks to a strong poker
Breakdown of stakes by country (2010)
sector.
USA

France accounts for 30 million “land”
17%
players.
Japan
In France, more than €4.5bn were bet
UK
40%
between June (market opening) and December
14%
Italy
2010.
Germany

Poker (€3,705m) greatly dominates Sports
12%
France
Betting (€448m).
5% 7%
Other
Poker predominance can be regarded as a
5%
statistical artefact.
Source: H2 Gambling Capital

Money changes hands very quickly and
benefits from a lower taxation rate.
Breakdown of online stakes in France
between June and December 2010

1 euro deposited on one’s account is bet
23 times on average for poker vs. 4 for
Horse Betting
sports betting.
10%

Therefore, €161m were genuinely
Sports Betting
deposited for poker purposes (vs. €112m
10%
for Sports Betting).
Soccer and Tennis are the most popular
sports.

Together, they gather 85% of bets taken.
Poker
80%

Soccer benefits from its huge popularity,
whereas Tennis generates significant
Source: ARJEL
turnovers mainly thanks to the high
betting frequency.
Quentin Toulemonde
January 2011
OSBI Consulting
5
The typical player fits an “identikit”

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Men are more attracted by online as well as
by land Sports Betting.
However, Online Sports Betting players show
significant discrepancies with other
categories.

Online players are, on average, younger
(45 vs. 30 years old).

The typical player’s socio-professional
category is higher than in any other
kind of activity (considering either land or
horse betting).
Breakdown of UK online stakes by media
(2010)
100%
90%
21,3%
17,1%
17,9%
18,5%
28,6%
25,6%
24,7%
80%
70%
27,9%
60%
TV
50%
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Phone
Internet
Online Sports Betting’s penetration rate is
quickly increasing (reaching 10.5% of the UK
population in 2009) thanks to two main drivers.

Internet network’s is getting more
and more accessible, with higher
speeds, allowing punters to play “live
betting”.

The offer is expanding year after year:
a bookmaker covers, on average, 25
different sports.
40%
30%
50,8%
54,3%
56,4%
56,8%
2007
2008
2009
20%
10%
0%
2006
Source: UK Gambling Commission
January 2011
Quentin Toulemonde
OSBI Consulting
6
Agenda

Sports Betting Industry: history and figures

France’s legal framework and its challenges

How we can help
January 2011
Quentin Toulemonde
OSBI Consulting
7
At a worldwide scale, there are major
discrepancies between legislations
Online gambling legislation status for some European and Pan European countries
Banned
Belgium
Spain
EUROPE
Germany
Under legalisation
Regulated or
authorized de facto
Italy
United Kingdom -Denmark
France
China
Argentina
South Africa
WORLD
Portugal
New Jersey* United States* --
Japan
Source: Pauline Pelletier, Relevant Authorities update
* US legislation regarding online gambling is defined at State level
January 2011
Quentin Toulemonde
OSBI Consulting
8
France opened its market following a bone of
contention with the European Commission

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France’s State monopoly on games of chance had been established for long.

A 1836 law bans lotteries.

The National Budget first encompassed National Sport Lotteries (still under State monopoly, namely
the “Française des Jeux” or FdJ) in 1985.

Online Sports Betting was opened to Française des Jeux in 2006.

Before opening, overall turnover reached €20bn (2009 figures). Profits generated from these
activities were partially used to fund the various sports federations.
In 2006, French law still showed major inconsistencies with European Law.

The Treaty on the Functioning of the European Union (article 49) stipulates that “within the
framework of the provisions set out below, restrictions on the freedom of establishment of
nationals of a Member State in the territory of another Member State shall be prohibited.
Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or
subsidiaries by nationals of any Member State established in the territory of any Member State.”

The situation regarding online games of chance was clearly in breach of this article.
On the 12th of May 2010, France set a milestone by opening and regulating its online games of chance.

However, this law only comes on top of previous measures and does not affect land-based
activities.

A Regulatory Authority was created: ARJEL, which stands for “Autorité de Régulation des Jeux En
Ligne”.

From this moment on, companies need to ask for a renewable, 5-year license.

A set of laws defines the legal and fiscal framework and answers three major questions.

What are ARJEL’s main objectives?
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Which sports are authorized?
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How can we compensate the shortfall for sports federations due to entrants’ competition?
January 2011
Quentin Toulemonde
OSBI Consulting
9
To justify all its measures, ARJEL sets three top
priorities

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To provide the consumer (i.e., the punters) with more transparent betting markets, therefore enabling
more efficient fight against fraud and pathological gambling.

ARJEL set up a national database listing all individuals banned from games (land and online).

70 million requests were sent to this database in 2010 and prevented 20% of “banned” people
from opening an online account.

Payback rate is limited to 85% (vs. 96% in the UK, for instance) to dampen addiction risks.
To strengthen competition between bookmakers, which would finally benefit to the consumer.
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FdJ’s payback rate used to be in the region of 75%. Competition forced them to increase it up to
the legal limit.

Licensed companies are allowed to advertise on the French soil, whereas illegal bookmakers face
threats of fines and prosecution.
To tax financial flows which were illegal, thus hidden, in the past.

Under the monopoly era, the French State levied up to €5bn a year (PMU and FdJ altogether).
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The newly created taxes will provide sports federations with a more stable, more sustainable source
of funding.

Part of the raised amount will be devoted to prevention and information campaigns, such as
“Joueurs Info Service” (Information Service for Players).
January 2011
Quentin Toulemonde
OSBI Consulting
10
According to insiders, the tax burden weighs too
much on profitability
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France’s tax status is clearly divided between
State and Sports Federations funding.
As the highest in Europe, this tax rate is
often criticized.

ARJEL’s opinion is to consider online
gambling as a public matter and not
as a lucrative activity.

It has already planned to take a new look
at the whole legal framework by the end
of 2011.

However, entrants urge it to sketch a
revised scheme as soon as possible,
since none of them managed to make
profits in 2010.
French tax status as of January 2011
% of stakes
Sports Horse
Betting Betting
Poker
State Tax
Social Security Tax
Subtotal Taxes
5.7
1.8
7.5
4.6
1.8
6.4
1.8
0.2
2.0
Sports Federations
Horse racing
Subtotal Sports
Funding
1.0
0.0
0.0
8.0
0.0
0.0
1.0
8.0
0.0
Total
8.5
14.4
2.0
Source: ARJEL
The Italian precedent is likely to affect
ARJEL’s view.

The Italian government had to slash its
tax rate to efficiently fight against illegal
gambling, which was corrupting the legal
offer.

Ireland is currently facing vivid disapproval
as they intend to raise taxes.
January 2011
Quentin Toulemonde
OSBI Consulting
11
Despite the new legal framework, entrants and
incumbents do not fight on an equal footing
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Many Online Gambling companies have showed
great interest in the French market.

By the end of 2010, 35 companies had
one or more license, and 15 were allowed
to act as bookmakers.
However, the Sports Betting market remains
very concentrated.

By end October 2010, the top 3 players
were controlling a 80-percent market
share.

From the very beginning, most entrants
have been lacking visibility on the
consumer end and could not fight against
incumbents’ fire power in terms of
marketing and advertising.
Sports Betting market share as of end October
2010
Others
Source: ARJEL
Marketing expenditures share as of end
August 2010
Others
Entrants rely on two levers to invert this trend.

They have formed alliances with existing
media groups to foster their activity, e.g.
Bwin with L’Equipe (sports newspaper).

A recent Autorité de la Concurrence’s
decision (Competition Authority) advises
PMU to re-brand its online activity,
since the 12/05/2010 law forces
Source: Le temps libre des Français dédié au sport
companies to clearly set their online
Quentin Toulemonde
activity apart.
January 2011
OSBI Consulting

12
Opportunities and challenges arise out of the
French context: a SWOT analysis for entrants
Weaknesses
Strengths
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France’s customer base is one of the largest in the world,
with an estimated 30 million “land” players.
Soccer and tennis are highly popular in France and
generally generate significant turnovers.
Historical monopoly (FdJ and PMU) have already instilled
a small, but existing, “betting culture” within the French
society.
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Opportunities
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Autorité de la Concurrence’s recent decision may get
enforced and thus weaken incumbents’ position and
favour smaller entrants.
Legislation (including tax framework) could be reviewed
before end 2011, as requested by entrants.
France may follow Italy’s example, which eradicated
illegal gambling by deeply cutting its tax rate.
January 2011
The taxation rate is too high, therefore the French
market lacks competitiveness compared with other
countries (including illegal offer).
ARJEL faces technical challenges to implement part of its
measures, such as illegal site blocking and IP detection.
Autorité de la Concurrence has released only advice,
which are thus non-binding for incumbents.
Restrictive technical requirements are costly and often
become a barrier to entry.
Threats
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No company made profits thanks to the French market in
2010. Since the legislation is to legally evolve only by the
end of 2011 entrants may face liquidity problems this
year (such as Eurosportbet).
FdJ and PMU may make use of their strong lobby to
freeze legislation as is.
As 15 licenses were already granted to Sports Betting,
there is a continuing threat of excess offer.
Quentin Toulemonde
OSBI Consulting
13
Agenda

Sports Betting Industry: history and figures

France’s legal framework and its challenges

How we can help
January 2011
Quentin Toulemonde
OSBI Consulting
14
OSBI Consulting helps Sports Betting Industry
Firms developing their potential
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OSBI Consulting is a French firm, launched in January 2011, aimed at enhancing Online Sports Betting
Industry (OSBI) Firms’ development and performance throughout the Globe.
Within this industry, our cross-sectional talents perfectly fit into a broad panel of challenges.

Board Level: General Corporate Strategy.

Commercial & Business Development: Sales Development, Market Insight.

Marketing: Acquisition & Affiliates, Customer Retention & Relationship Management, Product
Management.

Operations: Risk Management, Odds Compilation, Corporate Finance, Payments Optimization.
Our guidelines rely on three core principles.

Pay specific attention to our clients’ needs and objectives.

Commit ourselves to think of jointly defined actions rather than abstract ideas, including realistic
objectives and achievable milestones.

Never self-assess that our work is done; our clients’ satisfaction is the only key to success.
Our motto, “Betting on your future”, reflects these beliefs.

We are fully committed to improve our clients’ performance.

Our clients’ achievements are our best reward.
January 2011
Quentin Toulemonde
OSBI Consulting
15
Our approach consists in a three-step process
Problem solving
Description
Examples
Our value
added
Strategy defining
Implementation and
Follow-up
•Listen and challenge the
client’s specific needs and
objectives
•Set up a custom-fitted action
plan for each client and each
particular situation
•Always back qualitative
impressions with quantitative
data
•Switch needs into levers,
jointly with our client’s people
•Define Key Performance
Indicators to identify gaps and
monitor performance
•Define the problem as an
actionable issue
•Agree on a shared timeline
including milestones and
intermediary deliverables
•Ensure that the agreed action
plan is accurately delivered, on
time
•Fight against decline in market
share
•Redefine offer (sports,
schedule, type of bets, etc.)
•Enter a new, promising market
•List and schedule all
regulatory and financial
requirements
•Number of bets placed
(breakdown by sport, live betting
vs. pre-match betting, etc.)
•Experience in problem-solving
learnt from top consulting firms
•Extensive knowledge of the
Sports Betting Industry
•Significant hands-on
experience of Sports Betting
•Strong reactivity and
adaptability to new situations
January 2011
Quentin Toulemonde
OSBI Consulting
•Communicate action plan
throughout the relevant entities
•Tracking of application file and
continuous dialog with internal
and external stakeholders
•Analytical skills and tools
allowing precise performance
tracking
16
We put great emphasis on Web 2.0 to trigger
off exchanges within the community
LinkedIn: Quentin Toulemonde
Blog: http://osportsbetting.wordpress.com
Book: Les Paris Sportifs en Ligne (French, May 2011)
Email: quentin.toulemonde@gmail.com
January 2011
Quentin Toulemonde
OSBI Consulting
17
Our blog offers new perspectives on hot issues

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The “Online Sports Betting Industry Blog” deals with topical issues linked to the Sports Betting
Industry under various angles.

Strategy, such as New Markets Penetration, New Product, Business Development.

Corporate, such as Mergers & Acquisitions, Partnerships, Financial Results.

Legal, such as Compliance, Competition.

Events, such as Conferences, Seminars.

Academic, such as Applied Microeconomics Theory, Game Theory.

Extraprofessional, such as Movies, Books.
The blog is fuelled with original, fresh content once every two to three days.

Each post aims at providing a concise (c. 400 words) and soundly argued point of view on a
precise subject.
Its main purpose is to generate debates by using the Web 2.0 technology.

Each reader can freely leave comments.

One-click integration into social networks (Facebook, LinkedIn, Twitter, etc.) is made possible.
Examples of issue already tackled:

Is there a gap for a “Sports Betting Facebook”?

Are Danish and French legislation comparable?

Should tipsters be given a bonus?

Corruption and insider trading in top level sport: where is the weak link?

To which extent does the movie Even Money illustrate pathological gambling?
January 2011
Quentin Toulemonde
OSBI Consulting
18
“Les paris sportifs en ligne” is a comprehensive,
multi-purpose guide for all kinds of punters

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This 380-page book, written in French, is aimed at all kinds of readers, from beginners to experts.

For novices, it can be read as a preliminary guide to understand odds compiling, bookmakers’
payment, bet placing, etc.

It helps occasional players in winning their bets by sorting out all types of material and advice they
can find on the Internet. Losing and winning methods are therefore clearly divided.

Experts may be interested in further looking at the underlying Mathematics, which include basic
probabilities and weighted averages.
The book broadens the reader’s perspective as well, by dealing with applied psychology as well as well
as legal issues.
Some milestones put rhythm into the reading.

The essential concepts and their definitions are clearly highlighted.

The most technical paragraphs, which may put off some readers, are isolated.

A “humoristic” multiple-choice questionnaire which allows the reader to chill out while
checking his knowledge.

A series of increasingly difficult exercises will allow each type of reader to improve and use its
knowledge on paper before putting them in practice in front of his computer.
It will be published in May 2011 by Amphora, a well-known French player in the Sports Publishing
market.

It will be made available at major physical (FNAC, Virgin, etc.) and online (Amazon) retail
networks.

The first run may reach an expected 5,000 copies.
January 2011
Quentin Toulemonde
OSBI Consulting
19
Thanks for your attention
Quentin Toulemonde
OSBI Consulting
Email: quentin.toulemonde@gmail.com
Blog: http://osportsbetting.wordpress.com
LinkedIn: http://fr.linkedin.com/in/quentintoulemonde
Cell phone: 00 33 (0) 6 24 34 34 44
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