Interactive GamblingMarket DynamicsSimon HollidayH2 Gambling Capital

Lottery ExpoLas Vegas, 16 November 2010

Agenda• Interactive Gambling Market Background

• The European Story• Particular Reference to Lotteries• Case Studies

• US Past and Present

• US Market Potential• Gaming• Lotteries

• Final Word on Mobile

Internet Gambling the Global Picture• It’s 15 Years Old: $29bn

Industry 2010

• Over 2,600 Real Money Sites Operated by 660 Site Owners

• Largest Markets Include:• US Japan• UK Germany• Italy France• Canada

Global Internet Gambling Gross Win ($bn)

Internet Gambling; The Product Mix• Sportsbetting Largest• Betting Exchanges• In Play (or Live Betting)

• Bingo and other Gaming is the Fastest Growing• Slots/Other Side Games

Important

• Poker is Hard Going• (Esp for Non-US Facing Sites)

• Casino Strong Growth• Live Dealer• Slots

Internet Gambling by Product 2010e

The European Regulatory Story

State Lottery Products on the Internet• Approx. 35 Lotteries Offer

Interactive Products

• Global 2010e – Interactive Gross Win $2.8bn• 3.0% State Lottery Total

• European 2010e• Gross Win is $2.3bn• 80% State Lottery Total• Excludes Non-Lottery

Products

• European 2010e Total• $3.0bn Inc. Sports-Poker-Casino

Global State Lottery Core Games Gross Win ($bn)

The European Lottery Internet Story• Following UIGEA Europe became

the World’s Largest Market

• Lotteries Key Players on the Internet• Core Lottery Games• Sportsbetting• Poker• Other Casino/Bingo

• Strengthening their Hand in Regulated Markets• Sazka• Lottomatica• SISAL• La Francais de Jeux

European State Lottery Interactive Gross Win ($bn)

European Lotteries and Internet Poker• Monopoly Markets• Sweden 2006

• Svenska Spel• Poker SEK305m 09 (-18%)

• Austria 2008• Win2Day• Poker €6.5m 09 (+29%)• (Also Casino Games)

• Competitive Markets• Italy 2008

• Lottomatica/SISAL

• France 2010• La Francais de Jeux

Svenska Spel Interactive Gross Win (SEKm)

France: A Case Study• FDJ Monopoly Lottery &

Sports

• Interactive Sports/Horse Mkt Opened Up – June 10

• Interactive Poker Added – June 10

• FDJ Late to Market with Poker

• Onshore Interactive Gross Revenues• €567m 10e• €906m 11e• €1.36bn 15e

French Interactive Gambling Gross Win (€m)

Italy: A Case Study• Open Interactive Markets• Betting Early 07• Tournament Poker Sep 08• Bingo Dec 09• Cash Poker Mid-Jan 11• Casino (Ex Slots) Late Q1 11

• September 2010 Market Shares• Lottomatica 15.6%• SISAL 6.3%

• Onshore Interactive Gross Revenues• €910m 10• €1.93m 12e• €2.12bn 15e

Interactive Gambling Gross Win (€m)

Interactive Gambling MKt Share Sep 10

The US Market Past and Present• Offshore US Internet

Gambling Market• Peaked at $6bn

• UIGEA• Significant Reduction

Initially

• Today Approx.• $5.2bn

• Continues to Grow Offshore Operators Act Without Penalty

US Offshore Internet Gambling Gross Win ($bn)

The US Internet Gaming Potential• Poker – The Most Likely?

• Casino/Bingo – Could Follow as Legislators/ Regulators became More Comfortable

• Sportsbetting – Only in States Where Legislation Pre-Dates Federal Ban?

• Year 3• All States All Gaming

$16.6bn• 12 Largest States Poker

Only $3.4bn

US Regulated Interactive Gaming Gross Win ($bn)

Why Interactive has to be the Future for Lotteries• Convenience• What the Consumer wants• New Media - where you need to be to Capture the Attention

of many Consumers (Esp the Younger ones) much of the time

• Opportunity to Engage with the Customer 24/7

• Opportunity to Broaden Product Reach and Develop the Interest of Games

• Enable more Regular Play

• Not Just Computers/Internet – Mobile Devices will be Just as Important

US Interactive Lottery Market?• Lottery Products• Just as Likely as Poker?

• Greater Proportion of Instants Vs Draws

• Excludes EGMs• (Casino/Bingo)

• Assumption 50% of Interactive Cannibalized From Land Based

• $8bn Sales 10 – (14%)• $15bn Sales 15 – (>20%)

US Lotteries Potential Interactive Sales ($bn)

Interactive Includes Mobile• Windows Approx. 15% of Operating Systems Sold in 2011

• Increasingly People are Accessing the Internet via Mobile Devices• Google Android• Apple OS4

• In the UK Betting/Lottery seeing nearly 15% of Interactive from Mobile

• Japan Racing Association Majority of Interactive Revenues Mobile Since 08

• Mobile Gambling Nearly $3bn Gross Win this Year• And Set to Grow!

Thanks for ListeningAny Questions?Simon HollidayH2 Gambling Capitalsimon.holliday@h2gc.com

Lottery ExpoLas Vegas, 16 November 2010