Amusement and Gaming Machine Industry 2010

– Sustained Growth during Period of Economic Recovery
– New Ways to Prevent Pathological Gambling Behaviour
– The Interstate Gambling Treaty is a Debacle
– Evaluation of Gaming Regulation shows ‘The Policy has Proved to be Successful’.

Düsseldorf/Berlin. “The German amusement and gaming machine industry has withstood the poor economic climate in 2009 comparatively well. Growth in 2010 is above the gross domestic product. Consolidation is to be expected in 2011. The amendment to the gaming regulation (SpielV) on 1st January 2006 has raised competitiveness in the amusement and gaming machine industry – as desired from the economic minister conference in May 2000. Furthermore, the interests of player protection were optimally taken into account”, is the joint statement of the Chairmen Paul Gauselmann and Uwe Christiansen of the German Amusement and Vending Machine Industry Association (Verband der Deutschen Automatenindustrie e.V.).

Sustained Growth during Period of Economic Recovery

The amusement and vending machine industry attained an aggregated turnover of 5.14 billion euros in all three divisions in 2010. The increase compared to 2009 of 5.8% was distinctly weaker than 2009 compared with 2008 at 8.0%. The manufacturer turnover yet again disproportionally increased by 7.5%. The main reason for this was the industry commitment to convert the amusement with prize machines (AWP’s) to the Technical Directive 4.1 of the Physikalisch-Technischen Bundesanstalt (PTB) by 1st January 2011. Here potential wins convertible to a cash equivalent of over 1,000 euros on AWP’s may no longer be displayed. Furthermore, AWP’s must be completely inoperable for five minutes after playing one hour on them. The conversion or exchange of machines is almost fully complete.

As the number of 12 AWP’s per concession has been practically completely taken advantage upon, further growth can only be achieved in the field of new arcades – apart from replacement investments.

Renting and leasing have dramatically increased in importance in the field of machine operation. Complete hardware and software systems are being delivered more and more via rent or lease contracts or also only the machine hardware is being sold and the corresponding software being rented. In connection with the changed marketing concepts, sales have become increasingly less lucrative for independent distributors in the recent past as no or no particularly attractive commissions can be offered by the industry and that despite significant handling costs. Negotiating financial solutions as well as offering on-site repairs and services are becoming increasingly important to distributors. However, this does not suffice in all cases. Occasionally distribution capacities also have to be adjusted.

Since the amended SpielV came into force on 1st January 2006, the number of AWP’s in operation has strongly increased from the trough of 180,000 units in 2005 to 235,750 units by the end of 2010. The 1995 level has therewith still not been reached. When considering the growth of the past five years, one needs to take into account in addition that about 80,000 further so-called Fun Games in operation that paid out in tokens had to be completely removed by 1st January 2006 as the incentive for illegal use was too big.

The amusement and gaming machine industry secures over 70,000 modern jobs in Germany – 75% of these for female employees. A further approx. 35,000 employees can be counted to this that work indirectly in the industry. There are two distinct occupations since 2008 that relate to the amusement and gaming machine industry. The companies involved in the amusement and gaming machine industry pay more than 1.4 billion euros in taxes and social contributions – of which over 300 million euros in amusement tax (Vergnügungssteuer).

Strong Emphasis on Prevention and Player Protection

The commercial gaming right has been dominated at all times by aspects of player protection. Forbidding alcohol in arcades back in 1985 is an example of this: “Heads should to be clear when gambling” – state the VDAI Chairmen.

The 5th ordinance to amend the SpielV that came into power on 1st January 2006 underlines the strong emphasis on prevention and player protection in numerous ways:

• 80,000 Fun Games had to be removed without any transition time.
• Promotional jackpot systems were forbidden.
• The minimum play time of 12 seconds from the ‘old’ SpielV was reduced to 5 seconds in order to have a sustainable effect against several AWP’s being played at the same time.
• The regulation of placing AWP’s in only groups of two linked with a minimum distance as well as installing screens between the machine groups all serve the same goal.
• The possible shorter playing time along with the regulations on operating AWP’s according to the ‘new’ SpielV have brought about sustainable results: Only 1.4 AWP’s are on average played at one time by one player from the conditions set by the ‘new’ SpielV from 1st January 2006. This average number was 2.6 AWP’s under the ‘old’ regulation that was in place until 31st December 2005.
• Player expenditure per hour was measured at an average of 22.50 euros per hour under the ‘old’ SpielV. According to the ‘new’ SpielV, the 2010 results (measured by Fraunhofer Institute) in this field are only 10.89 euros per hour of play. As simultaneous AWP play by players has sunk from 2.6 to 1.4, then the average player expenditure has in reality fallen from approx. 60 euros to about 15 euros.
• More interesting monitor-based game sequences fascinate the younger generation, but in particular also female players: approx. 20% of arcade visitors were ladies in 2010 – in 2007 this number was merely 10.34%. The number of ladies who actively play on the AWP’s is indeed even greater – in 2010 this number was 21.23%. In 2007 it was merely 8.94%. In the latest and modern gaming centres the number is often above 30%.

More than 99% of All Adults Play Problem-free The number of pathological players in Germany according to consistent results from studies by the Federal Centre for Health Education (BZgA) on behalf of the German Lotto and Toto Block and the Institute for Therapy Research (IFT) on behalf of the Federal Health Ministry amounts to approx. 104,000 people. That refers to all types of gambling. A study carried out by the University of Bremen comes to a higher number of approx. 290,000 people. Based on this information, the number of pathological players in Germany amounts to between 0.2% and 0.56% which places Germany at the lower end of the spectrum when comparing the figures for the adult population in corresponding European countries. The range in Europe lies between 0.2% and 2.0%. The résumé is that player protection in Germany is working without any problems. More than 99% of all adults play problem-free!

Approx. 31,000 (= approx. 30%) of the total 104,000 pathological people are assigned to commercial AWP’s. This number of approx. 30% pathological players on AWP’s is disproportionate to the 40% share of gaming turnover that is allotted to the amusement and gaming machine industry.

The assertion that 70 to 80% of all problem players come from commercial AWP’s is wrong: What is correct: 72.8% of the 7,300 players (!) that looked for help in Germany throughout 2008 at the 934 advice centres state to have played predominantly on AWP’s. That amounts to 5,300 people from an annual figure of over 10 million players on AWP’s. The asserted 70 to 80% refer to those players looking for advice. Researchers explain the discrepancy between the percentage of AWP players that have been diagnosed with a ‘pathological player behaviour’ (about 30% of the 104,000 in society) and those utilising addiction treatment facilities (72.8%) in that players of other gambling games (1) search for other treatment options, (2) subjectively asses their treatment requirement to be less or (3) that the differential diagnosis according to the type of gambling game as cause in the facilities is not precisely ascertained. Particular attention is to be paid to the fact that as the info telephone number 01801-372700 has been included on the AWP‘s for over 20 years, that the amusement and gaming machine industry plays an active role in supporting problem players.

Could it be that protagonists of the theory of a growth in all types of addiction in society are also looking to public subsidy funding? The bigger a perceived problem is, the more research and treatment requirement can be justified and yet more money is set aside for this! The amount of project activities in the field of the Interstate Gambling Treaty (GlüStV) carried out on behalf of the 16 German states in 2009 was approx. 16 million euros. Is there really a growth in the types of addiction in society? Alongside the classical, physical addictions, incomparable psychological ‘dependencies’ are being brought into the debate, such as workaholism, shopping addiction, TV addiction, collecting addiction, sex addiction or internet addiction. Avarice, craving for recognition and jealously are not left unscathed either. According to press reports, approx. 90% of the entire global population is considered to be ‘addicted’ in one form or another.

New Ways to Prevent Pathological Gambing Behaviour

Non-removable pictograms with warning notices have been printed on every single front screen of more than 200,000 AWP’s in operation since 1990:

(1) ‘gambling for under 18 year-olds is forbidden’,

(2) ‘excessive gambling is no solution to personal problems’ as well as

(3) the info telephone number 01801-372700.

Advisors of the Federal Centre for Health Education (BZgA) offer advice and help to players with problems. Companies active in the state gambling monopoly were forced to adopt similar measures only due to the GlüStV from 1st January 2008 onwards. The amusement and gaming machine industry is thus a role model and pioneer!

“The commercial amusement and gaming machine industry stands by its social and societal responsibility. Prevention and player protection may not become empty words”, state the VDAI Chairmen. Documenting and underlining this pretence, an independent and competent advisory council was asked in early 2010 to compile a social concept for commercial gaming in arcades and bars / restaurants. The measures focused on player and youth protection as a whole and in their complexity are explained in this concept.

The social concept contains the development of low-threshold help and advice offers. New methods are being adopted: The Caritas Association for the Archdiocese of Berlin will be training arcade employees throughout Germany from 1st January 2011 onwards. The goal is to recognise pathological or problematic gambling behaviour early on and mediate affected persons to regional help facilities. Contrary to the casinos – excessive players will not be barred. ‘A helping hand is reached out and expansive, qualified help is offered’ to them both literally and in true life. The VDAI Chairmen particularly stress the alcohol ban in arcades that has been in existence ever since 1985.

The Interstate Gambling Treaty is a Debacle!

The GlüStV that came to power on 1st January 2008 has failed in its objectives:

(1) The monopoly providers cannot offer a complete legal gaming offer that corresponds to demand,

(2) the illegal market is booming (especially in the internet),

(3) tax revenue is being lost and

(4) local districts and states stand to be confronted by a barrage of lawsuits with unforeseeable claims for compensation.

Notwithstanding this, powerful forces in the states wish to maintain the monopoly and even expand it. It is difficult to believe that state-run gaming can better counteract against extreme behaviour than privately-run gaming! This is particularly so as the state (1) sets the rules, (2) controls them, (3) is the gaming provider at the same time and collects the money and (4) distributes the money. “Are there not conflicts of interest here?”, ask the VDAI Chairmen.

Internet is available worldwide around the clock in constitutional, open economies and/or legal systems. This means that efforts to monopolise the gambling market are completely useless. The attempt to make the state gaming monopoly tighter, more stringent and more comprehensive is destined to fail from the start. The result would be that turnover of the monopoly providers would fall further and market developments in the illegal and lawful grey zone would receive a boost. What is required much more is a legal framework that corresponds to market developments, technical possibilities and real life. Maintaining the lottery monopoly – based upon sustainable arguments – and liberalising the market for sports betting, similar as planned in Schleswig-Holstein – can at last bring about legal security and tranquility in the market.

The amended SpielV that came into force on 1st January 2006 has proven itself in industry perspective. “Only critics find a hair in the soup, one notes however by whom they are paid”, comment the VDAI Chairmen. The current evaluation report by Federal Ministry of Economics and Technology (BMWi) sets a good basis for further discussions. (1) Suggestions have to be tested on their necessity, (2) stipulated measures must be valued in a socially responsible way and (3) its feasibility must be questioned on the basis of technical, legal and economic aspects. “Further improving prevention of pathological gambling behaviour as well as promoting player and youth protection are goals that the coin-op machine industry feels strongly bound by”, state the VDAI Chairmen.