Lottomatica currently leads the Italian online gaming market, but a report from New York-based investment bank Jefferies indicates that its dominance is increasingly under threat from Flutter's Sisal and SNAI brands. According to Jefferies’ analysis, Lottomatica commands 30% of the Italian online gross gaming revenue (GGR) as of the first quarter, with Flutter not far behind at 27%.
The performance of SNAI, now part of Flutter, is crucial. Since acquiring Sisal in August 2022, Flutter has increased its GGR share from around 10% to 13%, gaining about three percentage points across online sports betting and iGaming. In contrast, SNAI has seen a decline in its online share, losing approximately four percentage points in recent years. If Flutter can recapture that lost market share, it might surpass Lottomatica.
"Flutter has a proven record of achieving leading market share in nearly every targeted market," Jefferies remarked, predicting that the progression of market share in Italy will be a focal point in the upcoming quarters.
The importance of this competition is underscored by Italy's considerable market size and a lengthy growth potential for online gaming. Jefferies estimates that the GGR for gambling in Italy will reach €22.6 billion by 2025, making it the largest market in Europe, with online penetration remaining at 28%, compared to 61% in the UK. Furthermore, it projects that Italian online GGR will see a 9% compound annual growth rate (CAGR) from 2025 to 2030.
Italy’s advertising regulations favor businesses with a strong omnichannel presence and established brands. Additionally, the new concession framework has reduced the number of online licenses from 81 to 52, which could expedite consolidation among the largest operators.
During its Q2 earnings call, Flutter offered evidence that its strategy with SNAI might be gaining momentum. CEO Peter Jackson emphasized that Italy has been delivering “exceptional levels of growth” across both sports and iGaming, with Flutter's revenue growth outpacing the overall market.
Notably, this growth came despite some challenges during a transition period, as Flutter integrated SNAI onto its platform in April, leading to what Jackson called a "brief period of share loss." Nevertheless, there appears to be a strong recovery. Jackson noted that in June, performance rebounded significantly, with active monthly players increasing by 30% and a robust acceptance of parlay bets during the World Cup.
While Jefferies' data from June indicated ongoing declines in SNAI’s online sports betting and iGaming shares, it also identified the completion of the platform migration as a potential turning point. Flutter contends that this inflection has indeed begun.
A historical comparison with Sisal lends weight to this argument, with Jefferies stating that Sisal has outperformed Lottomatica's online operations in seven out of the past eight quarters since Flutter’s acquisition, consistently exceeding Lottomatica in iGaming growth over the same period. SNAI also introduces a significant advantage that Sisal lacked: a much larger retail operations scale. Jefferies estimates that the acquisition of SNAI increased Flutter’s share of online GGR from about 20% to 27% and boosted retail sports betting share from 12% to 32%. Given that a strong retail presence aids customer acquisition, this merger could prove advantageous.
However, Lottomatica is not idle. CEO Guglielmo Angelozzi reported that the Italian online market experienced a 12% growth in Q2, which accelerated to 19% in June. Lottomatica has continued to gain ground in sports, iGaming, and overall online operations.
Lottomatica's online revenue rose by 24% in Q2, and 25% on a normalized basis, leading to adjusted EBITDA margins of 58% in the first half of the year. This positions Lottomatica strongly in the competitive landscape.
The company also boasts its own successful migration. Planetwin365’s sports share is now higher than before its migration, with CFO Laurence Van Lancker reporting a gain of 0.2 percentage points, while iGaming has regained approximately half of its lost ground.
Lottomatica's strategy emphasizes that, while it aims to defend its market leadership, it will not compromise profitability for market share. "The goal is not just to acquire market share, but to secure quality market share sustainably," Angelozzi explained. Van Lancker echoed this sentiment, highlighting a focus on "profitable growth" and disciplined promotions.
The future competition seems set to revolve around Lottomatica's efforts to maintain its leading position while safeguarding high online profitability against Flutter’s strategies that utilize its global technological capabilities to enhance SNAI and Sisal. While Flutter's preliminary results show promise, one month of 30% player growth does not yet confirm that SNAI’s extended market share decline has been reversed. However, if it has turned around sufficiently, the emerging data could pose significant challenges for Lottomatica, as Jefferies suggests that Flutter might simply need to replicate its success with Sisal to achieve similar results with SNAI.
