Lottomatica holds its ground as the leader in Italy's online betting market, but analysts at New York-based investment bank Jefferies see that dominance at risk as Flutter's Sisal and SNAI brands gain traction. According to their recent analysis, Lottomatica commanded 30% of Italy's online gross gaming revenue (GGR) in the first quarter, with Flutter closely trailing at 27%.
The performance of SNAI, now under Flutter's ownership, could prove crucial. After acquiring Sisal in August 2022, Flutter ramped up its online GGR share from approximately 10% to 13%, securing about three percentage points through improvements in both online sports betting and iGaming. Conversely, SNAI has seen a decline, losing roughly four percentage points of its online share in recent years. If Flutter can recover that lost ground, it may tip the balance in its favor against Lottomatica.
"Flutter has a proven history of achieving the leading market share in nearly every territory it enters," Jefferies observed, indicating that the evolution of Italy’s market share will be a focal point in the upcoming quarters.
The stakes are high. Jefferies projects Italy’s gambling GGR to hit €22.6 billion by 2025, positioning it as Europe’s largest market. Despite this potential, online penetration remains limited at just 28%, compared to 61% in the UK. Jefferies predicts that Italian online GGR will grow at a 9% compound annual growth rate (CAGR) from 2025 to 2030.
Additionally, Italy’s advertising restrictions tend to favor established businesses with extensive brand recognition and retail operations. The recent concessions have also decreased the number of online licenses from 81 to 52, likely pushing the market toward larger operators.
During last week’s Flutter Q2 earnings call, indications emerged that Flutter's strategy for SNAI may be gaining ground. CEO Peter Jackson reported that Italy continues to show "exceptional levels of growth" in both sportsbook and iGaming, with Flutter’s performance surpassing that of the overall market. This growth occurred notwithstanding some challenges from transitioning SNAI onto its platform in April, which Jackson noted caused a "brief period of share loss."
However, recovery appears to have been swift. Jackson highlighted a strong performance rebound in June, with a 30% surge in average monthly players and notable parlay betting during the World Cup.
Jefferies' data, which includes statistics through June, still indicated declines in SNAI's online sports betting and iGaming shares, with no clear signs of a turnaround. Nevertheless, Jefferies spotted the completion of SNAI's migration as a possible catalyst for a shift in momentum.
Flutter contends that this recovery has already begun, leveraging the historical performance of Sisal as a benchmark. Under Flutter's management, Sisal has outperformed Lottomatica in online business in seven of the past eight quarters and has consistently surpassed Lottomatica in iGaming growth in each of the last eight quarters.
SNAI enhances Flutter's position by providing significantly more retail scale than Sisal alone. Jefferies estimates that acquiring SNAI increased Flutter’s share of online GGR from about 20% to 27% and boosted its retail sports betting share from 12% to 32%. In a marketplace where retail presence is vital for acquiring new customers, this combination represents a strong competitive advantage.
However, Flutter’s assumed path to market leadership is tempered by Lottomatica's ongoing achievements. CEO Guglielmo Angelozzi reported that the Italian online market expanded by 12% in the second quarter, accelerating to 19% in June, as Lottomatica continued to capture share across sports betting, iGaming, and online overall.
Lottomatica’s online revenue saw a 24% increase in Q2, and a normalized basis reflected a 25% uptick. With its online adjusted EBITDA margins reaching 58% in the first half of the year, Lottomatica remains in a robust position as it heads into what could be a fierce market competition.
Lottomatica has also demonstrated its capabilities in migrating platforms, as seen with its Planetwin365 brand, which has recovered above pre-migration levels. CFO Laurence Van Lancker noted a modest gain of 0.2 percentage points in sports betting, while iGaming has regained half of its previously lost ground.
This history shapes Lottomatica’s perspective on the rising competition. The company has emphasized that its priority is not just market share acquisition, but attaining quality market share at sustainable costs. “The point is not only acquiring market share but acquiring quality market share at a sustainable cost,” Angelozzi stated, aligning with Van Lancker's focus on "profitable growth" and maintaining promotional discipline.
This sets the stage for Lottomatica to defend its position while maintaining high online profitability as Flutter harnesses its global capabilities to optimize two of Italy’s strongest brands, with SNAI representing the most significant opportunity for growth. While Flutter's early indications are promising, a single month of 30% player growth does not yet confirm a definitive recovery in SNAI’s market share decline. Should such a recovery be substantiated, current data suggests Lottomatica could face significant challenges. Jefferies indicates that Flutter does not need to carve out a new success story in Italy; it merely needs to replicate its previous achievements with Sisal using the SNAI platform.
