Lottomatica currently leads the Italian online gambling market, but a recent report from Jefferies, a New York investment bank, indicates that its dominance is increasingly under threat from Flutter’s Sisal and SNAI brands. In the first quarter of this year, Lottomatica captured 30% of the market’s gross gaming revenue (GGR), while Flutter is trailing closely behind at 27%.
SNAI's performance is crucial in this competitive landscape. Following Flutter's acquisition of Sisal in August 2022, Sisal’s online GGR share jumped from approximately 10% to 13%, representing gains in both online sports betting and iGaming. In contrast, SNAI has seen a decline, with Jefferies estimating it has lost about four percentage points of online market share over recent years. If Flutter manages to recover this lost ground for SNAI, it could surpass Lottomatica’s position.
Jefferies highlighted Flutter's tendency to dominate in various markets, suggesting that the evolution of market share in Italy will be closely monitored in the upcoming quarters.
Italy represents a significant opportunity for growth, with Jefferies forecasting the gambling GGR will reach €22.6 billion by 2025, making it the largest market in Europe. Currently, online gambling penetration in Italy is at 28%, substantially lower than the UK’s 61%. Jefferies anticipates a compound annual growth rate of 9% for Italian online GGR from 2025 to 2030.
Moreover, advertising regulations in Italy favor established omnichannel operators with strong retail networks. The recent new concession regime has also streamlined online licensing, reducing the number of licenses from 81 to 52, which could expedite the market's consolidation toward larger operators.
In its recent Q2 earnings call, Flutter unveiled signs that its SNAI strategy might be taking hold. CEO Peter Jackson reported “exceptional levels of growth” in Italy for both sportsbook and iGaming, with Flutter's revenue growth outpacing the overall market despite a previous migration to its platform that led to temporary share loss. His comments indicated a swift recovery post-migration in June, highlighting a 30% increase in active monthly players and strong engagement during the World Cup.
Jefferies’ data through June showed SNAI's online sports betting (OSB) and iGaming shares still declining, with no material signs of a turnaround yet. However, the completion of the platform migration could signal the beginning of a shift in momentum for SNAI.
Historical comparisons to Sisal add weight to Flutter’s argument, as Sisal has outperformed Lottomatica in online business in seven of the last eight quarters since being acquired by Flutter. Moreover, SNAI's retail presence adds a competitive edge, increasing Flutter's share of online GGR from around 20% to 27%, while its retail sports betting share rose from 12% to 32%. Having a stronger retail foothold can be significant in acquiring customers in the Italian market.
Despite Flutter's rising momentum, Lottomatica continues to perform well. CEO Guglielmo Angelozzi reported a 12% growth in the Italian online market for Q2, with an acceleration to 19% in June. Lottomatica managed to gain market share across sports, iGaming, and overall online sectors during this period.
In the second quarter, Lottomatica saw an online revenue increase of 24%, with a normalized increase of 25%, driving adjusted EBITDA margins to 58% during the first half of the year. This positions Lottomatica well for the ongoing competition.
Lottomatica also recorded its own successful migration story, with Planetwin365’s sports share exceeding previous levels, gaining 0.2 percentage points and recovering around half of its lost ground in iGaming.
Lottomatica emphasized its approach to the escalating competition, maintaining that it will prioritize sustainable growth over merely chasing market share. Angelozzi stated, “The point is not only acquiring market share, but acquiring quality market share at a sustainable cost,” while CFO Laurence Van Lancker stressed the need for “profitable growth” and promotional discipline.
The competitive landscape between Flutter and Lottomatica is set to be defined by this dynamic. Lottomatica aims to defend its leading position while maintaining high profitability, and Flutter is focused on utilizing its global resources to enhance SNAI’s performance. While Flutter shows promising early indicators, a single month of significant player growth does not confirm a reversal of SNAI's long-term market share decline. If it has turned the tide, however, the ramifications for Lottomatica could be considerable, as Jefferies suggests Flutter's strategy may not need to innovate but instead replicate its success with SNAI that it achieved with Sisal.
