Lottomatica continues to hold its position as the leading player in the Italian online gaming market, but a recent analysis by New York's Jefferies investment bank indicates that this dominance is increasingly under threat from Flutter's combined Sisal and SNAI brands. According to Jefferies, in the first quarter, Lottomatica captured 30% of the Italian online gross gaming revenue (GGR), while Flutter closely trails with 27%.
SNAI's performance as part of Flutter could prove pivotal. The bank points out that following Flutter's acquisition of Sisal in August 2022, the latter's online GGR share rose from approximately 10% to 13%, representing a gain of about three percentage points across both online sports betting and iGaming. In contrast, SNAI has seen its online share decline, estimated to be down by roughly four percentage points in recent years. Should Flutter manage to regain that lost territory, it could potentially surpass Lottomatica in market share.
Jefferies highlighted that "Flutter has a history of gaining leading market share in almost all the territories it targets," signaling that the ongoing evolution of market share in Italy will be a critical point of observation in the upcoming quarters.
The significance of the Italian market is underscored by its vast scale and a lengthy online growth trajectory. Jefferies projects that gambling GGR in Italy will hit €22.6 billion by 2025, establishing it as the largest market in Europe, while online penetration remains relatively low at 28%, compared to 61% in the UK. The bank anticipates Italian online GGR to grow at a compound annual growth rate (CAGR) of 9% from 2025 to 2030.
Additionally, Italy's advertising restrictions appear to favor prominent omnichannel operators with robust brands and retail establishments. The recent concession regime has also cut the number of online licenses from 81 to 52, possibly expediting the trend toward larger operators taking the lead.
In the company's recent earnings call for the second quarter, Flutter offered preliminary indications that its strategy for SNAI might be gaining momentum. CEO Peter Jackson reported that Italy continues to show "exceptional levels of growth" in both sportsbook and iGaming, with Flutter's revenue outpacing overall market growth.
This positive performance came despite some challenges, including the migration of SNAI to Flutter’s platform in April, which led to a temporarily diminished market share. Jackson noted, however, that recovery has been swift, stating, "Performance recovered strongly in June as customers embraced a significantly expanded product offering, with AMPs increasing 30% and significant parlay penetration during the World Cup."
The timing of these developments is crucial. Although Jefferies' market data through June indicated a continued decline in SNAI's online sports betting (OSB) and iGaming shares, it acknowledged that the successful completion of the platform migration could be a turning point. Flutter maintains that this turnaround has already begun.
The comparison with Sisal supports Flutter's argument. Since being acquired by Flutter, Sisal has surpassed Lottomatica in online business growth in seven of the past eight quarters and has outperformed in iGaming growth every single time. SNAI brings additional value to Flutter, boasting a larger retail scale. Jefferies estimates that acquiring SNAI increased Flutter's online GGR share from approximately 20% to 27% and bolstered its retail sports betting share from 12% to 32%. Given the competitive advantage a retail presence provides in acquiring customers, this combination is notable.
Still, Lottomatica shows no signs of complacency. CEO Guglielmo Angelozzi reported to analysts that the Italian online market expanded by 12% in the second quarter, accelerating to 19% in June, while Lottomatica maintained its share across sports, iGaming, and overall online segments. "Through a mix of organic growth and mergers and acquisitions, we’ve transformed from a marginal operator to the largest in the market," he stated.
In the second quarter, Lottomatica's online revenue surged by 24%, with a normalized increase of 25%, aligning with an impressive online adjusted EBITDA margin of 58% in the first half of the year. The company therefore enters the competitive landscape from a position of considerable strength.
It also has its own success to report following migration efforts. Planetwin365's sports share has bounced back above pre-migration levels, with CFO Laurence Van Lancker noting a gain of 0.2 percentage points and iGaming recovering much of its lost ground.
This experience is shaping Lottomatica's strategy amid increasing competition. Lottomatica has emphasized it will not chase market share at any expense. "The goal isn't just to acquire market share, but to achieve quality market share sustainably," Angelozzi commented. Van Lancker echoed this sentiment, underscoring the importance of "profitable growth" and maintaining promotional discipline.
This dynamic sets the stage for the upcoming contest. Lottomatica is working to defend its leadership while keeping online profitability high, whereas Flutter is utilizing its global assets to enhance two of Italy’s strongest brands, with SNAI representing the clearest opportunity for growth. While Flutter's early indicators are promising, it remains to be seen if a single month of 30% growth will suffice to prove that SNAI's long-term decline has been overturned. If it has, the implications for Lottomatica could be significant.
