Interactive Gambling Market Dynamics Simon Holliday H2 Gambling Capital Lottery Expo Las Vegas, 16 November 2010

Agenda Interactive Gambling Market Background The European Story Particular Reference to Lotteries Case Studies US Past and Present US Market Potential Gaming Lotteries Final Word on Mobile

Internet Gambling the Global Picture It’s 15 Years Old: $29bn Industry 2010 Over 2,600 Real Money Sites Operated by 660 Site Owners Largest Markets Include: US  Japan UK  Germany Italy  France Canada Global Internet Gambling Gross Win ($bn)

Internet Gambling; The Product Mix Sportsbetting Largest Betting Exchanges In Play (or Live Betting) Bingo and other Gaming is the Fastest Growing Slots/Other Side Games Important Poker is Hard Going (Esp for Non-US Facing Sites) Casino Strong Growth Live Dealer Slots Internet Gambling by Product 2010e

The European Regulatory Story Open Markets (With Lottery Monopolies) UK (Ireland) Ring Fenced Markets Italy France Land Based Licensees Only Czech Republic Estonia Monopolies Austria Finland Future Confirmed Markets Belgium Denmark Greece Poland Spain Future Possible Markets Germany Netherlands EC Green Paper

State Lottery Products on the Internet Approx. 35 Lotteries Offer Interactive Products Global 2010e – Interactive Gross Win $2.8bn 3.0% State Lottery Total European 2010e Gross Win is $2.3bn 80% State Lottery Total Excludes Non-Lottery Products European 2010e Total $3.0bn Inc. Sports-Poker-Casino Global State Lottery Core Games Gross Win ($bn)

The European Lottery Internet Story Following UIGEA Europe became the World’s Largest Market Lotteries Key Players on the Internet Core Lottery Games Sportsbetting Poker Other Casino/Bingo Strengthening their Hand in Regulated Markets Sazka Lottomatica SISAL La Francais de Jeux European State Lottery Interactive Gross Win ($bn)

European Lotteries and Internet Poker Monopoly Markets Sweden 2006 Svenska Spel Poker SEK305m 09 (-18%) Austria 2008 Win2Day Poker €6.5m 09 (+29%) (Also Casino Games) Competitive Markets Italy 2008 Lottomatica/SISAL France 2010 La Francais de Jeux Svenska Spel Interactive Gross Win (SEKm)

France: A Case Study FDJ Monopoly Lottery & Sports Interactive Sports/Horse Mkt Opened Up – June 10 Interactive Poker Added – June 10 FDJ Late to Market with Poker Onshore Interactive Gross Revenues €567m 10e €906m 11e €1.36bn 15e French Interactive Gambling Gross Win (€m)

Italy: A Case Study Open Interactive Markets Betting Early 07 Tournament Poker Sep 08 Bingo Dec 09 Cash Poker Mid-Jan 11 Casino (Ex Slots) Late Q1 11 September 2010 Market Shares Lottomatica 15.6% SISAL 6.3% Onshore Interactive Gross Revenues €910m 10 €1.93m 12e €2.12bn 15e Interactive Gambling Gross Win (€m) Interactive Gambling MKt Share Sep 10

The US Market Past and Present Offshore US Internet Gambling Market Peaked at $6bn UIGEA Significant Reduction Initially Today Approx. $5.2bn Continues to Grow Offshore Operators Act Without Penalty US Offshore Internet Gambling Gross Win ($bn)

The US Internet Gaming Potential Poker – The Most Likely? Casino/Bingo – Could Follow as Legislators/ Regulators became More Comfortable Sportsbetting – Only in States Where Legislation Pre-Dates Federal Ban? Year 3 All States All Gaming $16.6bn 12 Largest States Poker Only $3.4bn US Regulated Interactive Gaming Gross Win ($bn)

Why Interactive has to be the Future for Lotteries Convenience What the Consumer wants New Media - where you need to be to Capture the Attention of many Consumers (Esp the Younger ones) much of the time Opportunity to Engage with the Customer 24/7 Opportunity to Broaden Product Reach and Develop the Interest of Games Enable more Regular Play Not Just Computers/Internet – Mobile Devices will be Just as Important

US Interactive Lottery Market? Lottery Products Just as Likely as Poker? Greater Proportion of Instants Vs Draws Excludes EGMs (Casino/Bingo) Assumption 50% of Interactive Cannibalized From Land Based $8bn Sales 10 – (14%) $15bn Sales 15 – (>20%) US Lotteries Potential Interactive Sales ($bn)

Interactive Includes Mobile Windows Approx. 15% of Operating Systems Sold in 2011 Increasingly People are Accessing the Internet via Mobile Devices Google Android Apple OS4 In the UK Betting/Lottery seeing nearly 15% of Interactive from Mobile Japan Racing Association Majority of Interactive Revenues Mobile Since 08 Mobile Gambling Nearly $3bn Gross Win this Year And Set to Grow!

Thanks for Listening Any Questions? Simon Holliday H2 Gambling Capital Lottery Expo Las Vegas, 16 November 2010