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French Twist

One of the world's largest gaming markets faces new challenges

France is one of the oldest and largest casino markets in the world, with over 190 casinos generating .95 billion last year in aggregate turnover by entertaining millions of visitors. However, all is not well, as a continuing economic slowdown has combined with political uncertainty, sluggish regulations and the feared effects of a new smoking ban to see many Gallic operators fearing for their futures.

Many forms of gambling have their origins in France, including the games of faro and blackjack along with the suit system for playing cards that is still used around the world today. Roulette, French for “small wheel,” is another example. It was invented by mathematician Blaise Pascal in the 17th century as he attempted to unlock the secrets of perpetual motion.
But it was not until 1907 that casinos were permitted in France, after Parliament passed an exemption to the existing law. Before that, gambling had been illegal. However, following considerable lobbying from the nation’s resort areas, casinos offering only certain table games such as baccarat and chemin de fer were allowed in spa towns, seaside resorts and mountain retreats to increase the number of winter visitors.
This move worked. Tourism increased, and consequently, France would lead the world in the casino sector for many years. The market eventually grew to include over 150 casinos before, beginning in the 1960s, saddled with some of the highest taxes in Europe and a shrinking market of players, it began to sink into what appeared to be terminal decline.
This period also saw the rise of state-run forms of gambling in France such as the lottery and horse racing, along with new trends in public demand as players searched for simpler forms of gambling where large prizes could be won off small stakes. The configuration of French casinos at the time no longer met this demand and, as a result, the number of casinos had shrunk by 1985 to 135.
After this decline, optimism returned to the French casino industry when slot machines were made legal in 1987 following years of lobbying by casino operators. Casinos became profitable again as the gross proceeds generated by slot machines continued to grow.
“Without slot machines there would be no casinos in France,” says David Marshall, the former head of international development at Groupe Lucien Barriere.
 “The French casino industry was on its last legs and very moribund up until 1987 when the French government, at the pleading of the casino operators, introduced slot machines. There were only table games in casinos before this, and the casinos were going quite steadily down the drain. They introduced slot machines, and it has been a success story ever since.
“Slot machines are today the most important thing in a French casino. Ninety-three percent of gaming revenues in French casinos come directly from slot machines, with only about 7 percent coming from table games. This is quite different from a British casino, where there may only be 20 slot machines in an entire property.”
 French law only permits this form of amusement in casinos, and there are currently over 21,400 slot machines in the nation, ranging from 50 in the smallest casino to 400 in the largest.
“If you want to play a slot machine in France, the only place that you can do that legally is in a casino,” says Marshall. “There are no slot machines in bars, cafés, pubs or other such areas like there may be in other nations. Of course, the owners of bars, cafés and pubs have been lobbying to have the law changed for many years, with casino operators lobbying equally hard the other way to keep the law where it is.”
 Another reason for the popularity of slots is the retained memory of how casinos operated regarding table games.
 “The French fondness for slot machines may have something to do with the fact that, up until very recently, to go into a table gaming area of a casino players had to fill in an identity card and pay a tax before they could even enter,” says Marshall.
“There were no slots mixed in with the table games; they were quite separate areas and were treated as such.”
 The sector was given another boost only a year later when, following the efforts of the mayor of Bordeaux, Jacques Chaban-Delmas, the law was again changed to permit cities with over 500,000 inhabitants to have casinos as long as they met certain cultural demands.
This opened the door for casinos in larger areas such as Dijon, Lille, Toulouse and Marseille, although the latter is still without a casino due to the objections of Mayor Jean-Claude Gaudin. There are now 103 locations in France which, should they decide, could have a casino.
In addition, the largest city in France, Paris, is also without a casino, as its sheer size makes the strict demands almost impossible to meet. A holdover from the 1907 legislation also makes it illegal to open a casino within 100 kilometres of the city, with one exemption—the resort town of D’Enghien Les Bains 14 kilometres to the north, where a venue is operated by Groupe Lucien Barriere.
These two moves invigorated the industry and saw it grow even larger than it had been in the 1960s, with 160 casinos by 1999 and 170 sites by 2001 pulling in $3.33 billion in turnover.
This prosperity did not go unnoticed, and middle-sized towns and cities began lobbying the French government for permission to have casinos of their own. Lens in the north of the country is just one example, and officials there want the law changed again so they can open a casino in conjunction with a new soccer stadium. Other examples include the towns of Narbonne, Carcassonne and Perigueux, but the process could take many years, if ever, to come to fruition, even though President Nicolas Sarkozy is thought to be sympathetic to the idea.
“This process may take some considerable time and all depends on who is in power,” Marshall says. “At the moment, the president and the government are fairly pro-casino and pro-gambling. However, the French Socialist Party and others on the left are certainly more anti-casino and anti-gambling.”
Casinos are considered a public service in France and, as such, are controlled by the Ministry of the Interior under the stewardship of current Minister Michele Alliot-Marie, with enforcement duties falling to the Gaming Police.
“There isn’t a ‘gaming board’ as such in France; there is the Gaming Police,” says Marshall. “Things here are very strictly controlled, and they can shut your casino down literally overnight if they don’t like the way you are operating or feel that you are violating the terms of your license.”
The Gaming Police also are in charge of deciding which new technologies and games can be played, as there is no independent testing laboratory such as America’s Gaming Laboratories International entrusted with this responsibility.
“Every type of change in France takes a lot of time, including many years of negotiations between the operators’ union and the Ministry of the Interior,” says Sylvie Leroy, editor of the French-language gaming publication Journal Des Casinos.
This process quite often takes years, much to the frustration of French operators who often see foreign competitors utilizing new developments almost as soon as they are released.
One such example is ticket-in ticket-out printers, which are still undergoing testing, although the Gaming Police recently approved bill acceptors for use in French casinos after extensive examinations.
“One game or one technology, such as TITO that is allowed in the United States, could take many years before it is legal in France,” says Leroy. “This is very frustrating for operators, as they can go to shows such as the International Casino Exhibition in London every year and see new technologies they would like to use but can’t, because it would take two, three, four, five and maybe even more years before that technology is passed as legal in France.”
Once all of the tests are carried out and passed through the numerous government departments, the technology is quite often obsolete. But, this does not seem to affect either the speed or efficiency of the Gaming Police.
“They tend to check very carefully and take a long time doing it because they do not want to make any mistakes,” Marshall says. “They make sure that everything is squeaky-clean, as they do not want to take any chances. If it takes seven years to get poker approved, then it’s going to take seven years. That’s just the way things are here.”
Early last year, Texas hold ‘em poker became the latest game to be approved by the Ministry of the Interior. However, despite its popularity around the world, it has a lot of ground to make up if it wants to catch up with the two most popular table games in France.
“Roulette is by far the most popular table game in casinos in France,” says Marshall. “They call it ‘American roulette,’ but it is the same game as is played in England—a French wheel and a single zero and a single-zero layout, whereas the roulette played in America has two zeros.
“Blackjack is the second-most popular table game, with the rest fairly far behind.”
 Today, there are 195 casinos in France, including seven in its overseas territories—“Territoires D’Outre Mer” such as New Caledonia and Polynesia in the Pacific Ocean—and overseas departments—“Departements D’Outre Mer” such as the Caribbean islands of Guadeloupe and Martinique and the Indian Ocean island of La Reunion. Some operators run only single sites, but over 100 casinos belong to groups of varying sizes, usually from two to eight locations. There are also the “big four”—Partouche Casinos & Divertissements with 47 sites; Groupe Lucien Barriere with 33; Casinos Moliflor Loisirs with 20; and Tranchant with 18.
“The French casino market is going through the same process now as the British market—namely, consolidation,” says Marshall. “In Britain, there are major companies that run most of the casinos, and it is the same in France.”
Most of these companies are French-owned and financed, although a few have received investment from non-French backers in the past.
“There is nothing to stop a non-French company from coming in and buying an operator, except that the government does tend to make it a little bit difficult,” Marshall says. “It is not encouraged, but there is nothing to stop it, and a few of the companies do have some foreign money behind them.”
Partouche is by far the largest operator in France with almost 50 percent of the market and, like other operators, offers a wide range of leisure activities in addition to gambling, including restaurants, discos, shows and, quite often, hotels.
Casinos in France offer a wide range of entertainment facilities to make themselves as attractive as possible to the local population. This is done not only because casinos want locals as customers, but also because it is the local administration that chooses who is to operate the casino.
“In France, it is the town that decides if it wants a casino or not,” says Marshall. “It is not the operator that decides. An operator cannot just go to a town that doesn’t have a casino and ask them to grant a license to site a casino. A town first decides that it wants a casino and then requests proposals from operators and chooses from the proposals. They actually choose the operator.”
After the initial upsurge that followed the changes in legislation that saw casinos posting average annual growth figures consistently over 10 percent, the market has begun to level off with most operators now happy if they break even at the end of the year.
“The growth has ‘platformed,’ with most casino groups today lucky if they grow by the rate of inflation plus 1 percent,” says Marshall. “There are now a lot of casinos in France, with most major areas in the country covered by a casino.”
Certainly, saturation is a factor for the reduced growth, but there are also other reasons, including the lingering economic effects of France’s transition to the European common currency, the euro, and the stagnation of the overall economy. There also is a ban on smoking in all public places due for the New Year that has many operators hurrying to find a solution.
However, the largest factor to blame, many say, for the slowdown in the French casino industry is the high rate of tax that must be paid to the government, including a 12 percent tax on any win over $2,194.
“Operators do not like the taxes as they feel that there are too many of them,” says Leroy. “They also feel that, every time the government needs money, they go to the casinos to raise it. This is one of the reasons that not a lot of foreign investors are involved in the French casino market.
“It is very hard to drive the company when there is not a clear road in front of you.”