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Start Betting Business in Russia Now

Speech at The First Betting Conference, which took place on the 26th & 27th March 2007 in Vienna, Austria.

The Russian Betting Market

Some information about standards of living in Russia:
The population is 145 (one hundred and forty five) million.
The cost of one square meter of apartment in Moscow is more than 3500 euros, which means that a two bedroom apartment in Moscow starts at 350 000 euros.
A cup of coffee costs 2.5 euros.
A ticket to the cinema is 5 euros.
A ticket to a concert or a football match starts at 20 euros.
The average salary in Russia is 400 euros in a month. Salaries are much higher in large cities, in Moscow, for example, the average salary is 800 euros.

Statistics suggest that Russian gaming brought in more than 1 billion dollars to betting companies in 2006. The lion’s share went to local Russian operators.

Currently there are about 400 betting companies operating in Russia. New legislation, which came into force on January 1st 2007, raised the ante necessary for operating a gaming business in Russia. Only the larger Russian companies can meet these new requirements. In fact only 8 local companies will be able to work legally after 01.07.2007.

We believe that this situation represents a great opportunity for foreign companies that are looking for new markets. The Russian market has a lot of potential and as you’ll see in my report that betting companies are taxed at the level of offshore jurisdictions and can market their services in a wide range of ways.

Payment Systems

All Russian betting companies accept bets and deposits via shops and via the Internet. However, only a minority of players bet and deposit via the Internet. This is probably because many players don’t feel comfortable using Internet services and also because not everyone has access to the Internet.

The figures look like this. Over 70 % of players only bet in specialized shops. 30 % of players bet both in shops and via the Internet. The figures on deposits to gaming accounts are even more graphic. 95 % of deposits were made using betting shops and only 5 % were made in any other ways, including electronic payment systems, bank and postal transfers and bank cards.

The data above suggests that a successful gaming business in Russia needs to have mini offices in large cities which can accept deposits from and make payments to players. Growing confidence in your brand, in electronic payment systems and in Internet services will lead players to increase their use of electronic payment systems and placing bets via the Internet.

WebMoney is the most popular payment system among gaming portals. Popularity of this system with gaming portals is easy to explain. It is one of few payment systems that accept payments to gaming resources. Two more payment systems are currently also very popular among Russian players: Money.Yandex, OSMP.

Your players will be able to use these systems to deposit and withdraw funds if you can convince these payment systems that you have all necessary licenses and operate a legal business in Russia. If you follow our plan to start a gaming business in Russia you will be able to connect these payment systems to your gaming business.

There are 10 more electronic payment systems that would be very convenient to use for payments but they do not work with online gaming resources.

WebMoney provides a rating of internet resources that use its payment system. Please take a look at the rating of sums that were deposited in the online gambling section. The rating is given according to the sum of money transferred in the previous 30 days.

To summarize, I want to emphasize the importance of opening shops in Russia once again. There are two principal reasons to do so:

Players deposit cash 20 times more often through shops than through all other payment systems.
To receive a gambling license in Russia you are legally required to provide the two most popular payment systems.

To work effectively in the territory of Russia it is enough to open just one shop in each major Russian city. There are only 20 cities in Russia with a population of more than 1 million.

Legislation, License, Taxes

The new Federal law “State regulation of the organization and conduct of gambling” (First of January, 2007) regulated the activities of betting companies. These regulations come into effect on July 1st 2007.

The basic restrictions for sport betting companies are as follows:

It is forbidden to accept online bets within the territory of Russia. This means that if you accept bets made via the Internet you have to do it from abroad and not on behalf of a Russian legal entity.
To enter the gaming market you need an obligatory level of net assets at the moment of applying for the license.

It is necessary to receive a sport betting license to work in the Russian market License requirements

Need to be a Russian commercial legal entity, e.g. a Ltd company.
The company’s net assets (money on account) at the moment of submission and consideration of the application for the license should be 100 million rubles (about 3 million euro).
The cost of license is 100 Euro.
The license is given for five years.
Licensing starts from June, 1, 2007.

Betting tax is paid on monthly basis and is a fixed sum of 3700 euros a month. This sum does not depend on income or turnover. You will also need to pay taxes on employee salaries. This will be approximately 400 euros per employee.

So you can see that although the requirements to receive the license are relatively high, the taxation on betting activity is still pretty attractive.

So you need to set up a Russian legal entity and to receive betting license to conduct legal betting business in Russia. In order to get accepted as a licensed betting company you are required to have at least one land-based shop where you can accept bets.

Betting Advertising in Russia

The first and most important requirement for making advertising for betting in the mass-media is Russian betting license.

Once you have a license there are a number of advertising solutions:

Advertise in the following places (according to Russian advertising law):

In promotional newspapers and magazines.
On free-of-charge TV and radio channels from 10 p.m. till 7 a.m. local time.
On subscription TV channels (Pay TV). We do not have many subscription channels in Russia, but the majority of sports channels with live broadcasts are only accessible in Russia on subscription. These channels are also shown in sports bars and the visitors of these bars are an additional audience.

It is also possible to publish your own newspaper or magazine advertising your betting company and probably advertising other companies (not competitors). It is possible to distribute such newspaper near stadiums before matches.
The outdoor advertising of gambling services is not legal, but indoor advertising is legal. This means that you can advertise in places where bets are accepted - in your shops.
Please note that formally the Internet is not included in the list of mass-media where advertising of gaming is legal. The big portals that are registered in Russia will not take direct advertisement of gambling services. However, there are a lot of very popular Russian-speaking sites that are formally governed by non Russian companies.

It is possible to sponsor sports events for marketing purposes, but the main type of advertisement during sports matches is on advertising boards and it is illegal to advertise gaming on advertising boards. If you want to become a sponsor of a sport event or a team you’ll have to contact the organizers of event or the team manager directly. There is no standard practice of the sponsorship of sports events in Russia at this moment.

If company does not have Russian gambling license you can only advertise on a number of online sites. This means that a Russian betting license is required for successful and vigorous marketing strategy.

The plan for a new company to start betting business in Russia

Register a Russian company with a fixed capital exceeding the size of the required net assets. The company should be registered with the same name as your international brand.
Open an account in a Russian bank. Your deposit into this account should exceed the required net assets. The application for a betting license is handed to proper authorities. Once the license has been obtained all extra money can be transferred back to the parent company.
Open a number of betting offices in the larger Russian cities. There are about 20 cities in Russia where the population is over one million people. The brand of your offline company should be exactly the same as the brand of your online company. In this way, any advertising of your land-based company will in reality advertise your online resource. For example 5 % of your focus will be on the land-based part of the project and 95 % on the online part of the project.

Let’s say MyBetBrand.com, an international gaming concern has decided to expand onto the Russian market. First we register a Russian company, MyBetBrand.

Then we develop a site in Russian, preferably in the domain .ru (MyBetBrand.ru) or .com (MyBetBrand.com). The site has information about the Russian company with an address, the license and the addresses of places where players can make bets. The main page of the site has a link to a section where players can placer bets through the Internet. At the beginning of this section we point out that the Internet betting service is provided by the MyBetBrand company which is registered and licensed in Malta.

It is possible to rent office space in net shops in Russia which have offices in the major Russian cities. This office space can be uses for accepting bets and deposits.

Final Provisions

The Russian gaming market has great potential. A company enters this market after obtaining a betting license and opening land-based shops. It is not hard to get this license.

Legal offline activity is a necessity as it allows the company to:

Accept cash from players
Establish Betting shops/offices in the territory of the Russian Federation. These premises will make an important contribution to creating consumer confidence and significantly broaden the company’s marketing options.
Advertise using the company name.

The main problem that foreign company may face in Russia is bureaucratic delays in the registration of the company and in getting the license. We have a great deal of experience in working with state structures, banks, payment systems and mass media.

We invite you to do business in Russia. We welcome any request for help or advice. We’ll do everything we can to help you.

For more information please contact our Sales Department.

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