"Slightly more than a year after the publication of the 2005 financial results, the Amministrazione Autonoma dei Monopoli di Stato reported on its activities in 2006 during the annual meeting with the Institutions and its own staff, which took place on 12 March in the Auditorium of the Parco della Musica in Rome. Giorgio Tino opened the proceedings, highlighting two fundamental issues: firstly, the place of gaming in society and how to create it, setting operating objectives in line with the wishes of Government and Parliament, and more or less overcoming the apparent interests and the hypocrisies within the sector; secondly, the evolving background which is of more direct interest to the gaming sector, particularly in the light of the convergence of the different technologies and markets, even more so now that one can foresee that the barriers - some of them psychological - will disappear between the different forms of entertainment and recreation, all competing with each other. It is of course important to start from the results achieved in the gaming sector, also because, according to Giorgio Tino, “in any situation results always represent the main reason for our work and are a factual way of assessing the management of any organisation, whether public or private”. AAMS FINANCIAL RESULTS FOR THE YEAR 2006 The amount spent on gaming, in other words the true “sales” figure for gaming, has grown impressively during the last three years, rising from nearly 15.5 billion euro in 2003 to over 35 billion at the end of 2006. This growth translates also into an increase in tax receipts, climbing to 6.7 billion Euro in 2006 against 3.5 billion in 2003. Compared directly with the previous year, the amount spent on gaming in 2006 has increased by nearly 24%, against an increase in tax receipts of slightly over 9%. According to Giorgio Tino “this latter figure is particularly important, as it demonstrates that the increase in tax receipts has been achieved by widening the tax base on one hand, and on the other by reducing the tax rates, most of all to the benefit of the winnings made by the players, rising from 18 billion Euro in 2005 to over 23 billion in 2006. The underlying policy of increasing the so-called “payout” is certainly prompted also by the need to ensure that our public gaming system remains competitive vis-à-vis those in other countries. This is part of a well established trend, because in 2006 the tax burden was on average equal to 19.1%, against 22.6% in 2003. Through these measures it has been possible to create the necessary conditions to safeguard the consumer in a real way, enticing him away from the illusions and the dangers of illegal gaming, now starting to become progressively less competitive and “good value”. The figures highlight that in the last three years the increase in gaming receipts has been achieved: by recovering what was previously played in the “black gaming market”, in clandestine raffles and lotteries (15%); by cleaning up the gaming machines industry (77%), making it possible to recover - through actions in cooperation with the Police - no less than 15 billion euro, previously stolen from the players and the Government through illegal video poker games. Another undeniable achievement realised by the Government is the stabilization of tax receipts derived from gaming, which is of significant importance from the point of view of risk management. It is clear in fact that the Government, having decided and initiated a strategy not to encourage the expansion of games on offer in the gaming sector for social reasons and those of public order, views the stability of tax receipts as of far greater importance than “short-term” growth, and also as regard the constancy of cash flow forecasts. In actual fact the 2002 tax receipts from gaming could vary by as much as 50% during the year, even against gaming receipts that remain more or less constant – all this because of a poorly diversified range of offerings, in which the Lotto had a dominant position, being the only game with a “bank” directly managed by the Government. Today the impact of Lotto receipts on the total receipts from gaming has fallen from 57% in 2002 to 29% in 2006, thanks to the continuous widening of the range of games on offer. This is a development that has concerned especially those games until recently “managed” in the black market, causing a rise in the relevant tax receipts equal to an astonishing 250% in only three years, having gone from 1.9 to a hefty 4.8 billion euro. Today even the Lotto ensures a reasonably constant cash flow of takings on a monthly basis, thanks to actions that have greatly reduced the phenomenon of betting on “laggards”, this being the main reason for uneven gaming and tax receipts. The gaming market The results from the creation of a true gaming market, one that is really open and competitive, are evident. The recent selection of Companies entrusted with collecting bets, both for sport and for horse racing, quite clearly demonstrates that the Government - and AAMS for its part - are not at all engaged in a dull and short sighted defence of keeping our system in Italian hands. There is actually a real and strong interest in encouraging new operators, both Italian and foreign, to enter the market, because it is perceived with certainty that stronger competition can and should generate a further improvement in the quality of the gaming services, together with a greater efficiency of the whole system. The overall benefits can be to the advantage of the consumers, the sector operators, whether as licence holders or simply as points of sale, and of the Government. However a competitive market does not mean a market devoid of rules, imposed to safeguard public trust and fair competition. In a similar vein, healthy competition does not mean being able to promote one’s own business with actions that are likely to create confusion among the consumers. Safeguards for the consumer Giorgio Tino highlights a strategy based in the main on 5 tenets: a preventive approach, basically through the development of products that are more and more diversified, controlled and above all competitive when compared to illegal gaming; a careful selection of those authorised to take bets, ensuring that licence holders have the requirements to guarantee their own reliability as Companies and as business operators, and to make them effectively subject to the regulations of our market and the relevant controls, both introduced to safeguard the fair conduct of gaming and the public trust (hence the mandatory requirement to situate the Data Processing Centres in Italy and to open a stable Head Office here, even if small and simply dedicated to operating the system); ease of identification of sites (whether physical or on the Internet) where it is possible to play in full safety, identified through especially designed logos or “small stamps”, suitably promoted to the public; full and correct information to consumers and development of their awareness, such as, for example, the incisive campaign on “Safe gaming”, broadcast via the main national communication media; targeted and direct suppression of illegal activities, introduced in 2006, above all through initiatives in the gaming machine sector and the action to prevent access to illegal or irregular Internet sites. In addition and in response to the actual wishes of the consumers, it will be necessary to devise and create gaming experiences capable of encouraging forms of social intercourse and participation, in which the element of competition between players will be stronger than the single chase for a win. In this way it will be possible to bring into being sufficient forms of social control, and “self regulating mechanisms” capable of gradually reducing the heavy deployment of other measures to combat the ever present detrimental aspects of gaming. THE PLACE OF GAMING IN SOCIETY According to the AAMS Director General it is clear that, unlike the past, our society nowadays “refuses” to be defined in a simple and straightforward way, which was possible for an agricultural society, for an industrial one and even for a post-industrial one. If it is true that today we live in a “wealthy society”, an “information society”, a “hedonistic society”, a “throw-away society” and a “network society” all at the same time, it is also true that this is even more than before a playful society, clearly in the more positive sense of the word. The main difference with regard to the other definitions of society is the wide spread lack of awareness of the role and function of gaming, for which we all have a joint responsibility. Today gaming is perceived and lived in a more natural way, as a part of everyday living for millions of people in Italy, and in the main is able to generate a healthy interest. We must not forget, again within its social dimension, that today public gaming makes a valuable contribution to development, through the investments made by a greater number of companies in the sector, of new technologies rightly belonging to the information society (strictly in line with non material services such as those of gaming), and the reduction of the “digital divide”, thanks to the increase in the technical competence of several million people, who through their interest in gaming are getting to know the internet, the information support networks, the new platforms and the modern payment systems. In addition to talking about “safe play” it is perhaps time now to talk about a true “right to safe play”, to be safeguarded both as a form of expression for each of us and for its undoubted social value. THE EVOLVING BACKGROUND According to the Director General, there are three issues which have the greatest interest and impact for the world of public gaming: EU regulations, new technologies and the coming together of the entertainment markets. EU regulations As far as the regulatory framework affecting the world of public gaming is concerned, there is no doubt that the reference environment is that of the European Union. Nationally Parliament has devised and the AAMS has implemented a system that is for the most part robust and consistent, generally able to define roles and duties, in addition to showing the way forward for future developments. On the other hand in Europe the issue has other dimensions, because of the great diversity of approach on some issues in the member states, both for the internal model as regards AWPs, and on other issues of no lesser importance and interest to all the countries. These are firstly the restrictions to be applied to general principles and regulations for fundamental reasons of public interest, such as safeguarding consumers as well as public order and safety, and secondly in which measure and under which conditions the regulations currently in force in one country could be made to apply “automatically” in another country, as a consequence of the free market in services. Above all it is unproductive and what is more, it is extremely difficult to find a unilateral common ground for the different points of view while such different interests persist. Then it is crucial to continue to state the reasons for the specific features of the so called “Italian model” (based on essential aspects of public interest), as long as the current imbalance persists, to the advantage, in the case of an indiscriminate deregulation, of the player in those countries in which gaming is less well regulated or where above all the interest of the public is seen in a different light because of different environmental, social or demographic situations. We need therefore to create the conditions for a progressive and well balanced convergence of the different models. According to Giorgio Tino, it is important to enable the Italian public gaming system to be ready to meet the conditions by which one European gaming market will progressively be brought into being, so that the forthcoming change could be a profitable opportunity rather than an impending threat - both to the consumers and the operators and the Government. As evidenced by the growing number of actions initiated by the European Commission offices against very many member states for infringements of the regulations, we can no longer delay the start of an open debate to finally define common rules even in this market. This is a market which should put the consumer above all at its centre, well ahead of gaming companies, on account of the overriding importance of such safeguards and the quality of the products being offered. For this reason AAMS has taken note with great satisfaction of the very recent ruling in the so called “Placanica affair”, whereby the European Court of Justice has clearly stated that member states can impose limitations on the freedom to establish and on the free provision of services in the gaming sector, for reasons of public interest relating to the prevention of criminal activities and in order to safeguard the consumers. All the more so because the efficiency of the system for granting licences, praised by the same Court in order to “control those operating in the games of chance sector”, is an important and justified acknowledgement of the regulatory and administrative work done in the last few years by the Italian government, to be continued with consistency in the years to come. It is obvious that, because the world of Italian public gaming is in a state of continuous and necessary development, the ruling of the Court of Justice fits within a regulatory and market context that is completely different from that prevailing at the start of the Placanica proceedings, so much so that it can be deemed, as far as the fundamental issues are concerned, to have been “overtaken by events”, at least as regards our country. When faced with such evidence, it is not surprising that the “frantic” attempts by a specific British Company, trying in some ways to “console” itself, to support contrived and misleading interpretations of a far-sighted and extremely clear ruling, on which such expectations had been placed, should later be shown to be unfounded. However, what is surprising is that some press organisation could have fallen for the same misunderstanding. Referring again to the same specific British Company, we can only view again with restrained satisfaction the very recent orders by which the Lazio Regional Administrative Court has rejected the suspension request for two regulations of major importance, by which the prohibition to access internet sites that are not authorised for gaming purposes had been restated, in the interest of Italian consumers and to safeguard them, and to entrust provisionally the management of an important numerical game (waiting for the results of the European tender) to the previous operator, applying the conditions laid down on this point in the 2007 Italian Budget. Technologies Technology is more and more a crucial factor for the success of gaming, in addition to being an inescapable element for safeguarding the consumer and for guaranteeing public trust: it is enough to think of the contribution made and being made by technology, on both aspects, to the entertainment machine sector, although so much more has still to be done. The aim of AAMS is to establish a reference point at an international level, for all innovations and technologies serving the gaming sector, with particular reference to the world of the internet, nowadays a common ground for other activities and offerings as well. Convergence of the entertainment markets Mastery and intelligent use of new technologies will be necessary to face the challenge of the convergence and the competition amongst different entertainment markets, still basically separated today, but very soon to collide with each other in a rather disorderly way. The markets will converge in a way that will place many games in direct competition with other forms of enjoying and spending free time and will create the opportunity to devise new consumer experiences. For example, it is obvious today that the television and internet platforms are already tending to unify, in such a way that the former may benefit from the interactivity and the latter from the better content and greater production capacity. It is clearly the case of imagining a world in which, quite soon and at the same time and on the same supports and platforms, it will be equally possible to watch a movie, have a chat, read a book or a newspaper, update one’s blog, speak to a friend, put oneself to the test in a role play, try to establish new friendships or new business, play the lottery, Superenalotto or bingo, take a dance lesson, watch a match, place a bet on the very match one is watching... Therefore all this will be a giant market of emotions, in which the gaming experience will need to compete against other entertainment forms, generally cheaper ones, or to add value to them. According to the Director General, a major complication in this new gaming environment is a body of regulations on gaming created in successive layers over time, and not always inspired by the criteria of consistency and unity. AAMS places at the disposal of those parties concerned its own expertise and determination to prepare and place before Government and Parliament proposals for legislative measures regarding gaming and tobacco, with the objective of defining a consistent regulatory framework, whose interpretation cannot lead to misunderstandings and that is capable of being easily adapted to the development of the sector environment. Newslot danger. According to Vincenzo Visco: AWPs only in closed and controlled premises “There are many games: you can play tennis, you can play billiards and you can also play with those hellish small machines with electronic games and then there is the game with which we are dealing.” Vincenzo Visco, the Economy and Finance Deputy Minister, begins his address with these words at the Annual General Meeting of AAMS, not sparing criticisms for automatic amusement games with limited prizes. Since its inception this Administration – says Vincenzo Visco referring to AAMS – has been concerned with difficult matters, requiring to be managed within a monopolistic framework. When one tries to organise games, where the demarcation line between a game of chance and a risky speculation is always very thin, the fact that the Government imposes a monopoly situation derives from the clear fact that the bank always wins. This is basically a summary of the speech given by Vincenzo Visco, who explains how it is possible to earn substantial amounts of money without much effort through the organisation of games, and that it is not by chance that in these sectors organised crime has developed all over the world, in all times and in all historical periods. According to Visco, this is the main reason why, particularly in some segments of this sector, maximum care and prudence should be exercised. In addition the Deputy Minister has highlighted that the modernisation of the gaming sector goes back to 1996/97 with the inclusion of betting and of the Totocalcio within the responsibilities of the State monopoly. That was an operation to rationalise and to modernise the country, because at that time only the Lotto game and the national Lotteries were under the direct control of the State. New important activities were set in train in those years together with the setting up of Lottomatica. The first connection networks were established and the foundations were laid that would lead to the management of the sector on an industrial basis. In this way the first communication highways were established for the public network and important financial resources were made available to the Treasury, enabling a reduction of the tax burden in the years to follow. We are aware that there is a ceiling for gaming receipts –Visco explained– and that such a ceiling has not yet been reached. We hope to reach it with the latest liberalizations to have been introduced, and at the same time, with the same measures, we will try to bring our system more in line with the European requirements, responding in a factual and positive way to the very strong pressure coming from the UK in these matters. According to Visco it is necessary to identify premises set aside for gaming, as closed premises, where dangerous games are played, because gaming is dangerous. This is entirely for the benefit of public safety. Today even in Europe it is being acknowledged that a licence system is the best for the regulation of gaming. In our system – the Deputy Minister stated –a difficult area has come to light lately, namely that relating to AWPs. Now on this point it is no secret to anybody that I fiercely opposed the proposals in Parliament to extend such games into public premises. In essence one is dealing here with videopoker, or with games reproducing that type of play, even though they require some modicum of ability. In 2000 I managed to get my way with a Parliament split down the middle, with groupings made across the opposing factions, formed on the basis of different concerns for the health and well being of citizens, because of the risks they may be faced with, and of the realisation that behind gaming there is an entire industry. It is true, as stated by Giorgio Tino, that the receipts from gaming go some way to reducing important portions of the illegal market, but this is not the point. Out of the millions of these small machines in existence we only control a part. We must extend the connection methods in the networks, the methods of control, we need to have a higher certainty that the cards are not changed, etc. This is a sector where the earnings are enormous and where the consequences for the consumer are very serious as well. There have been nasty stories read by everybody in the newspapers, and doubts continue to exist for the connections with specific parts of society. On this AAMS will have to commit itself strongly; it is not enough to talk about very important results when we face great risks. On the other hand, the development of all other forms of virtual gaming, apart from horse or sport betting, is extremely interesting and deserves great attention. Obviously for the whole sector it is a minor reason to have a public monopoly, as it is evident that in this field anybody can organise things to play in a free way. Lastly, Visco recalls that, at the end of the ’90s, a part of the gaming receipts were set aside for the so called “good causes”, that is to finance the restoration and recovery of items of the National Artistic Heritage. This is an undertaking to be continued with commitment in the next few years."

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