Version: 01012005
Editor: Franka Pals
Publisher: Novamedia
Disclaimer: Novamedia disclaims all liability for information provided within the "Novamedia European Gaming and Lottery Files".The information is supplied by independent journalistic sources. No parts of these files may be reproduced in any form by print, photo print, microfilm or otherwise, or re-distributed electronically in any form without written permission from the publisher.
Iceland is the most western country in Europe and the second largest island in the North-Atlantic ocean. The first settlers came to Iceland from Norway and Ireland in the ninth century. Iceland was subsequently ruled by Norway and Denmark. Althingi, the world's oldest functioning legislative assembly, was established in the year 930 A . D.
Iceland has a strong economy, low unemployment and low inflation. Per capita income is among the highest in the world. Iceland is ranked in fourth place for standard of living in the Wellbeing of Nations. report, which was published Oct. 11, 2001 (the United States is ranked 27th).
In environmental terms, Iceland is unique. It is a large country (103.000 square km), about the same surface area as Ireland or the State of Virginia, but is sparsely populated, with only three inhabitants per square km living mostly along the coast. The interior of the country contains stunning contrasts. It is largely an arctic dessert, punctuated with mountains, glaciers, volcanoes and waterfalls. Most of the vegetation and agricultural areas are in the lowlands close to the coastline.
In 1989 the Icelandic Stock Exchange (ISE) launched its first trading system, which allowed continuous trading, order-driven and acceptance-based. Trading has always been electronic by remote access. The exchange has never had a trading floor. Iceland's economic intelligentsia met November 2, 2001, to consider making the country a tax haven.
Brains from the Institute of Economic Studies at the University of Iceland and the International Policy Network invited economists, lawyers and public policy analysts to examine how countries like the two Channel Islands, the Isle of Man (both promoting free Internet gambling), Switzerland and Luxembourg have become wealthy by offering business friendly laws and tax rates to individuals and corporations. Iceland is not a member of the European Union. It has access to the common European market through the EEA (European Economic Area) agreement. It's also protected by a defence agreement with the United States.
celand, with its stable political situation, a location in the middle of the North Atlantic Ocean, daily flights to the major financial centres of the world, sophisticated telecommunications system, well-educated population and well developed financial sector, may at present have a unique opportunity to join countries which offer low tax rates to individuals and corporations. Tax Free offshore Internet gambling will also be considered
| Population: | 293.966 (July 2004 est.) Population growth rate: 0,97 % (July 2004 est.) |
|---|---|
| Age Structure | :Age Structure: 0 - 14 years : 22,5 % (male 33.522; female 32.489) |
| Median age | :Total: 33,8 years Male: 33,3 years Female: 34,3 years (Source: CIA, 2004 est.) |
| GPD | Purchasing power parity: $ 8,678 billion |
| Currency | Iceland Krona (ISK) |
| Internet: | Roughly 81% of respondents have access to or own a computer and
roughly 77% have access to a computer connected to the Internet. Those |
| Telecom | Roughly eight out of ten Icelanders use GSM mobile phones and more
than half use SMS text messages. |
| Languages: | Icelandic, English, Nordic languages, German widely spoken. |
The term 'lottery' is not defined in Icelandic law. The general interpretation, however, is that a lottery is an activity in which a group of participants take part, on payment of a fee, in a draw for one or more prizes, i.e. their hope of winning depends on chance. The term does not cover instances in which, on the one hand, the payment of a fee is not a condition for participation, and, on the other, when participation requires a certain amount of skill, with the result that the probability of winning does not rest solely on chance.
Under Articles 183 and 184 of the Criminal Code, No. 19/1940 (cf. the Act No. 82/ 1998), it is a punishable offence to engage in gambling and betting on a professional basis, to encourage others to participate in these activities and to derive direct or indirect income from having the activities take place on one's premises. Gambling is illegal in Iceland whereas lotteries are not (given that these lotteries are in aid of charities and philanthropic causes, sports clubs and political parties).
Operation of lotteries in Iceland is governed by general laws. Lotteries held by particular parties are governed by special laws.
The ordinary legislation applying to lotteries and raffles is the Act No. 6/1926. Under this act, lotteries of all types are forbidden except under license from the Ministry of Justice. Raffles without the permission of a police commissioner are forbidden. Under the act, lotteries with cash prizes may not be established without authorization in law. It is also forbidden under the act to trade in, or sell, shares in foreign lotteries, or to engage in any work connected with them. Each year the Ministry of Justice grants 50-75 licenses to various ordinary lotteries. Licenses are granted for lotteries that are in aid of charities and philanthropic causes, sports clubs and political parties. The range covers many small-scale lotteries, both local and national.
In addition to the general legislation on lotteries, special legislation has been enacted covering the largest lotteries operating in Iceland.
Various types of lotteries are represented, including sports pools. Pools have not been regarded as being covered by the term 'lottery' because the chance of winning a prize depends to some extent on knowledge or skill. Nevertheless, pools have many ressemblences with lotteries. Most of the lotteries involve cash prizes.
Many types of promotional lotteries and games, which were prohibited up to 1993, have become popular recently in connection with the sale of goods and services. They take various forms, and it has become more common to offer participation through a mechanical medium, e.g. via the telephone or computer.
If there is no direct payment for participation in the game or lottery, or if participation is based to an appreciable extent on knowledge or skill of some type, then these lotteries or games have not been regarded as being subject to the ordinary legislation on lotteries, and have therefore taken place without any licenses or supervision. On the other hand, lotteries of this type have become so conspicuous that attention must be given to the question of whether legislation should be enacted to cover them.
All lotteries were banned in Iceland by legislation in 1926. This was primarily decided to stop Icelandic funds from running to foreign lotteries (mainly the Danish "det Kongelige Köbenhavnske Klasselotteri") and to stop private parties running small scale lotteries mainly in marketing purposes.
In 1933 the Icelandic parliament (Althingi) granted the University of Iceland monopoly right to run a lottery in Iceland with monetary based prizes. All profits should run the university, except for a 20 percent license fee, for the monopoly rights. The legislation is largely based on the Danish law about the Klasselotteri (which is understandably chosen as the model since Iceland was a Danish colony).
Since then other lotteries have been established. The first two (SIBS class lottery in 1949 and DAS class lottery in 1954) were also class lotteries, but had to give prizes out as some non-monetary objects (i.e. houses, boats, cars, etc.). Sports Betting was introduced in 1972, lotto in 1986. Legislation for slots machines was passed in 1994, although they had been operated in the market for more than a decade in another organizational form than the law defined. The Sports Betting and Lotto have now merged in one company: Íslensk getspágetraunir, Reykjavík (successor, in 2001, to Íslenskar Getraunir and Íslensk Getspá, established in 1968 and 1986 respectively). The products of Islendic Getspa are: Lotto, Joker, Lotto Askrift and Vikinga Lotto.
Each lottery operator has a right to provide one particular form of lottery, except for the UIL which has a more general permit to run a monetary based lottery. On that basis the UIL runs a class lottery, instant tickets and video lottery terminals. According to the law regarding to the lotto, no other party is permitted to run a lotto in Iceland. No other party is permitted to run slot machines. All operators do in fact have a monopoly righton one certain game except for the two smallest product based class lotteries. The only party to pay a licensing fee is the UIL. The logic behind that lies in legal terminology. The slot machines are fundraising machines (with small stakes and low prizes) but not a lottery. The lotto is not a lottery but a numbers game, according to Icelandic law. In that manner the Icelandic parliament was able to permit new lottery licenses in Iceland from 1949 without breaching the UIL's monopoly right for running a monetary based lottery in Iceland. Other lotteries do not pay a licensing fee or any proportion of profits to another cause other than the good causes that they are legally bound to support.
The four lottery operators in Iceland are:
Other gaming possibilities in Iceland are bingo halls and private clubs.
In addition to the Icelandic purchaseincentive lotteries mentioned above, it is possible to take part in a large number of lotteries and games of foreign origin on the Internet. Participation in sports pools on the Internet has been authorized, but actual lotteries are not allowed to take place on the Internet.
Many parties have contacted the Ministry and requested permission to setup lotteries on the Internet, and the statutory lotteries have also sought to expand their activities to include the Internet. Up to now, no licenses have been granted to hold traditional lotteries on the Internet, such as number lotteries, betting machines, etc., in which participation in the lottery would actually take place on the Internet.
Consideration is being given to the question of whether such lotteries should be permitted, and, if so, then in what form. It is likely that legislation would have to be passed covering such activities. Permitting Icelandic parties to operate lotteries on the Internet may be a better way of preventing participation in foreign Internet lotteries. The Internet has been used by the sports betting (oddset) for a few years to sell their product and give information.
E-commerce is allowed in Iceland. The UIL class lottery has sold tickets on the Internet since January 1997. You can also purchase lotto on the Internet in Iceland.
The Icelandic Justice department does not intend to permit an Internet-based lottery at this time. The topic of Icelanders participating in offshore lotteries and casinos has not been issued formally by the Justice department or the industry in Iceland.
The oldest lottery operating in Iceland is the UIL Class Lottery. That particular form of lottery was the only permitted product for almost 40 years in Iceland. Three lotteries had the permission to run such a lottery and the market share of each seems to have been fairly stable, but UIL has been the leading product. UIL has a monopoly right to pay out monetary-based prizes and also has the highest payback ratio. The market changed dramatically in 1986 when a new operator was given the license to run the lotto, Islenk Getspa.
Sports betting had been introduced to the market in 1972. Since then the market share of the class lotteries has declined and the newer technology gained popularity. UIL's reaction to the lotto was the introduction of instant tickets. They were an immediate success on the market, but their market share diminished rapidly in recent years in competition with another product that gives instant gratification: the slot machine. To maintain its profits and provide steady funds to the University of Iceland the UIL launched a video lottery operation in December 1993. The slot machines and video lotteries have been the fastest growing products on the lottery market while other products have been stagnant or declining, since they were introduced to the market.
The turnover of the lottery market has been fairly stable, but the revenues have shifted toward products that offer instant gratification and a high entertainment value. This is the same trend as is seen in most markets. The modern consumer demands entertainment value and interactivity.
As mentioned all operators have a monopoly right on one product. They have an exclusive right and an obligation to deliver profits to a good cause. The trend in Iceland in the last decade has been that new licenses have been issued for new products and assigned to new companies. Hence, the lottery operators already on the market have a hard time holding a steady income. In many of the neighbouring countries, the state lottery is licensed to run many products, so the declining lifecycle of one is overcome by the popularity of another. In Iceland the different products in many instances are in the hands of different parties which induces fierce competition and the winners are usually those with the newest and most technologically advanced products. In the present day the video lottery and slot machines (which are very similar, except for that the VLT's are run as an interconnected system) are the winners with increasing market share every year.
In 1934, the University of Iceland became the only organization in Iceland permitted to run a lottery with cash prizes. For this privilege the UIL was to pay 20 percent of net profits to the state, but the remaining 80 percent would be used to finance the building program for the University and for the purchase of research equipment.
The UIL is an organization owned by the University of Iceland and is therefore a state company. At the time when the Icelandic parliament gave the university the monopoly rights to run a lottery in Iceland, the state had already agreed to build a new main building for the university, but in the middle of the depression, funds were lacking for all new state financed operations. The suggestion to raise the funds by a national lottery came from the University of Iceland, but was backed by prominent Icelandic politicians, as a means to finance education.
The UIL started its operations in 1934 by running a class lottery. The lottery was welcomed by the people of Iceland and was UIL's only revenue for more than 50 years. It was the only income for the building program of the university. Wages and other expenses of the university are paid directly by the state and financed with taxation, but buildings were financed with donations through the UIL. In the last decades the UIL has also financed equipment and the renovations of the university buildings.
The Icelandic legislative assembly has permitted new forms of lotteries which caused increased competition on the lottery market and gradually diminished income for UIL's class lottery.
In 1986 the lotto began its operation in Iceland with an on-line system.
UIL's answer to that was to introduce instant tickets in the year 1987. In recent years the lottery market has grown more competitive and changes in technology have paved the road for new forms of lotteries. To maintain a leading role on the Icelandic lottery market UIL introduced an interconnected system of video lottery terminals in 1993.
UIL has held its position as Iceland's largest lottery since its first year of operation by answering competition with new products and product development of the older products.
Regular subscription customers are 40.000 in a country with only 100.000 households. There is a ticket in 35 percent of Icelandic households (some households have more than one customer, i.e. husband and wife). The UIL turnover in the year 2003 was 2.700.000.000 Ikr. compared to 2.205.000.000 Ikr. in 2000
"The trend in the lottery market over the last decades, both in Iceland and abroad," Jon Oskar Hallgrimsson, UIL's finance and marketing manager, said, "has been that consumers demand more excitement and rapid response to their participation in a lottery". In the first 50 years of operation of the class lottery it was typical to have drawings once a month. Since 1997 that form has been adapted so that there are two drawings every month.
- Class Lottery
The class lottery was launched in 1934 and was a popular form of lottery at that time in Europe. Class lotteries are still operated in Denmark and Germany. UIL runs one class lottery each year, in which there are 12 classes, one for each month. To have a valid ticket, a customer has to pay for the ticket for every class in the lottery. A ticket owner can pay for his ticket by monthly instalments or for a whole year in advance. Therefore new customers enter the lottery in the beginning of each lottery year. Those taking part in the lottery generally subscribe to a certain ticket number and retain that number for years. The system used to be manual in the sense that all tickets were pre-printed at UIL's headquarters and sent to over 100 agents around the country who delivered them to the ticket owners or subscribers. Today the class lottery is operated by an on-line system that registers individual purchases in central database. The transactions between UIL and its customers are increasingly getting automated and technical (although a few agents still operate in the old system without an online computer connection). A majority of ticket owners pay their monthly instalments automatically with credit cards and get information about drawings and prizes on the Internet, via SMS and WAP on mobile phones. New customers can also purchase tickets on the Internet and pay for them automatically with credit cards or directly form their bank account.
According to the laws about UIL from 1934, 70 percent of gross income are paid out as prizes, which is an unusually high payback ratio, considering that lotto companies around the world typically pay out 40 percent to 50 percent.
- Instant (Scratch) Tickets
Instant tickets give the customer the opportunity to find out immediately if he has won a prize and the value of the prize. The result of the lottery is predetermined when the ticket is printed but the result is only revealed to the customer after the purchase of the ticket when a latex seal is removed. The tickets are sold by 300 retailers throughout the country and in vending machines. The payback ratio is 50-60 percent. Security standards in the printing and production of the instant tickets are very important since the result is predetermined and the lottery must maintain its integrity at all times. This form of lottery is very flexible because games can vary with each printing of new tickets.
- Video Lottery Terminals (VLT's) The video lottery is the fastest growing lottery form in both Europe and the United States. UIL launched its VLT operation in 1993 and it has increased its share in sales and profits since then. The VLT operation contributed to 57 percent of UIL's net profits in 2003.
In 2003, this VLT net machine income numbered 1,5 billion kr compared to 1,2 billion kr in 2002.
Customers can try their luck in terminals that are interconnected and get the result immediately. Since the VLT's are connected to a central system it's possible to offer jackpot prizes that grow incrementally with the amount of play.
The payback ratio is around 90 percent, but the nature of the game, i.e. repeated purchases at the machine, does in fact prevent a direct comparison with the payback ratio of the more conventional lottery forms. It is UIL's policy to ensure that participants in the VLT's are over 18 years old. Therefore the terminals are located were children do not have access, i.e. bars, liquor-licensed restaurants and special gaming halls.
UIL has entered into another contract with IGT-Europe. After a contract of 400 machines was signed in 1993, a second machine contract of 75 iGames, with a service contract for five years, became effective in mid August 1998. It utilizes IGT's popular iGames like Red Ball, Diamond Mine and Lion Fish. The iGames branded under 'Gullregn', or 'Gold Rain', have become an instant success.
The operation of the class lottery has undergone major technological changes in recent years, which have paved the way for a modern brand image for the 70-year-old product. Product development and marketing have changed the brand from being old fashioned and passive to a low effort, automated high-tech lotteries. Automatic bank transfers collect 65 percent of the revenues. Retailers collect the remaining 35 percent, but their share is decreasing. 34 Percent of new customers use the Internet to select tickets, method of payment and the level of service they prefer. 37 Percent of new customers make the same choice by calling a toll-free number to the UIL service centre. Customers can get results on the Internet and with a WAP telephone. They can also subscribe to results and various information on e-mail and with SMS messaging. Winners can get prizes paid out directly and automatically on their bank accounts after each drawing.
The Internet is playing an increasing role in both services to existing customers and in generating new income. The customer base is growing rapidly with product development and marketing that targets younger customers that prefer a low effort lottery participation to that of making the exchange at a retailer.
Website: www.sibs.is
The SIBS Lottery is a monthly class lottery. It is a non-cash lottery (i.e. the prizes consist of goods or services).The odds of winning are high; On average, most numbers (over 85 percent) receive a prize. Few lotteries can offer the same odds. If the grand prize does not fall on a sold number it is added on to the grand prize of the next month and so on until it strikes a sold number and a lucky ticket owner gets the additive amount of two or more grand prizes. However, the popularity of class lotteries has declined.
The SIBS Lottery was established in 1949 to pay for the building of a rehabilitation center for the handicapped, sick and injured at Reykjalundur and has since then helped in maintaining Reykjalundur, Mulalundur and other institutions where SIBS -The Icelandic Association of Tuberculosis and Chest Patients - has put its powers to work to support the sick to help themselves. Only Icelandic residents and Icelanders living abroad may participate in this lottery. The Association of Icelandic Heart and Chest Patients (S=CDBS) has been licensed to run a lottery to support its activities since 1959.
Website: www.toto.is
Islenk Getspa (at present running under the merged name of Islenk getspa-getraunir) originated from July, 1986. In May that year a law was signed by the Icelandic parliament which gave the Lotto Company permission to operate Lotto in Iceland till 2005. No taxes to the state have to be paid and all profits go to sports and handicapped related matters. Iceland was first in the world with an online lottery. Currently there are about 235 online retailers. Total sales in 2002 were 2.237 million ikr. compared to 1.128 million ikr. in 2000.
Website: http://www.lukka.is
Íslandsspil is an operating company that raises funds for the National Center of Addiction Treatment (SÁÁ), Icelandic Association for Search and Rescue (ICESAR) and the Icelandic Red Cross by operating gaming machines and other similar activities. They have been running slot machines since 1972 and are licensed to run video betting machines (fruit machines or one-armed bandits) for fund-raising purposes.
The machines involved are very similar to those operated by the UIL, the main difference being that the university's video machines are interconnected and so accumulate large jackpot prizes, while the betting machines may not be interconnected and the prizes are far smaller, the maximum being ISK 15.000.
Another difference is that the Icelandic Gaming operates standalone machines.
Íslandsspil operates over 600 gaming machines in over 280 locations all over Iceland. These betting machines are generally located in refreshment shops, bars, supermarkets and fast-food restaurants, while the university's gambling machines are located in special gambling saloons and restaurants.
In November 2004 they have opened a new interactive casino-gaming website with play-for-fun games. Its solution is a part of Betware's wide range gaming solutions. As of now, four instant games are offered, but very soon more games will be added. With Betware's Interactive Gaming System,
Íslandsspil has strengthened its competitive position and offered an alternative solution to its current slot machine setup.
Website: www.das.is
The Retired Seamen.s Home (DAS) runs a class lottery since 1973. It is a non-cash lottery (i.e. the prizes consist of goods or services).The popularity of these kind of lotteries has declined; class lotteries no longer seem to be very popular.
Website: www.betware.com
Betware, a WLA Associated Member, is a software and service company that specializes in providing technical solutions to gaming companies operating in fully regulated jurisdictions. Betware solutions have been in operation since December 1996. The company does not intend to take any part in betting, but will concentrate on supporting its clients in utilizing the Internet successfully. It has a wide product line, covering most sports betting, lottery and casino games, as well as software solutions for online betting through multiple sales channels, with emphasis on interactive Internet and mobile solutions. The Gaming Factory allows independent third-party party gaming developers and operators to create their own games. Betware has already implemented a number of its games on WAP and PDA (Palm) and is currently involved in extensive development for interactive television. Betwares first clients were the Icelandic Soccer Pools (Íslenskar Getraunir), with the first game on the Internet launch in 1996 (as described under 4.3.2).
The headquarters of Betware are in Reykjavík, the capital of Iceland, but is internationally active as well. Betware has had a presence in the U.S. since 2000 and is actively participating in the market in Scandinavia, Europe and the rest of the world.
In October 2004 an agreement was signed between British Columbia Lottery Corporation and Betware to implement their Interactive Gaming System.
In September 2001 Betware and Dansk Tipstjeneste signed a contract wherein it is agreed upon that Dansk Tipstjeneste will use Betware's interactive gaming system and purchase professional services regarding the setup and maintenance of the Interactive Gaming Center from Betware. The contract is valid for at least five years. In May 2003 this was followed by another agreement for an implementation for 2 other games.
As mentioned Betware's clients included Íslandsspil and the Iceland Lotto Company. Additional clients include MyLuckyWorld in Norway and Svenska Spel in Sweden.
Interlott, a GTECH brand, designs, manufactures, sells and services dispensing machines for the lottery, telecommunications and banking industries. It is the United State's leading manufacturer of Instant Ticket Vending Machines (ITVM's).
In 1996 Interlott has provided the University of Iceland Lottery (UIL) with 16 eightbin ITVM's. In January 2003 75 units were in service in retail outlets throughout the country. In February 2003 UIL purchased Compact Dispensing System (CDS) ITVM's. This is a four-bin compact ITVM, which can be mounted on a wall or placed on a pedestal.
In 2001 total revenues were $ 42,7 million. Net income was $ 1,1 million.
International Game Technology (IGT) is a designer and manufacturer of slot machines (it controls more than 75% of the US market), and it also produces video gaming and player tracking and accounting systems.Products include reel-type slot machines (Vision Series, S-Plus), video gaming machines (Players Edge-Plus, Game King), video gaming terminals for governmentsponsored lotteries, and progressive jackpot slot-machine networks (MegaJackpots) that link slot machines from several casinos to increase jackpot payoffs.
International sales account for almost a quarter of its winnings.
In 2003 the net income of IGT was $ 390,7 million, compared to $ 271,2 million in 2002. Revenues were $ 2,1 billion in 2003, compared to $ 1,7 billion in 2002.
In 1993 IGT-Europe provided UIL with 400 machines. A second machine contract of 75 iGames, with a service contract for five years, became effective in mid August 1998. It utilizes IGT's popular iGames like Red Ball, Diamond Mine and Lion Fish.