Advertising is to be restricted in Armenia. What is going to happen to the local gambling market?

Amendments to the gambling legislature are approved. New restrictions will be a reality soon.

Amendments to the Law on Advertising external linkExternal links are prohibited to the Armenian parliament in January. They were to set new restrictions on advertising for gambling operators. According to the bill adopted in the first reading, advertising will be allowed only in four-star (or above) hotels and at the entrance or on the façade of the buildings where gambling takes place. The ads will be totally banned from other places.

The amendments were criticised by both the operators and the mass media. So, what’s going to be changed?

The Armenian government gradually tighten the legislation

The first serious gambling restrictions were brought to life in 2019. The local government limited the total number of betting retail shops and online casinos. Capital administrative regions could have only one facility of this kind. Slot machines that were located in gas stations were completely banned.

In fact, the law only restricted physical offline operations, while over 80% of the gambling companies operated online. Only one operator out of the five that were active in the market back then was really affected. It was Goodwin that operated offline primarily. The others - TotoGaming, Vivaro (currently Vbet), Adjarabet, and Eurofootball - kept on operating without any problems.

New mass media advertising restrictions came into force in May 2020. Gambling ads have been allowed to fill only 20% of a website and could be broadcast on TV only from 10 p.m. to 7 a.m. Currently the government is trying to tighten the gambling advertising restrictions once again.

Why does the government do it?

Let’s get back to the events that took place four years earlier to understand the background of such strict restrictions.

Armenia went through the velvet revolution in 2018. The new government immediately started to deal with the economic situation in the country, which was pretty poor back then. Armenia was at 105th place in the Corruption Perceptions Index (Transparency International) and the 54th place in the Index of Economic Freedom (The Heritage Foundation). Officials promised to open the market and to launch global reforms to attract investors.

Despite some positive changes the rating of the government has fallen down after four years of their work. It keeps on falling down. People don't like the current situation. The country has seen no global changes. The Poverty index was 27% in 2021, according to the official data (unofficial sources cite 33%). It’s a bad trend for sure. Despite the economic growth (6%) the real income of the citizens kept on decreasing in 2021. The poverty index went 0.6% up. The COVID-19 pandemic and the 2020 Nagorno-Karabakh war made the situation even worse.

With all these things affecting social life, the mass media claimed that the citizens of Armenia were spending a lot of money on gambling. Babken Tunyan, a member of parliament that represents the ruling party, said that the Armenians placed bets equal to 30% of the country’s GDP within 11 months of 2021 (3.2 trillion drams/$6.5 billion). It is twice more than the Armenian Governments expenditure budget. The operators’ GGR (Gross Gaming Revenue) was 70 billion drams ($140 million). According to the data which was made public, GGR was 5% higher in 2019 before the COVID-19 pandemic (40 billion drams/over $80 million). It fell down to 2% only in 2020 when the pandemic emerged.

Some sources on the market believe that the numbers Tunyan revealed are understated and the real GGR (%) is actually very close to the 2019 data. However, even the numbers Tunyan revealed allow us to understand that operators’ income almost doubled - from 40 billion drams (over $80 million) to 70 billion (over $145 million). The amount of bets made in 2021 was four times more that in 2019.

Do the legislative amendments reflect the situation in the country?

Gambling advertising restrictions sound logical in this situation. Politicians that support the bill claim that amendments should be approved as soon as possible to decrease the high level of problem gambling.

However, Rafael Davtyan, ex head of marketing in Vbet and GrandSport, believes that there’s no full perspective on the problem gambling spread in the country.

This issue has never been a subject of research. We don’t have any objective and precise data. Unfortunately, no one knows how many gambling addicts live in the country, how much time they spend on gambling. We only have a subjective opinion. I personally believe that that problem gambling is really a cultural problem. In fact, there’s no law that could regulate it. Neither is there a source that would collect betting data, winnings and losses of a particular gambler and a bookmaker. A special control body collects betting and winnings data in Belarus. There’s no background in Armenia that could be a reason to publish such data and refer to it. The approach that the local government has is very unprofessional. I can’t see a clear target of the law. It’s just a decision. That’s it.

Ex member of parliament and the head of a non-governmental organization “Freedom and democracy” Naira Zograbyan supports new betting restrictions. However, she thinks that restrictions have targets other than gambling business itself.

“The goal that the government pursues is to bankrupt the mass media. A direct ban on advertising in the media would face a serious opposition, including the one from international organisations. This is why the government has chosen a ‘legal’ way of doing the same things. They put pressure on bookmakers trying to deprive the mass media from money”.

Wait, why mass media?

Media regulatory issues are currently very important for the Armenian government. Prime minister Nikol Pashinyan is one of those who has been talking about it recently. The parliament has adopted a mass media financial transparency bill. The opposition believes that the main goal of the bill is to restrict some media. The point is that most of the Armenian press (including internet media) belong to ex government members. Pashinyan has been clashing with them for many years.

Is it really the only reason? Well, we don’t know for sure. Rafael Davtyan evaluates the level of possible damage to the media market in case the bill will be adopted.

“It’s not only about bookmakers, it’s about media, too. Mass media get over 50% of their income from gambling: outdoor ads, TV and Internet. I used to work in that area for seven years, five of them I worked in Armenia. Some media even get up to 70% of their income from gamling operators. I think this is a real problem”.

Armen Martirosyan, founder of Nett Digital advertising agency, claims that mass media get 40% of the income from gambling, and five years ago it was only 15%.

What is going to happen next?

Rafael Davtyan believes that new amendments will lead gambling operators to revenue losses very soon.

If the amendments are adopted, we’ll see no serious changes in a couple of quarters. Maybe some companies will recount their current budgets. However, even the second quarter after the new legislation starts working, the operators will lose 5% to 15% of the income. Obviously it will do harm in the future. These are not steps towards real safety for gamblers. Armenia can and should implement foreign experience for the local reality to start moving this issue forward.

Currently, there are two opinions on how the Armenian gambling business is supposed to be regulated. The first idea leads to total restrictions: a total advertising ban, limits on the number of retail shops. Rafael Davtyan thinks that most of the citizens will support this step, but the market may become part of the grey economy.

There’s another opinion. Restrictions are necessary, but the industry has grown so much recently that regulation with simple restrictions will lead to a real collapse for the industries that rely and depend on gambling.

Besides the media, gambling invests a lot of money into Armenian sports. The main league of the country, the Armenian football championship, is widely sponsored by bookmakers. For example, Vbet is a part of the tournament’s naming and sponsors the clubs (Pyunik, Noah, Van). TotoGaming supports Ararat. The development of Armenian football directly depends on gambling operators currently. Almost the same is true for mass media.

It’s unclear how the amendments will make the situation with problem gambling better. Legislators haven’t provided any objective numbers, and no research has been held. As Rafael Davtyan says: ‘It’s just a decision. That’s it”.

It’s clear though what exactly is going to change. Bookmakers’ revenue will decline, independent media, professional and amateur sports in Armenia will be harmed.

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