THE FINNISH GAMBLING MONOPOLY – TO HAVE OR NOT TO HAVE IT?

I’m still on my summer holiday and try to avoid to do too much work but now it’s almost impossible to avoid that. There is the most active discussion about the Finnish gambling system going on and I believe that I understand very well what it is about. I should mention once again that all opinions are my own ones and my company Veikkaus has nothing to do with this blog.

We got new government about two months ago and I gave my estimations what that will mean for the Finnish gambling policy and system. I believed that the importance of responsible gaming will increase, and the current monopoly-based system will stay until the end of 4 years period of the new government. I still believe on that but now the probability of system change has become a little bit higher. Our Prime Minister Antti Rinne has said that Finland should make deep analyze about other possibilities too.

There are two main areas which have caused lots of discussion. The first one has been those 18000 slot machines which Veikkaus has all over the country in shops, cafeterias and gasoline stations. The second item has been ads where Veikkaus has given too positive feeling of gambling. It’s quite obvious that there have been too big mistakes in those ads where for example “therapist” has encouraged “patient” to make some horse betting. But are those mistakes so serious ones that due to them we should discuss about the gambling system? Are those mistakes sign of something bigger problem which we have?

The new Veikkaus is in bad situation. The company is 100 % owned by the Finnish State. It’s obvious that management should follow the guidelines which owner will give but has it been clear what the owner is willing to have? The operational profit from Veikkaus to the state has been over 1 billion euros a year and gambling tax has been about 200 million a year. The Finnish State has got from Veikkaus totally about 1,2 B€ which is over 2 % of the state budget. So, we are talking about the huge financial issue. But as you know, the fiscal revenue can’t be the official reason for gambling monopoly. The only acceptable reason for monopoly system could be prevention of social problems like crime and problem gambling. The Finnish State has decided that monopoly is the best way to prevent those gambling problems. But would it be possible to maintain that revenue level and at the same time prevent problems?

The Finnish State should decide which is the primary goal of Veikkaus – money or responsible gaming. If they will select responsible gaming, it will mean that they should accept that the revenue level will go down quite a lot. I think that it would be quite easy to increase responsibility if we don’t have to care about the profit at all. But Veikkaus doesn’t have monopoly anymore in real life and our regulators don’t have tools to regulate those offshore companies which have already quite big market share in online gambling business in Finland (their GGR from Finland is about 300 M€). If Veikkaus will increase the responsible level and regulator can’t control those unregulated companies the gambling revenue will go outside the Finnish borders and gambling problems won’t decrease. If the Finnish State will select profit as a main goal, it will mean the end of monopoly and we’ll do the same what has happened for example in Denmark and Sweden.

I would say that the current situation is strange where Veikkaus is in the middle and ”shots” are coming from socially responsible bodies which are looking for much more responsible gaming actions and require Veikkaus to stop business development and marketing. At the same time ”shots” are also coming from total other side from more business-oriented bodies who would like to break monopoly-based system and promote offshore gambling companies. It is almost fun to follow that kind of discussion where those two totally opposite bodies have found the common enemy. I would say that it would be similar case when in politics extreme right and extreme left will find common enemy.

The new government decided just two months ago what kind of gambling policy they will follow. Despite of that our Prime Minister Antti Rinne said few days ago that they will consider that policy again, but it should be based on facts and deep understanding of gambling business. Quite many EU countries have moved from monopoly system to license-based system and we have lots of bench marking information from those changes. I think that we could utilize the experiences from France, Denmark and Sweden and could estimate what that kind of gambling systems would mean here in Finland from business and responsible gaming point of views. I have been surprised that there is not so much information about responsible gaming results from those other countries – it even seems that they haven’t care about that so much when they have changed their systems. As far as I know they didn’t make any problem gambling research in Denmark before they moved to the license system.

I’m not saying that it’s impossible to take care profit and responsible gaming at the same time but it’s very difficult to do. I’m saying that decision makers should know what they are looking for and what those changes might mean. As an economist I would say that monopoly as such will decrease the business activities. So, if Finland will follow the Swedish way, it would mean that at least that gambling activities will increase and we’ll have more marketing actions. But at the same time our regulators could control all those current unregulated offshore companies which are nowadays out of their scope and that would be positive thing. I don’t know what will happen here in Finland, but I know that we’ll interesting time ahead.

RAHAA VAI VASTUULLISUUTTA?

Mitäpä sitä kesälomallaan muutakaan tekisi kuin kirjoittaisi omaan työhönsä liittyvää blogia… Kuten olen jo blogeissani aiemminkin todennut, niin kirjoitukseni ovat täysin omaa käsialaani ja työantajallani Veikkauksella ei ole näiden tekstien kanssa mitään tekemistä. Ajatukseni ja mielipiteeni ovat siis täysin omiani, vaikka tietysti työtehtäväni ovat edesauttaneet tietojen saamista ja näkemyksien syntyä.

Kirjoitin pari kuukautta sitten arvioni Suomen uuden hallituksen mahdollisista vaikutuksista suomalaiseen rahapelipolitiikkaan ja -järjestelmään. Totesin silloin uskovani mm. siihen, että vastuullisuuden merkitys tulee korostumaan ja nykyinen yksinoikeuteen perustuva järjestelmä tulee säilymään ainakin tämän hallituskauden loppuun asti. Olen edelleen samaa mieltä, vaikka tuon jälkimmäisen asian todennäköisyydet ovat tämän viikon kommenttien perusteella muuttuneet.

Veikkauksen mainonta on saanut viime aikoina osakseen kovaa kritiikkiä. Virheitä on varmasti tehty, mutta kyseessä ovat toistaiseksi olleet yksittäiset ylilyönnit ja/tai virhearviot, joiden ei mielestäni pitäisi millään tavalla vaikuttaa siihen, minkälainen rahapelijärjestelmä Suomessa on. Vai pitäisikö kuitenkin? Onko mainoksista tunnistettava linja rahapelaamisen kannustamiseen sittenkin merkki jostakin isommasta rakenteellisesta ongelmasta?

Kansanedustaja Juhana Vartiaisen lausunto Veikkauksen tilanteesta oli kuin suoraan omasta suustani. Uusi Veikkaus on joutunut hankalaan tilanteeseen. Osakeyhtiön tulee kuunnella omistajansa mielipiteitä. Veikkaus on 100 % Suomen valtion omistama yhtiö, joten Suomen valtion ääni on omistajan ääni, mutta mitä tuo ääni kertoo yhtiölle? Veikkaus tuottaa edunsaajilleen vuositasolla yli miljardi euroa ja sen lisäksi valtio saa rahapelitoiminnasta noin 200 miljoonan euron verotulot. Fiskaalisen tuoton taso Suomen valtiolle on siis noin 1,2 miljardia euroa, joka on yli 2 % koko valtion tulobudjetista. Taloudellisesta näkökulmasta puhutaan omistajan kannalta valtavan suuresta asiasta. Toisaalta taloudellinen tuotto ei ole pätevä oikeudellinen peruste yksinoikeusjärjestelmän ylläpitämisen syyksi. Rahapelien järjestämisen yksinoikeus on mahdollista, jos järjestelmä ehkäisee pelaamiseen liittyviä ongelma, joita ovat mm. rikollisuus ja peliongelmat. Veikkauksen omistajan eli Suomen valtion tehtävänä on siis myös ohjata yhtiötä toimimaan mahdollisimman vastuullisesti. Nyt näyttää siltä, että omistajan kaksi eri näkökulmista syntyvää tahtotilaa iskevät toisiaan korville.

Toistan varmasti itseäni liikaa, mutta Suomen valtion tulisi päättää, kumpaa asiaa Veikkauksen tulee ensisijaisesti tavoitella. Vastuullisuuden priorisointi tarkoittaa väistämättä nykyisen tuottotason merkittävää putoamista. Vastuullisuustoimenpiteiden lisääminen lienee kohtuullisen helppoa, jos tuottojen alenemisesta ei tarvitse välittää. Toisaalta vain Veikkauksen tekemät erityisen kovat vastuullisuustoimenpiteet eivät välttämättä juuri poista ongelmapelaamista, mikäli viranomaisilla ei ole nykyistä enemmän keinoja puuttua Suomen reguloinnin ulkopuolella tapahtuvaan pelaamiseen (= offshore peliyhtiöt). Tällaisessa tilanteessa aktiivisten pelaajien rahat vain siirtyvät toisille peliyhtiöille, joiden vastuullisuustoimenpiteet ovat yleisesti ottaen selkeästi Veikkauksen nykytason alapuolella. Mikäli taas Suomen valtio päättää priorisoida tuottotasoa, niin yksinoikeusjärjestelmästä pitänee luopua ja siirtyä esim. Tanskan ja Ruotsin seuraksi lisenssijärjestelmään tai ainakin osittaiseen sellaiseen.

Veikkaus näyttää joutuneen ristituleen, jossa toisaalta ”ammuksia” tulee peliongelmia korostavilta tahoilta, jotka vaativat yhtiötä toimimaan nykyistä vastuullisemmin ja lopettamaan tai ainakin merkittävästi hidastamaan tuotekehityksen ja myynnin edistämisen. Toisaalta ”pommitusta” tulee aivan toisilta tahoilta, jotka pyrkivät edistämään yksinoikeuteen perustuvan rahapelijärjestelmän murtumista ja suuressa määrin myös yksityisten kansainvälisten rahapeliyhtiöiden liiketoimintamahdollisuuksien avautumista Suomessa. On ollut ”huvittavaa” seurata viime aikaista keskustelua, jossa nämä kaksi täysin eri asiaa ajavaa tahoa ovat yhdessä arvostelleet Veikkauksen toimintaa. Vertaisin tilanne politiikkaan, jossa äärioikeisto ja -vasemmisto hyökkäävät yhteisen keskellä olevan vallanpitäjän kimppuun.

Olen pääministeri Rinteen kanssa samaa mieltä siitä, että suomalaisen rahapelijärjestelmän perusteita tulee jälleen kerran tarkastella, vaikka Suomen uusi hallitus vain pari kuukautta sitten teki hallitusohjelmassaan asiasta selkeitä linjauksia. Uskon vahvasti faktaperusteiseen päätöksentekoon ja toivon, että tätä periaatetta noudatetaan myös rahapeliasiassa. EU:ssa on viimeisen kymmenen vuoden aikana tapahtunut monessa maassa muutos rahapelien yksinoikeudesta lisenssijärjestelmään. Näistä muutoksista, mm. Italiassa, Ranskassa, Tanskassa ja viimeisimpänä Ruotsissa, on saatavissa paljon faktatietoa. Taloudelliset vaikutukset on helppo analysoida, mutta yllättävää on se, ettei kaikissa maissa ole kiinnitetty huomiota peliongelmissa tapahtuneisiin muutoksiin. Esimerkiksi edistyksellisessä Tanskassa ei tehty ennen muutosta ongelmapelaamisen määrän arviointia lainkaan, joten vertailukohtaa muutoksen vaikutuksille ei ole olemassa. Vaikuttaakin siltä, että monen maan päätöksentekoa on ohjannut taloudelliset tavoitteet.

Olen todennut aiemmissa blogeissani, että vastustan lähtökohtaisesti monopoleja. Olen kuitenkin saanut työskennellä rahapelejä yksinoikeudella hoitavissa yhtiöissä kohta 28 vuoden ajan ja ymmärrän sen vuoksi hyvin, että joissakin tapauksissa yksinoikeudella päästään parempiin tuloksiin kuin vapaalla kilpailulla. Uskon näin olevan aloilla, joilla on todellinen tarve säädellä asiakkaiden kulutusta. Suomessa tällaisen kuluttajia koskevan erityisen suojelun aloiksi on katsottu mm. alkoholi ja rahapelaaminen. Vaatiiko kuluttajien erityinen suojelu yksinoikeusjärjestelmää vai ei?

Ruotsin lisenssimallissa viranomaiset ovat saaneet säätelyn piiriin aiemman parin yhtiön sijaan yli sata yhtiötä. Viranomaisen mahdollisuus puuttua asioihin on siis tässä mielessä lisääntynyt merkittävästi. Toisaalta aiemman parin virallisen toimijan (ATG & Svenska Spel) mallista siirtyminen yli sadan rahapelibrändin malliin on aiheuttanut mainonnassa räjähdysmäisen kasvun, joka taas väistämättä lisää peliongelmia. Järjestelmäratkaisuun ei siis ole itsestään selvää ratkaisua. Elämme kiinnostavia aikoja…

PREDICTIONS ABOUT SPORTS BETTING

It’s already 1½ months when I last time wrote my blog. I should be more active but there have been so many other things to do…

I participated in World Gaming Executive Summit few weeks ago in Barcelona. That was good event where I got some ideas for my blog. I had excellent panel discussion about the future of lotteries with CEO of Lottoland and I’ll write about that after my summer vacation but now I’ll concentrate on Sports Betting – again.

Sergey Portnov, CEO of Parimatch, gave interesting predictions about the future of Sports Betting. I’ll summarize what Sergey told and make my own predictions too. Let’s see how well we could see the future of Sports Betting.

Portnov presented 10 points and gave odds all of them. Here is short version about his predictions without those odds:

  • there will be 100+ new betting sites targeting 18 – 25 years old segment
  • marketing massacre is imminent, budgets doubling and LTV also growing
  • bookmakers will run their own sports competitions to ensure always on live betting propositions
  • majority of companies will transform management teams
  • ICE event will be overfilled with payments solutions, bookmakers will finally start building USPs around payments
  • sport streaming in its current form will become obsolete
  • individual product offerings will overtake generic offerings
  • all major players in the market will rebrand
  • offshore market will grow faster than regulates market
  • esports will account for 10 % revenue for betting operators

It’s very logic that I look Sports Betting from different perspective than Sergey does. Finland versus Ukraine/Cyprus and state-owned monopoly versus private owned offshore company are totally different worlds. Anyhow we both know Sports Betting business well and that’s why I could agree with Sergey about many of his points.

My 10 predictions about the future (5 years) of Sports Betting are:

  • GAFA companies will enter to gambling/Sports Betting business
  • big media companies will utilize their sports media rights also in Sports Betting business
  • companies will have separate Sports Betting brands & offering for active customers and average customers
  • individual products & services will increase their popularity
  • esports will be the second biggest sport in Sports Betting (includes new esports formats)
  • marketing of Sports Betting will be banned – at least in EU
  • bonuses won’t be allowed
  • regulated companies will have at least 80 % market share in Europe and North America
  • there will be new popular Sports Betting products which are different ones compared to current fixed odds Sports Betting
  • the importance of responsible gaming will increase dramatically

WHERE THE FINNISH GAMBLING POLICY WILL MOVE?

We’ll finally get the new government here in Finland 7½ weeks after the Parliament election. It has taken more time than normally to establish that government than we are used to have. I believe that there are two main reasons for that. The first one was EU Parliament election. Parties weren’t willing to announce the new government program before EU election. The other reason has been quite strange result of Parliament election. The biggest party got just a little more than 17 % of votes (for the first time under 20 % ever) and there was no clear winner at all.

Anyhow now it seems to be sure that the new government will be there soon. We shall face strong movement from the “right side” to the “left side”. There will be four former opposition parties in the government and just one party will continue in that new government too. That will mean that many things will probably change in next four years. I’m keen on seeing what it will mean for gambling business.

As you know we have monopoly system in whole gambling business here in Finland. My company Veikkaus is taking care of all possible gambling businesses. As far as I know all big parties have supported that system at the principle level. So, new parliament and government won’t necessarily mean anything from gambling system point of view. But there is more and more discussion about our system anyhow and I’ll now give just my personal estimation/guess what might happen in next few years.

The Ministry of Interior Affairs is responsible for the gambling legislation and regulation. Civil servants of that ministry have made study about what kind of needs our gambling legislation would need. The published a memo about that last week and you could find it here: http://julkaisut.valtioneuvosto.fi/handle/10024/161645 (only in Finnish). That memo describes well how our regulator sees gambling business. Civil servants are not the final decision makers, but they will have lots of influence towards politicians.

The Finnish Lotteries Act (= gambling law) is a little bit strange. Veikkaus has monopoly in all gambling verticals (lottery, casino, sports & horse betting) and it’s the only company which has right to market it’s gambling product but not all of them. From customer point of view it’s anyhow legal to use services of other gambling operators and the Finns are doing that more than ever. Those offshore companies are not allowed to have any marketing & sales actions in Finland, but regulator can’t control that in online channels. Finland is not using any kind of blocking to prevent gambling abroad. Now discussion about need of blocking is increasing and something might happen in that area.

The Ministry of Interior Affairs has now analyzed if blocking could restrict gambling abroad and at the same time reduce gambling harms caused by those operators. They have found out that blocking could reduce total gambling and gambling problems. They also say that if there would be blocking then Veikkaus doesn’t need to market its gambling products and doesn’t have to develop games that attract players to gamble. I believe that it might be the case in short term but in long term that would mean big problems. The Finnish customers would be forced to use worse products than the other ones could have, and they would know that. What that would mean for the reputation and acceptance of gambling monopoly and Veikkaus as the best lottery company in the world? What would happen then when the monopoly system will anyhow change to licensed system – how Veikkaus could be ready in that situation?

The main purpose of monopoly system is to reduce gambling problems and whole gambling. The regulator doesn’t think about the gambling profits at all but politicians do. It would be easy to reduce gambling – make it illegal and stop it totally. That would mean “some” financial challenges – the total amount of money to the Finnish State from gambling business is over 1,2 B per year. It has been quite interesting situation where the state has at the same time required Veikkaus to slow down its operations and make at least the same amount of profit as before. Veikkaus must take responsible gaming really seriously and there will be more and more changes in that area. Maybe the biggest change will be mandatory identification in slot machine gambling from the beginning of 2022. I’m not expert in that business but I would say that it will mean 100 – 200 M€ less profit.

Veikkaus has nowadays international business co-operation in lottery and horse betting businesses. Eurojackpot and Vikinglotto are popular products in Finland! Common horse betting pools with the Swedish ATG have big share of the whole horse betting in Finland. There has been discussion could we continue that kind of co-operation. According to the study it seems to be possible to continue that kind of existing co-operation, but civil servants are skeptic to let Veikkaus to have more than kind of operation. Veikkaus would like to have more international B2B businesses but would it be possible?

I try to guess what the new government might decide about those four main themes in that study of the Ministry of Interior Affairs.

  1. Blocking – it would be easy to decide that we should have blocking system also in Finland if I think about that from the principle ideology of government parties. But I don’t believe that there would be any kind of blocking due (or thanks) to RKP (small Swedish speaking party). Blocking would have serious effect on PAF and RKP won’t let that happen.
  2. Responsible gambling – every parties is willing to take that even more serious and I guess that balance will move to that direction. I won’t be surprised if we’ll have mandatory identification in whole gambling business in next four years or at least the decision about that.
  3. Money – the government program sees to be maybe too positive about financial future and I’m afraid that they will realize that quite soon. So, there will be need for that 1,2 B€ also in the future. The challenge will be the balance between responsible gaming and gambling profits. I guess that the new government will accept some hundred million decline of gambling profits and take responsible gaming more seriously.
  4. International business co-operation – Veikkaus could continue the current international co-operation and could get permission for some other new areas if the will be channeling reasons for that. I believe that due to previous point – there should be some ways to get more gambling revenues from “not so dangerous” business verticals (lottery and other pool-based games).

As a joker I would like to guess what the new government will decide about the gambling system. As you probably have already noticed from my previous blogs I have though that we should ask “when Finland will move to licensed system?” instead of asking “is Finland going to move to licensed system?”. I still believe on that but now I would say that the gambling system won’t change during the next four years. The new government will try to make Veikkaus monopoly even stronger!

ABOUT ESPORTS AGAIN

I already wrote about esports three months ago when I admit that I’m fan of esports. In that blog I try to describe that “rising star” in general level and I’ll do that again. There are two reasons why I’m going to continue with the same theme – it’s so important one and I’ve visited two esports seminars in last few weeks (New York & Helsinki).

The total revenue from esports was over 900 M$ in 2018 and growth was almost 40 %. It seems that the same kind of development will continue also this year and it would mean that revenue will be 1,2 – 1,3 B€ this year. It’s not anymore just hobby of nerds at garages…

Sponsors have already found out esports and money from those pockets is increasing rapidly – last year the sponsorship growth was over 50 % and there are nowadays big companies like Coca Cola, Intel and Audi among those sponsors. The area which is increasing even faster than sponsorship is media rights. One challenge in esports is that fans are not used to pay about picture and media companies should find out new innovative ways to get money from customers. But there are huge opportunities ahead because there were 380 million people who were keen on following esports.

The most important bodies in esports ecosystem at this moment are game publishers (f.ex. Riot, Valve, Blizzard), platforms (YouTube, Twitch), competitions, teams, players, sponsors and of course fans. From my point of view one important and interesting body is missing from that list and it is of course Sports Betting companies. I’m sure that the importance of those bodies in esports ecosystem will change but I don’t know how but I would like to speculate a little bit.

At this moment the money to esports is coming mainly from sponsors, advertisers, media rights buyers and of course players/fans. As I already said the revenue from the three first bodies seem to increase all the time and I don’t see any reason why that development would stop – the speed of increase will reduce after some years. The more interesting question is what will happen to money coming from the big audience and what other income resources there will be?

Esports is so young phenomenon that real big audience hasn’t found it yet and despite of that there are already now that 380 M people who are interested in that sports and approximately 165 M real active fans. The number of active fans is by the way about 50 million more than ice hockey has. I believe that most of those fans have used to play esports (or video) games before and there is huge possibility that other kinds of fans might find out esports also in next few years. I’m sure that it will happen thanks to media companies who are going to show more and more esports in their channels. There are over 100 M ice hockey fans in the world and I guess that just minor part of them are former ice hockey players. Why the case wouldn’t be the same in esports?

Esports industry should concentrate more on two separate customer groups. The first one is “hobby players” who are keen on those games and things/features related to that sports. The business model for them could be extra elements to those games – they would be ready to pay for new kind of weapons or whatever is need in games which they are playing. That’s what game publishers are doing nowadays. The other more interesting group is fans of esports. Nowadays those two groups seem to be same group but quite soon there should be totally different business and service model for fans. Many of them are now former esports hobby players who have became too old to be active players anymore. But as I already mentioned there will be big group of fans who are not or haven’t been players by themselves at all.

Would the same business model which big teams are using in other sports work in esports too? I have heard that NBA fan is using about 20 times more money than fan of esports. There seems to be huge business potential but how to monetize that? Merchandise and tickets might be one traditional way? The other possibility is to develop extra services related to live feed like for example Formula 1 has done. Sports Betting and other type of gambling might be one solution. I’m sure that all those things will raise already this year but for some reason I have feeling that we’ll see something totally new in next few years…

I know that almost everyone in current esports ecosystem is thinking and planning about “something totally new”. We are also doing that because we believe on esports and would like to play bigger part in that “raising star” of sports. That’s the reason why my company is going to organize “Innovation Challenge Week” where the theme is esports next week. I’m sure that we’ll get interesting ideas from there and I’m afraid that I’m not willing to share those ideas with you – yet…!

WHO ARE INTERESTED IN THE US SPORTS BETTING MARKET?

It’s too long time when I wrote my blog last time. I spent last week in New York/New Jersey in the excellent Betting on Sports America event. I learnt there quite a lot about US Sports Betting opportunities and among other things had chance to give my advices to US lotteries.

I got also some feedback about my blog. I heard that quite many is reading my stories via mobile phone and it has been difficult to read it when I’m writing too long paragraphs. I now try to change my style a little bit and hopefully it will help.

It’s not 100 % sure what will finally happen there in USA. The PASPA decision seemed to chance everything and in fact made Sports Betting legal or at least made it “non-illegal”. But after that there was another court decision which changed almost everything… At this moment there are less than 10 States where Sports Betting is already allowed. There are also 10 – 15 States which are planning to make it possible quite soon. It’s possible that about half of US States will have legal Sports Betting in next few years.

About 90 % or even more of participants of the European Sports Betting seminars are already somehow involved in that business. That’s why I was surprised there in New Jersey when I noticed that at least half of audience didn’t have so much knowledge about our business. That was strange but at the same time fascinating. The whole business might change due/thanks to those newcomers and I’m keen on seeing what will really happen!

I try to make short analyzes about different interest groups who are involved in Sports Betting in USA. The first group is of course customers. There has been huge unregulated/illegal Sports Betting market in USA. Customers are already used to make a bet and that would help a lot but at the same time it means that customers are more critical and enlightened. If US companies won’t succeed very well it would be possible that the unregulated market will stay quite big.

There are lack of information and knowledge about gambling and Sports Betting among politicians and regulators. They should make big decisions but how they could take care of that if they don’t understand enough about consequences? The whole gambling industry should deliver as much valid information as possible, but we should understand that politicians won’t so much for our issues.

All top sports leagues are interested in Sports Betting. Their attitudes vary quite a lot but all of them are now thinking about their role in that new business in USA. The biggest ones NFL, MLB, NBA and NHL have already extremely big business by themselves, but they would like to control and get some more revenue also from gambling side. I don’t believe that any leagues would start their own Sports Betting business.

Las Vegas has been the only place in USA where Sports Betting has had legal role already many years. There are lots of gambling companies operating Sports Betting. Those companies might have good position if they could utilize scalability but I’m not sure if they can do that. The most popular sports in USA are different ones compared to Europe. Vegas bookmakers have razor-sharp analyzes about American football, baseball and basketball and it will be very difficult to beat them in those areas.

Some big European Sports Betting companies like William Hill have already established their operations to USA. Those companies are used to offer same products all over the world and scalability is one key word for their success. They have of course chance to manage in US market too, but it would be more difficult than they have expected it to be because they have to make it in slightly different way in all States. I have heard that they haven’t got so good revenues for example in New Jersey as they have expected.

How about US lotteries? They are used to outsourced they business operations to technology suppliers and probably they will do the same if they will decide to move to Sports Betting business. If they would like to manage in the heavy competition, they should control their customer database and operate at least in some areas in different way than the other operators are doing. I gave them two potential business ideas: they could offer “the most responsible” Sports Betting in US or/and they could offer “more lottery style” pool-based sports games too.

Big technology companies are used to operate some gambling products on the behalf of license holders and of course they would like to do the same also in Sports Betting. I won’t be surprised if some of those tech companies would like to own operating license by themselves too.

The big new player in gambling business might be media companies. The message from BOSA seminar was clear – all big US media companies are considering the business possibilities in Sports Betting market. The main scope is to make Sports Betting more entertaining than it has used to be. Media companies’ core customer group is sports fans not heavy punters. I have had that same idea already 15 years… Those big companies like ESPN or NBC have lots of money and if they decide to be big player in Sports Betting business I wouldn’t be surprised if we talk about 9 or even 10 digits investments! I guess that they won’t try to get operating licenses for themselves but some important roles they will have for sure.

There are also lots of investors who are looking for new business opportunities from gambling business. I’m not expert on that area but I have understood that there would be some billions of dollars available investments. Normally private investors are just looking for profits and that would make Sports Betting business even heavier than it’s used to be…

There are many critical things still open in US Sports Betting business. What would happen if interstate gambling would be allowed? It’s obvious that in that case different companies would manage. What kind of limitation there will be – for example now mobile gaming in allowed just in five US States? What will happen if Silicon Valley will concentrate on the gambling technology development? That might chance the whole industry and who will manage then in our business. I’m extremely keen on seeing what will happen and hopefully I could play some role there!

HOW WELL DENMARK HAS SUCCEEDED IN GAMBLING POLICY?

I’m sorry that I made stupid mistake by accident in my previous blog! I wrote that regulated companies had ¾ of gambling marketing in Sweden. That’s not true at all. I was supposed to write that offshore companies had ¾ of that marketing! According to statistics offshore companies had 79 % of gambling marketing and that describes very well that there hasn’t been monopoly in Sweden in practical level. I also forgot to write about the reasons why the former monopoly companies ATG and Svenska Spel have managed so well. I believe that they have done good work but of course their existing brand and customer base have helped a lot. I’m keen on seeing what kind of changes there will happen later this year.

This time I’ll concentrate on Denmark. They started with new kind of gambling legislation from the beginning of 2012, so they have now 7 years’ experience about that. There is still monopoly in lottery business but nowadays the most of gambling business is based on license system. I don’t know what official goals the Danish State set for the new system, but I could guess what they were. Probably there were at least three goals? 1. To get as much gambling as possible to regulated side instead of being illegal one. 2. Maintain or even increase the gambling revenues to the Danish State. 3. Reduce or at least minimize the number of gambling problems. My analysis might be stupid one if those weren’t the goals for that big chance they made there but I’ll take that risk…

The size of offshore gambling business in Denmark increased very much before they decided to change their legislation. The regulator, Spillemyndigheten, didn’t have tools to control actions made by offshore companies and that caused problems to monopoly operator Danske Spil which started to lobby for license system. The basic idea was to get same rules and conditions to all gambling operators in Denmark and to get all companies under control of regulator. There is still illegal gambling market in Denmark but it’s relatively small compared to situation in 2011 (before the change). By the way Spillemyndigheten calls all gambling without the Danish license illegal gambling. So, I would say that Denmark has reached the first goal.

The sale of gambling products has increased over 50 % after the change in 2012. There are big differences between different gambling verticals. Some games, mainly monopoly area, have went slightly down and some areas, online casino and sports betting, have increased a lot. So, the change has been from lower payout games to high payout games. That’s why sale number don’t give the best picture if we think about the profit to the state. The total revenue to the Danish State has been surprisingly stable all the time. State gets revenue from two different sources. There is 20 % gambling tax from GGR and they also get the profit from Danske Lotteri Spil (monopoly business). We could speculate what would happen in Denmark without the big change in gambling legislation? I believe that the revenue to the Danish State would drop and that’s why in big picture Denmark has managed to reach the second goal quite well.

Sports Betting business has changed much more. There are about twenty companies operating Sports Betting in Denmark. That number has been about at the same level from 2012, just slight decrease. During that time sale of sports betting has increased by 250 % and even GGR has raised by 215 % (2018 versus 2012). There have been also big changes in payout percent and distribution channels. Seven years ago the actual payout was about 85 % and last year it was almost 90 %. Theoretical payout is of course much higher, but customers are still using longer combinations and that’s why the actual payout is lower. Sports Betting has moved to internet and mobile channels. Last year about 1/3 of sports betting (GGR) came from land-based channel and almost 50 % from mobile channel and the rest from internet. Actually here in Finland the share of retail channel is even lower than they have there in Denmark. The biggest difference is that Live betting is quite popular in Danske Spil’s retail network.

There seems to be lack of information in the third goal area. For some reason they didn’t make problem gambling survey before they changed the legislation in 2012. The previous data is from 2005 and I think that it doesn’t give the best picture of results. Because I don’t have anything else from that area I should use those old numbers… They made large problem gambling research in 2016 which showed that there has been slight increase in the number of gambling problems compared to 2005. They have dealt problem gamblers to two different groups. There are less than 0,5 % of adults who have serious problems and they call those customers as gambling addicted or problem gamblers. The size of that group has increased a little bit. The other much bigger group is called risk players who are not “sick” yet but might have big risk to get sick. Total number of those two separate group is at the level of 3 % of adults and there has been also slight increase in that amount too. So, I would say that Denmark hasn’t managed very well in that third goal but the result has been surprisingly good if I compare that to the increase of sale and GGR.

As far as I know there are some changes planned in the Danish gambling market. They have already moved some former monopoly game areas, for example horse betting and bingo, to license part. Now there is going on quite heavy discussion about marketing limitations which seems to be the trend in many other countries too. I believe that there would be quite soon more limitations to the marketing of gambling products. One rumor is that it won’t be allowed to have sports betting marketing related to live sports events. There has been also discussions about the ownership of Danske Licens Spil which is still owned mainly by the Danish State but which is competing against other license holders.

I’m keen on seeing which system, the Danish or the Swedish, will finally get better results from all those three goal areas.