Does the proposed Finnish gambling legislation make sense or not?

I have written this column for http://www.lotterydaily.com (published February, 1st), and Conor Porter has partly modified the text.

The Ministry of the Interior Affairs has published a proposal for Finland’s new gambling legislation early in January.

The preparatory work done by the officials lasted for almost one year. I think that they did a great job, as Covid-19 certainly made the process significantly more complicated and, nevertheless, the work was done on schedule. The outcome of the work was also excellent given the assignment of the task. Officials are not responsible for the fact that the political mandate of the work was anything but sensible.

The aim of Finland’s current Government Program is to secure Veikkaus’ monopoly and operating conditions. In addition to this, the objective is to combat gambling problems and to channel gambling to Veikkaus’ responsible and controlled offering.

The Government Program also states that other gambling companies’ marketing will be addressed, and ways will be sought to restrict gambling to other gambling operators’ sites.

Based on the gambling policy guidelines mentioned above set out in the Government Program, the Ministry of the Interior Affairs set up a working group in early 2020 to prepare the guidelines for Finland’s new gambling legislation. The starting point for the legal reform was that the Finnish gambling system would continue to be based on a monopoly system.

Therefore, the working group did not have the opportunity to carry out such proper preparatory work as analyzed and sought the best possible solution as a basis for the Finnish gambling system. The mandate stated unequivocally that the preparation should be based on a monopoly model. Therefore, well-functioning licence-based models in other countries were not even studied.

I have stated on many occasions that I am always, in principle, objected to monopolies. On the other hand, during my Veikkaus-years, I’ve understood that there are business areas where competition should be limited. Gambling is definitely an activity that states must regulate because of potential problems.

However, this does not mean that a monopoly is automatically the best solution for restricting operations. It is lousy preparation if not all possible sensible alternatives are analyzed, but one of the essential things is decided without examining them. On what grounds can the Finnish Government claim that, in preparing the matter, it has promoted the interests of its citizens in the best possible way by prohibiting the examination of possible better alternatives?

As a whole, the proposal for new gambling legislation is a huge disappointment. Maybe I expected too much when I hoped to see things change. Now I feel that just a few changes are promised, and they are taking some things in the wrong direction. Hopefully, even concerning the gambling problems, there are developments in the right direction. But I am not sure about it.

The number of gambling problems in Finland has changed incomprehensibly little during the 21st century compared to the fact that gambling has increased significantly. The share of Finns suffering from gambling problems has been at the level of about 3% from year to year.

Instead, the number of people suffering from serious gambling problems has increased somewhat, and I hope that the new legislation will help this unfortunate development. I will return to this topic shortly after commenting on the policies made on physical slot machines.

The Finnish gambling policy’s core problem has been the discrepancy between business profit expectations and the responsibility requirements set at the same time. The Finnish state has not been able to decide which issue it considers more important. Therefore Veikkaus, the monopoly operator, has had challenges in understanding what the owner wants from it.

Revenue expectations have been high, but at the same time, instruments to respond to competition have not been allowed to be used. It now seems evident that responsibility has gained and is gaining more weight. On the positive side, the choice has finally been made, but I think it is far too late and no longer enough to save the situation. Now there is a significant risk that the gambling problems will not develop in the desired direction. At the same time, gambling profits will collapse, and above all, Veikkaus will permanently lose its future competitiveness.

Mandatory identification for gambling is coming, which is now introduced a few weeks ago in physical slot machines. The requirement to register for other gambling products will take effect over a few years. It is a good reform in terms of responsible gambling, but it is also a reform that will significantly impact the decrease in gambling revenue. The potential positive impact of identified gambling on business is based on the utilization of customer data.

However, it seems that Veikkaus’ ability to use data as a modern business company will be restricted or even denied. This shows that decision-makers have no understanding of what can be done with customer data. Using it is not automatically the same thing as adding gambling problems. It seems that the Finnish state no longer even wants Veikkaus to operate a profitable business anymore, but at most just put its products on offer, as was the case in the 1980s. I’m sorry on behalf of Veikkaus’ knowledgeable and skillful employees because they do not get to do the job properly.

There have been significant changes in slot machine operations over the past year. Veikkaus voluntarily decided to reduce the number of those machines a lot. However, the number of slot machine locations did not decrease in almost the same proportion. The change that has now come into force, making slot machine play only possible for registered customers, is a good thing. The explanatory memorandum to the new law states that slot machines’ placement should aim for solutions that minimize the gambling problems.

However, many would like to see slot machines removed from public open spaces, but that is not the case. I have never understood why slot machines can be kept in entirely open spaces in Finland. Slot machines are an integral part of gambling, but I think the machines’ correct location would be mainly in arcades and other age-restricted areas, following the Danish model. However, this is not the case in Finland, even after the new gambling legislation.

One of the most positive reforms of the proposed legislation is the clarification of the marketing of gambling. The premise is that marketing should be moderate and channel gambling to games that don’t cause so many problems. The weakness of the current legislation in force has been the definition of marketing and product information provision.

Several years ago, I was among those who planned the current gambling marketing policies, and I am ready to raise my hand and admit a mistake (as in basketball). I am glad that from the new legislation, the possibility to share product information is removed. Appropriate legislation should contain as few interpretations as possible, and the situation now seems to be improving.

The introduction of payment blocking will cause my blood pressure to rise. It could be the best solution for everyone, that I advise you to read a blog written by Aki Pyysing on the subject (https://www.sijoitustieto.fi/sijoitusartikkelit/viisikko-blokkaa-pelkasta-rajoittamisen-ilosta – unfortunately only in Finnish). However, it is enough to say that this reform makes no sense.

The reform’s economic impact is entirely non-existent, and this will not reduce gambling problems, so why is such nonsense done? In light of Norway’s experience, the blockings may restrict banks and major payment companies’ activities. Still, they will be replaced very soon by new service providers beyond the control.

Personally, the most exciting reform proposal is the opportunity for Veikkaus, or its subsidiary, to start a new type of business. I was the CEO of that kind of subsidiary, Veikkaus Solutions Ltd, and most recently, my job in Veikkaus was to prepare for re-starting a new business. Now it seems that Veikkaus would again have the opportunity to establish a subsidiary for non-gambling activities. The intention is for the subsidiary to provide gambling products and services to other operators and not engage in consumer gambling activities.

This is an excellent thing in the long run. Sales contracts for gambling products and services today are based almost exclusively on the revenue share model. The compensation received by the selling company is based on how much the customers of the buying company end up buying those products.

Hopefully, the Finnish authorities will not interpret such sales for gambling purposes. A massive opportunity for Veikkaus, which is still one of the best lotteries globally, would be to start international B2C gambling operations. Selling gambling products directly to customers in other countries would generate significantly more revenue than trading among gambling companies. However, B2C operations are not possible under the Finnish monopoly system. It would have been one additional primary reason for moving to a license-based system.

In conclusion, the answer to my question in the title is NOT. This reform, as a whole, makes no sense. I consider it a much better option to omit this proposed change altogether and move on to the licence-based system’s preparation. The rationale for the licence-based model would be worth its own separate column.

HOW MUCH IS ENOUGH?

I have written this text for www.LotteryDaily.com  and it is partly modified by Conor Porter.

The biggest competitive edge for lotteries in the gambling business has always been the ability to offer the highest jackpot in the market. This is still the case despite consolidation of the gambling business.

Former casino and sports betting operators have developed new products with high jackpots and have even entered the lottery business with the so-called “lottery betting” product.

Throughout history, lotteries have tried to increase the size of their lottery jackpots. As I have already mentioned in my previous columns, companies must know their customers and understand the motivations for gambling also among potential customers. The motivations for gambling and playing lottery games could vary a lot. It is partly up to customers’ socioeconomic background, but there are also many other reasons.

It is easy to notice from data that huge lottery jackpots increase sales a lot: the bigger jackpot, the bigger sales numbers, and profits for the lottery. Lotteries have done surveys among their customers and have found out the same result – the biggest motivation for buying a lottery ticket is to dream about something big. Although €1m would be enough for most customers, €100m would be even better for them.

We already have huge jackpots!

It is not clear what a big jackpot is. A million euros is a huge amount of money for someone, but someone else might think it should be 10 or even 100 times more. It is often irrational thinking. A person with thousands of euros may think that Lotto is not worth playing when the grand prize is only a few million euros, even if it could change his whole life.

European and US lotteries offer the biggest lottery jackpots. We have two separate coalitions in Europe, which are organizing the biggest lottery games; the EuroMillions and the Eurojackpot. Both of those groups have decided to limit the maximum size of lottery jackpots. The maximum jackpot in EuroMillions is €190m, and in Eurojackpot, it is €90m. Those amounts are also the top prizes ever paid out from those games, and they’ve been paid out quite often.

US lotteries have also established two separate groups which are organizing the high prize lottery game, Mega Millions and Powerball, which offer the highest jackpot in global gambling. US lotteries are using the so-called annuity amount in their marketing, which describes the jackpot’s potential size if the winner doesn’t take the prize immediately but rather for many years.

The highest US jackpot has been in Powerball, where three winners shared a $1586m jackpot. That’s bigger than the largest jackpot awarded in Mega Millions where one customer won $1537m, the highest amount of money a single customer has ever won anywhere.

All of those four games have increased the sale of lottery games, and it seems that huge jackpots have helped lotteries to do better business. However, those mega jackpots have also caused some problems.

When customers have noticed that it is possible to win €90m in the Eurojackpot, the jackpot size of the local Lotto game is not so attractive anymore, even though €10m would be a huge amount of money to win. This has caused quite a big cannibalization from local Lotto games to those multi-state jackpot lotteries.

The other challenge which especially US lotteries have noticed is the inflation of jackpot size. There have been about 50 times when someone has already won over $300m either in Mega Millions or Powerball games. According to the US lottery experts I have listened to in lottery seminars, the sale will increase remarkably only when the jackpot is over $250m. For example, a $200m jackpot doesn’t have any serious effect on lottery sales. That sounds crazy to me!

Is it still possible to have even higher jackpots?

None of the lotteries could, in practice, offer those huge jackpots alone. Collaboration is the tool for that. It would be possible to offer even higher jackpots in those European games, but they have decided by themselves that there are maximum top prizes in both EuroMillions and Eurojackpot. They could decide by themselves if they would like to change that and remove the maximum limit. Of course, regulators might have opinions about that.

Removement of the maximum prize limit could help a little bit in Europe, but it won’t raise those games to the next level. If European lotteries would like to do that, the best solution would be the collaboration between EuroMillions and Eurojackpot groups. Together, they could go to the next level, as it might be possible to offer lottery products where the jackpot could be €300m-€500m or even higher.

US lotteries have similar opportunities in their markets. The next step after the mergers of those European and US coalitions could be the collaboration between Europe and the US. That kind of partnership could raise the theoretical jackpots to billions of euros/dollars. The next step after that could be ‘World Lotto’…

I’m not sure if I would like to see that kind of development or not. I’m not sure what is enough for the customers and what that kind of development would be for lotteries in the long term. Lotteries shouldn’t voluntarily give their biggest competitive edge away. Lotteries have traditionally been able to offer much higher jackpots than other gambling companies.

However, the market has changed quite a lot in recent years as Lottoland and other similar companies have entered the market. Those Lotto betting operators can offer the same jackpots as the original lotteries. On top of all that, those companies can take advantage of the lotteries’ game brands and offer all different huge jackpot products in one place.

Lotteries still have pole position in that competition because customers are used to getting the highest potential main prizes from lottery games. Lotteries shouldn’t give that position away!

WHAT CAN WE LEARN FROM NORWAY’S GAMBLING MONOPOLY?

I have written this blog for LotteryDaily.com and they published it last week. This text is partly modified by Chris Murphy.

The Nordic countries of Denmark, Finland, Norway, and Sweden have quite similar systems and legislation in many areas. That has been the case also in gambling business until the beginning of 2010’s when Denmark decided to move from a monopoly to a license-based system in 2011. 

Sweden decided to follow that from the beginning of 2019. Finland and Norway still have gambling monopolies in all gambling areas, and they are by the way the only European countries that still have that kind of legislative situation. 

It begs the question; why are those well-developed, innovative countries still trying to keep a monopoly-based system? Furthermore, is there anything we could learn from them? 

For the purposes of this particular column I’ll concentrate solely on Norway and return to covering developments in my home country after some months. As you know, in practice all European countries have a monopoly-based system in lottery games but not in sports betting. And most countries have never even had a monopoly in the casino business. But Norway has a monopoly in all gambling areas and physical casinos are totally forbidden. 

The question is, has that kind of model worked well? The size of gambling business in Norway is big. There are about 5.4 million inhabitants in the country and the total GGR of gambling business in 2019 was M€1.244. Almost half of GGR came from digital channels. 

Gambling acceptable among Norwegians

Although there is a monopoly, the share of offshore operators is big – according to H2GC it is 27%. Gambling is common and acceptable among Norwegians. According to surveys almost 2/3 of adults used to play some gambling products at least once a year.

The previous government was keen on liberalization and it seriously investigated a number of other possible legislative models for the Norwegian gambling business. In 2015 it opened up the lottery business by a fraction by issuing supplementary lottery licenses for five small operators. Those licenses are still valid, but the operational possibilities are extremely limited. 

It seemed that Norway would move to a license-based system at the same time as Sweden, but in summer 2017 the government decided to continue the monopoly system. The system is not as the monopoly we have in Finland because there are two operators, Norsk Tipping and Rikstoto, and small lotteries plus bingo halls, but in principle it is still a monopoly.

Norway has run and controlled monopoly-based gambling seriously. The prevention of gambling problems has been the main purpose, relegating profit to just a secondary element. The country has enough money anyhow and there has been no need to maximize gambling revenues at all. 

There are lots of restrictions for gambling in Norway. Mandatory identification in order to gamble has been in existence for many years and there are tight gambling/loss limits in the gambling business run by the state-owned Norsk Tipping. Norway had also tried to restrict gambling offshore with blocks in place for 10 years. 

Gambling offshore is still legal in Norway, but operators don’t have licenses to offer their services in the country and are prevented from marketing their products. To compound matters, it has become difficult to move money to those companies and get winnings back from them. 

However, preventing Norwegian players from gambling offshore has been difficult to achieve because they have become accustomed to playing with those operators. According to customer surveys many Norwegians are unaware that companies like Unibet and Betsson don’t have licenses to operate in Norway. That might explain why 27 % of gambling is still going abroad despite the official monopoly system.

I think, though, that Norway is the best example of how a country should organize its gambling business should it be monopoly-based. Its system is not an ideal one, because there is no reason to have those minor lotteries and probably they should consider merging Norsk Tipping and horse betting operator Rikstoto. 

But there are lots of good things. The state has allowed Norsk Tipping to develop its own business, enabling the state-owned lottery company to offer good products and service to its customers. It is important, however, to have the right channels in place, otherwise the legitimacy of the monopoly system will disappear. 

Norway has now introduced even lower loss limits for gambling. That has and will continue to affect the profitability of Norsk Tipping for sure. The same kind of limits are expected to be applied to horse betting too from the beginning of 2022 and that will greatly impact the GGR of Rikstoto. 

More laws proposed

Consequently, if Norway can’t better control offshore gambling there will be an inevitable migration of players in that direction. The current government knows that and has proposed more laws, for example a restriction of gambling ads on satellite channels which will limit the business of offshore companies. At the moment it seems that tighter payment blocks have managed to reduce offshore gambling a little, but according to estimates it is just a temporary remedy.

To reiterate, the main purpose of the monopoly system is to prevent gambling problems. Norway has tried to do that for a long time. Among other measures, they prohibited the huge slot machines business that was operating 15 to 20 years ago, because most gambling problems were caused by those machines. 

It is strange that although Norway has put lots of effort into the reduction of problem gambling, the results are not so good. The University of Bergen has undertaken significant new research on Norway’s gambling problems. It found that the incidence of problem gambling has increased compared to the situation in 2015. There are 3.1 % of people suffering from gambling problems (2.3 % in 2015) and 1.4% are experiencing serious problems (0.9 % in 2015). 

The number of gambling problems is now at the same level as it was before the ban on the slot machine business. The structure of gambling problems has also changed. Now almost half of the problems are coming from digital casino games. Nowadays younger customers are suffering from gambling problems than before. There are different measurement methods of gambling problems in different countries, but despite that it is obvious that the number of gambling problems is at a higher level than it is in Denmark and Sweden where they no longer have a monopoly.

Norway has strongly and consistently tried to control the social and economic disadvantages of gambling with a monopoly. It is even prepared to decrease profit levels if that would help to reduce the number of problem gamblers. I would like to award them “10 points” for that. 

Unfortunately, results show that it has still not succeeded very well. There will be more restrictions for offshore operations, but it is unclear if they will work or not. I believe that state control and regulation will always be behind business development and that’s why there is no way to totally prevent offshore gambling anymore. 

Might it be possible that the monopoly system is no longer the best tool to prevent gambling problems in the current digitalized world?

Given that a monopoly has not succeeded in combating Norway’s gambling problems, it is unlikely these measures will work in any other European country. In Norway and also here in Finland we will have a discussion sooner or later about gambling monopolies. The states must find the best balance to prevent gambling problems and offer customers the best products possible. That leaves one final question; does the monopoly system still offer the best way to achieve that?

MORE GAMES PLEASE!

I wrote this column for http://www.lotterydaily.com and they published it few days ago. This text is partly modified by Chris Murphy.

The world is changing, and cycles of change are constantly accelerating in all areas of living. This is also the case in gambling business and the change will continue. The digitalization of gambling has been talked about to the point of fatigue, but despite this, for example, many lotteries do not seem to be able to move around in a large scale. Somehow it seems that traditional state-owned lottery companies prefer to focus on the fight against change rather than seeing it as an opportunity. But change can’t be stopped and coping with change requires the ability to adapt to it.

Instead of the relentless talk of digitalization, I would like to bring another topic to the debate where I’d expect a much more active approach from the lotteries. Fighting against change has meant that lotteries’ own game portfolios haven’t been developed as much as they should be. 

A typical portfolio has been just a few draw-based games and some scratch cards. Product renewal has meant a new lotto game or instant ticket. No more radical changes have traditionally been seen from the lotteries.

The gambling market has been constantly evolving and new business areas have followed each other. People use a wide range of gambling products and have started to become customers for several different gambling companies. 

A modern and agile gambling company focused on the digital business often builds its strategy for a goal that aims to get customers to use products from as many different product groups as possible. The idea is based on the fact that a customer playing several different products in the same company is more likely to remain the company’s customer than those who play only one or two products.

Gambling companies will get another benefit if they manage to expand customer product usage. Customers, who increase the number of games they play, will also increase their total consumption on average.  Of course, the growth is not as big as the money invested in a new game, because most of the money spent on the new game is out of some other games they used to play before.

However, the actual jackpot for the company is available. If the money that customer uses for playing your new game is at the expense of the games of another gambling company, then the entire profit of this new game is new money for your company. If lottery expands its offering to completely new game types, it is possible that its loyal customer will discover games which he used to play with another company. In this situation, there is a chance that the customer will transfer all his gambling to the lottery and even in the case where his total gambling does not increase, the lottery’s profits can and will increase.

How does the traditional lottery product development with a “new lottery game” fit into that pattern, which is hoped to produce customers who are going to use just lottery’s own products? Not so good. With a new lottery game or scratch card it is extremely difficult to get any customer to transfer his gambling from another company to your lottery. 

A successful launch of the lottery game can certainly bring new money from old customers, but the turnover that has been accumulated mainly for the new product is a shift from your other products. You won’t earn a lot when you just move money from your right pocket to the left one.

Of course, I’m aware that in many countries lottery owners have curbed product development and instead been satisfied with the profits from the traditional lottery business. The most important thing has been to secure the established monopoly position and try to prevent that from being jeopardized. Business growth may not even be a key consideration. But what will the future look like if the static offering starts to lose interest against other gambling offerings? Not good at all.

The monopoly status of the lotteries is beginning to be more and more nominal.  Lottery betting has come to rob the same market and other gambling verticals have otherwise stuck right next to customers on their skin. Modern gambling is often fast and entertaining compared to lottery products. 

Nowadays it is much more difficult to get younger customers to become regular customers for lottery products. Should lotteries expand their offering to other gambling verticals? They definitely should if it is legally possible. And if it is not, at least a reasonable effort should be made to change the legislation to a form in which other gambling verticals could also be offered to the lottery customers.

Why has this not been done to a significant extent? The owner’s will and legislation are, of course, valid reasons but they can be influenced if necessary. The big ideological problem seems to be that many lottery operators are cautious about using smaller prize games to compete internally against traditionally higher payout lottery products. 

If only the same bet moves to a lower payout product, the revenue will of course be lower. You shouldn’t worry about that at all. In modern gambling products, the rhythm of gaming and the circulation of money enable the same kind of profits thanks to increased turnover. 

The crucial factor for the overall development of revenue is whether the customer is ready to increase the total amount of money he used to play or not. It is difficult to see that adding a new product group to the company’s portfolio would reduce the total amount of money spent on gambling in any significant customer segments.

In today’s gambling world where responsibility is the key word, the offering of lottery has traditionally been the product vertical that causes the least gambling problems. Will lotteries risk their reputation if they start offering more harmful gambling products? 

This is a scenario that needs to be taken into account. An extremely aggressive offering of casino games could lead to such a thing. To offer much softer sports and horse betting is hardly not. And casino games can also be offered to customers in a responsible way. The market situation and the potential of the different new product verticals should determine which product groups give the best balance between possible risks and profits. But responsibility shouldn’t be a barrier to expanding the range of gambling verticals for lotteries.

As we go further in the 2020s, it is clear that the competition in gambling businesses will become even harder. Even in countries where traditional betting shops have managed to maintain a strong position in the face of internet competition, the situation is not everlasting. 

Even in those cases, lotteries can’t fail to try to maintain their position as the sole gambling operator of large customer groups in their own country. However, this won’t be possible in the future unless lotteries are starting to expand their offerings to other gambling verticals. In the future a modern, successful, and competitive gambling company will offer a wide range of different gambling products from different gambling verticals. I would like to see lotteries to be among those modern gambling companies!

LOTTERY INNOVATIONS – CASE LOTTOLAND

I participate in World Gaming Executive Summit event in July in Barcelona. I had opportunity to be one of the members in panel where we discussed about lottery innovations. One of the fellow panelists was Nigel Birrell, CEO of Lottoland. I was surprised how much we agreed on current situation and also about the further development in lottery business. My company Veikkaus, the national monopoly operator, and Lottoland, the market “hooligan”, look lottery/gambling business from very different perspectives but finally we are trying to reach about same goals. I’ll now tell what I personally think about companies like Lottoland and also what are main changes needed in lottery business.

I was asked to give my “confession” about Lottoland in ICE Vox seminar in February 2018. Although as a protest I’m not used to give any confessions, I made presentation about that and here are 7 points I made 1½ years ago. I think that they are still valid.

  1. Lottery business has no competition
    1. Lotteries have believed that competition is in casino and sports betting business but in lottery business.
    1. Due to previous point lottery innovations haven’t been significant at all.
    1. Lotteries have been and unfortunately still are in protection mode – we have believed in lobbying & EU Law.
  2. The business idea of Lottoland is great
    1. Betting on lottery results and the Lottoland business model is something like “Uber” of the lottery business.
    1. What Lottoland has done would be possible for lotteries. Why lotteries haven’t done that by themselves?
    1. There are excellent business solutions from Lottoland.
  3. Scared & angry
    1. I felt scared & angry when I noticed what Lottoland was doing -> protection mode again
    1. I think that it was steal of our brands!
    1. There wouldn’t be Lottoland without lotteries because they business was based on our products.
  4. Wakeup call- thank you!
    1. We should develop our own business.
    1. The key issue is to understand motivations of our customers – huge jackpots is not the only reason to play lottery.
  5. New surprise(s)
    1. Lottoland moved to B-to-B business and that was new surprise.
    1. What will be next surprise – maybe “Super Lottoland”?
  6. Speed of development increases uncertainty
    1. How much and quick gaming and gambling businesses will merge?
    1. Blockchain or something else – there will be new technologies all the time.
  7. We are going to fight!
    1. Lotteries or at least some of us are ready for fair competition!

Lottoland is just one company and I use it only as an example to describe what would happen if companies don’t develop their businesses and don’t put effort on innovation. Then there will be someone else who is doing that and will win the battle. It’s extremely important that you understand and serve your customers as well as possible. In old days it was possible that company decided what they were selling but nowadays customer is decision maker and he/she has lots of alternatives where to select – also in lottery business despite of monopolies.

I realized at the latest in that panel in Barcelona that there are still lots of lotteries who are not trying to innovate anything. I knew that it was the case some years ago, but I was a little bit shocked that it still is. Due to that fact there is lots of empty space in lottery/gambling business where newcomers, companies like Lottoland, have excellent business opportunities. If lotteries believe that they will win the battle in courtrooms, they are totally wrong!

I know that it is not easy to keep monopoly and at the same time innovate new business solutions, but we should try to do that anyhow. I’m happy and proud that my company Veikkaus is going to host EL’s (European Lotteries) Innovation seminar here in Helsinki in November. We try to increase the level of knowhow, understanding and spirit of innovations among lotteries. I hope that after few years the reputation of lotteries is not anymore old-fashioned, and we could still run profitable and responsible business!

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.

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