Tag: gambling

And the winner is… – CUSTOMER!

Gambling companies have had very product centric strategies. The main business elements have traditionally been products and product related services. The basic idea has been that players will select us if our products are the best ones. This business model worked quite well about 10 – 20 years ago when gambling business was mainly based on retail shops and physical casinos and when internet and mobile gambling was not so big.

Consumption habits have changes and gambling business can’t be out that development. Gambling in retail network is going down and business has moved to internet and especially to mobile channel. When in old model there were just few retail shops in their own neighborhood now there are tens of alternatives in everybody’s pocket when mobile has become the main channel of gambling. Active customer could easily select his gambling operator among hundreds or even thousands of gambling companies. It’s not possible to operate with same business models anymore in this new world.

Successful company should understand the needs of their customers. It’s not enough anymore that product is good. It’s the fact that you can’t get permanent advantage with products in gambling business because we are living in “copy – paste” world. In practice it’s impossible to get patent for your new products and due to that the other operators could copy them in few months or even weeks. We have almost the same challenge with product related services which are also easy to copy if they seem to work in other companies. So with the traditional key elements you could get in the best case few months advantages compared to your competitors. One good example of that is bonuses. I don’t remember which company started that but it’s sure that it didn’t get very good benefit from that because all the others did the same very soon. Nowadays almost all companies have different kinds of bonuses and they are “new normal” which means that the only winner has been the customer who now gets a little bit higher payout percent.

The good gambling operator has to have high quality products and services and also trustable and flexible technology but you won’t win the game with those elements – you will just lose without them. I believe that those companies who understand more about the needs of their customers and could develop their service models based on those needs will win the competition. That’s why the importance of data will be extremely high. It’s not enough if you just collect data but don’t know how to use it. You should understand what the most important features are in that data. It’ll complicated task because those features will vary real much among different customer groups and could be even personal ones. More personalized service you could offer the better possibility you have to succeed. It’s not worth of doing personalization manually but machine learning and automatization will be useful tools for that. The goal is to give your customer feeling that he/she is important to you and you are offering him/her interesting products and services with “only for you” principle. The satisfied customer is for sure more loyal than unhappy customer and will probably be ready to spend even more money.

There are lots of talk about data and personalized customer experience. As an active gambling customer I would say that I have never get “wow” feeling from any gambling company. It’s of course possible that I’m too critical customer but the more likely alternative is that gambling companies haven’t yet understood what they should do. It’s sure that in long term the customer will be the winner because he/she is the king/queen which the companies will serve better than they have done earlier. Those companies who just optimize the profit of next quarterly will lose – hopefully! The companies who will invest in long term customer experience development will finally win the competition because that’s the only important area where you really could differentiate yourself from your competitors. You should try to find out the most important features by “test & learn”-method and utilize automatization and machine learning as much as you can. We are already doing that and there are tens or even hundreds of changes in our offering every day. We are all the time analyzing the results of those changes to the customer experience and have got excellent results from that. But there is still long way to go in that area…

Whale or dolphin?

Gambling business is business of scale. Economies of scale work there which means that costs won’t increase with the same speed as sale will increase. In principle the bigger business you have the more cost efficiency business you have. In theory that would lead to the “natural monopoly” situation where there would be in long term just one global gambling company!

We have seen more and more mega size mergers and acquisitions in gambling business. The main reasons for those huge deals have been to increase cost efficiency and to get bigger market share and to utilize the big size of the companies to make even better and more profitable business. Here are some examples of that kind of M&As: Ladbrokes merger with Gala Coral and further Ladbrokes Coral acquired by GVC, Bwin Party acquired by GVC, Betfair merger with Paddy Power, Sky Betting acquired by Stars Group and Tab merger with Tatts. In addition to that you could notice that also big companies outside gambling business (for example ESPN) have acquired gambling companies to get more new business. I believe that this development will continue and become even more common in next few years and that will change our business dramatically.

Although development seems to go towards even bigger gambling companies at the same time there appear more and more newcomers.  Is there space for both giants (whale) and agile smaller operators (dolphins)? For sure there are if we understand that those companies are operating in different levels. Small companies are looking for new business opportunities from niche areas which could be from limited customer groups, from geographical limited areas or from limited products/services areas. There will more potential new business areas thanks to innovations. It seems that big companies are going to acquire all the time those successful small companies if their innovations and business seem to develop in good way and create business potential also in bigger markets.

Whale which will utilize its’ size doesn’t need as much agility as much smaller dolphin to get more fish than dolphin. Sometimes it will be enough that whale will open its’ mouth and fish will swim inside and at the same time dolphin should work quite hard to get much less catch. In long term whale will win but both could be happy when they understand their roles. There will be space for dolphins too because they will always be more agile than whales. I think that it would be easier to get more agile and new methods to big company via acquisitions and partnerships than try to change the whole company culture. That’s one reason why there will always be M&As.

I believe that innovations to gambling business will mainly come from small companies although big companies will have more resources for innovations too. The main reason for that is company culture of those big operators which mainly support the current business and prevent big changes. That’s another reason why we shall see those acquisitions and partnerships between whales and dolphins. I would say again that it is important that companies realize in which level they are operating and adapt their goals to that level. Of course it’s always possible that someone will manage to raise to upper level and it makes business even more interesting one but you should be realistic and don’t build your business based on dreams.

As I already told in my previous blog there was huge merger also in Finland when the Finnish State decided that there will be just one gambling company taking care of whole business. Although the process and reasons of that merger were unique ones some of main goals were exactly similar with the most of mergers and acquisitions. The new company is giant, 90 % market share, and one of the biggest companies in Finland. However it is not real big company in the global gambling markets. New Veikkaus is in fact at most middle size company in European and especially in global level. Is Veikkaus whale or dolphin? In Finland it is for sure whale but in global gambling market it would be dolphin. It’s interesting theoretical question what kind of position Veikkaus should take if it would operate in global gambling business? Could that kind of “small sea whale” become whale of big sea and could it change to dolphin and which change would be better for it?

Monopoly?

To be honest I have always been against monopolies but I have worked last 27 years in monopoly companies. How that could be possible and what I really think about monopoly in gambling business?

I was quite active in politics during college and university times. My ideology is politically from the “right side” and I believe on business rules but also the “Nordic welfare state model” where the State has big role in the society. I have studied economics at the University where my professor Matti Virén taught us among other things how the optimal economy should work and that’s quite far away from monopoly model… Monopoly is only good for the company which has managed to get that kind of position!

But nowadays I understand that there might be reason to have monopoly in some business areas which shouldn’t act based on free business rules. Those exceptions should be possible in businesses which might cause serious problems to customers and where the State would like to have tight control of business. Gambling is good example of that kind of business. It’s a fact that gambling might cause problems to some customers and that’s why the State should control that business. The State could do that in many different ways but gambling shouldn’t be organized without any control of the society as a free trade!

My home country Finland is the member state of European Union and we should follow the laws set by EU. It might be surprise to some of you that there is no common legislation about gambling issues in EU? There have been many court cases in the European Court of Justice (ECJ) where they have decided gambling related issues. Based on those cases EU has required some member states to change their gambling legislation and rules. Finland has been in that kind of process too but some years ago EU decided that the Finnish gambling system is acceptable from their point of view. EU also accepted the new model where we now have all possible gambling business in one monopoly company. EU has let the member state to decide who they are organizing gambling businesses in their own country.

The models are varying very much from country to country. The important thing is that legislation should follow the main principles of free movement of goods, services, capital and persons inside EU. You might think that monopoly is preventing free movement of services and it’s doing that but it’s ok according to ECJ if there reasons to limit that kind of business. ECJ has decided to member states could limit gambling business if the purpose is to prevent problem gambling or other social problems or prevent criminal actions like money laundering or match fixing. ECJ has also decided that also monopoly companies should have opportunity to further develop their products and services and channel the demand of gambling products to their offering. The profit from gambling business to the State can’t be the reason to have monopoly but that profit is not negative feature and there seem to discussion in EU should it be even more.

So it’s possible to organize gambling business with monopoly model as Finland has decided to do. In most of EU countries the lottery business is in model monopoly and other gambling businesses have moved to license model. I’ll tell you more about those other models in next blogs.

I believe that monopoly model as such will prevent problem gambling compared to model where we would have several licenses. There should be correlation between the size of gambling business and the number of problem gamblers – the more customers are playing the more problems there will be. The size of business will increase when business will move from monopoly to free competition in all possible businesses. If monopoly company has possibility and capability to develop its’ products and services and it won’t do too much marketing action it’s the best and most secure gambling system from the customer point of view! Whatever model we have it should work properly otherwise we should make changes to that.

Who is this writer?

This is my first blog ever. I decided to follow my excellent co-workers Reijo Anttila and Sami Siltanen who started their blogs just 1 – 2 weeks ago. Both guys have already written great stories about gambling business. They have done that in Finnish and that’s why I decided to start my own blog mainly in English. English is not my native language which will mean that there might be some mistakes and for sure not so nuanced language as it would be in Finnish.

I think that it’s easy to start with the theme which I know better than anything else: ME – Jari V.! I believe that readers should know who I am? Everything I have done has not been huge success and there have been even some quite big failures but also great results too.

I have been involved in sports almost from my birth and gambling appeared to my life as a young kid. Those days no one talked about problem gambling… I used to play football and ice hockey and got my first racing horse (trotting) already at the age of 10 years. I guess that I was something like 5 years old when I made my first Football Pools bet and started Horse Betting at the age of 10 years. Ten years later when I went to the University I was almost professional gambler. During my studies I worked in some newspapers and wrote about sports but also worked in bank. I was planning to be banker as my father used to be but in autumn 1991 I noticed interesting position in Horse Betting company and managed to get it and started there in the beginning of 1992.

It would be too long story to tell all details what I have done during my years in Horse Betting company, Lottery company and Gambling company so here is the list of main projects where I have been the key person or have had at least important management role.

  • Purchase of new central system (IT) for Horse Betting company
  • The first national level Problem Gambling study in Finland
  • Preparation of the new Gambling Law in Finland
  • Planning of off track Horse Betting system –> nowadays it’s more than 90 % of total
  • Introduce of new Sports Betting and Horse Betting games
  • Launch of the first (lottery) Internet gambling business in the world – nowadays GGR (gross gaming revenue) is about 550 M€/year
  • Development of Mobile gambling
  • New Customer based business strategy and based on that customer database – nowadays there are more than 2 M customers
  • Introduce Live Betting as the first (or second) lottery in Europe
  • Establish of Product Development company together with IT company
  • Internationalization plan and run operations (CEO of subsidiary company) based on that -> the biggest disappointment of my career due to political decision to stop this operation!
  • Develop Innovation process for lottery company
  • New Strategy for the company (included in scenario work etc.)
  • Integration (merger) of three gambling companies: Fintoto (Horse Betting), RAY (Casino & slot machines) and Veikkaus (Lottery & Sports Betting) -> new Veikkaus: GGR 1,8 B€/year
  • Establish common Innovation network with 5 other lotteries
  • Establish common Product Development company with 3 other lotteries
  • Lots of roles in international gambling organizations – nowadays the head of Sports Betting working group of European Lotteries