RESPONSIBILITY – COMPETITIVE EDGE FOR LOTTERIES?

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

The background of lotteries is in almost all cases from states and quite often it is also linked to the organizations that care for charity issues like social welfare and sports. Consequently, lotteries have been regarded as different from normal commercial gambling enterprises.

Lotteries try to collect money for good causes but haven’t always been able to use all possible tools to achieve that end. There is also the perception that lotteries are more responsible operators than those from the commercial gambling sector.

But during the last few years the lottery environment has changed a lot and lotteries are no longer the homogenous group they were. As a result, it’s not obvious that lotteries are acting any more responsibly than their commercial gambling counterparts. But should that be the case?

I would say that we could section lotteries to three separate groups. The first group is lotteries which are owned by states and which are acting like state offices. The next group is lotteries which are running their business in a similar way to other gambling companies. The third group falls somewhere between those two first groups. They are trying to run business but are not willing or allowed to use all possible commercial tools to achieve that.

What kind of business could those ‘state office’ style companies have and how could they succeed against commercial competition? The owners of those companies are in all cases the states which try to control gambling business as much as they can. But it has become more difficult due to digitalization where customers have lots of other opportunities available.

There are just two possibilities for those kinds of lotteries. One is to prevent all other gambling activities which, for me, is the ‘North Korean’ way to act. The second option is to change the business strategy of the company.

I’m not sure if we should call those business-oriented lotteries as lotteries at all. While they are still ostensibly running lottery businesses, they also have lots of other businesses. They have other gambling verticals like sports betting and in many cases also casino games in their product portfolio. They could also have business operations in other areas and in many countries.

There are some lotteries which are privately owned and even listed on the stock exchange. It is easy to understand what the difference is between totally state controlled companies and publicly listed companies. I would say that the only reason why those companies are still considered a part of the ‘family’ of lotteries is that they operate monopoly-based lottery products (Lotto).

The most challenging and, at the same time, interesting group are those lotteries which exist between those two first groups. This ‘middle group’ of lotteries is trying to achieve commercial business goals, but without the same tools that their business-oriented counterparts are using.

Those lotteries could have some other gambling products like sports betting in their offering and they are in most cases serving their customers in retail and digital channels. Channeling is a good word to describe the ideology behind those kinds of lotteries. It means that they are trying to offer their customers legal alternatives to those games offered by private gambling companies.

However, they are restricted to using lower payout percentages and are not allowed to offer bonuses etc. I’m not sure if that kind of operation would succeed in the long term without tight restrictions for other gambling companies. The ‘middle group’ will sooner or later face similar challenges and problems to those experienced by ‘state office’ lotteries if they don’t change their strategies.

For a company to succeed, it should understand what its customers are willing to have and what other options those customers have available to them. It sounds simple – know your customers and your competitors. The next step is to understand what your own strengths are. If you are not better than your competitors in any area, you will have big difficulties ahead!

A successful company doesn’t have to be the best one in all areas – nowadays it is probably impossible. You should have a few (or at least one) areas where you are better than your competitors and you shouldn’t be worse than average in any areas. That’s incredibly good basics for a successful business!

So where should lotteries be looking to identify their competitive edge? Are those ‘middle group’ lotteries better than other gambling operators in any areas? The most common success factors for companies are strategy, people, finance, operations, and marketing. I don’t believe that lotteries could be stronger than other companies in management or leadership areas and the same problem is also with personnel/staff.

The salary level in lotteries is so far away from top-class business companies that it’s impossible to attract the best people to lotteries. But I trust that it would be possible to get good enough directors and experts and avoid the risk to be worse than an average in those two areas.

How about finance? Could lotteries find their strength from that area? In principle it could be possible but not in practice. States have money but there are so many areas which need more resources that it’s unlikely that they would invest lots more resources in their lotteries. I would say that state-owned companies are not investing as much as the best companies are doing and states are in many cases careful owners – they are risk-averse. So, no competitive edge from that area.

We have two potential areas left. How about operations? Would it be possible to have better processes and/or way of working than other companies have, and would it really matter for lottery/gambling business? Of course it could be possible, but I don’t believe that operations would be the area where any companies could gain competitive edge for gambling operations.

Some lotteries seem to think that their perceived trustworthiness in relation to commercial gambling enterprises remains their strength, but I don’t believe in that. This could be area where a company could lose the game, not win it.

So, we have just one area remaining – marketing. I think that “marketing” is a limited way of describing that area. It involves among other things communication, brand, sales, and customer relationship. But there seems to be two areas which could offer a potential competitive edge for lotteries.

All lotteries have strong retail sale channels and most lotteries nowadays have digital sale channels too. Those lotteries which have two strong sales channels or even one omni-channel solution could achieve a competitive advantage on commercial gambling operators which are serving their customers solely online.

Unfortunately too many lotteries still face challenges with their own online sale channels. That’s why I don’t believe that omni-channel is currently the solution to winning the competition against private gambling companies. Maybe it could be possible in the coming years?

Lotteries have enjoyed strong brand recognition and good reputations, at least in Western Europe where lottery operations have operated for tens of years and given millions or even billions to good causes. That ‘money for good causes’ could be seen as a potential strength for lotteries.

But nowadays in many countries lottery profits are going to the state and not directly to beneficiaries. As a result, customers are no longer certain as to where those profits are actually going, to the point where it looks just like another form of taxation.

My solution would be a combination of brand, communication, and customer relationship. Lotteries should communicate that they are acting in a more responsible way than the most of their commercial gambling counterparts.

They should explain that they are subject to stricter limits on the gambling products they offer which is why they are different from those offered by commercial gambling firms. Lotteries should tell consumers that they take responsible gaming seriously and that they are operating frameworks where gambling is as responsible as possible.

The purpose of those restrictions is to take care of customers and to prevent problems. I believe that lotteries could use responsibility as a way of gaining a competitive edge in gambling business. They should be saying: “We are offering the safest and most trustable environment for gaming!” But it won’t work if lotteries just say it, they must also run their businesses in a way that demonstrates that.

ARE LOTTERIES DIFFERENT THAN OTHER GAMBLING COMPANIES?

What is the definition of lottery? Wikipedia tells that lottery is a form of gambling that involves the drawing of numbers at random for a prize. Lotteries are outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. Is there anything which makes lottery totally different compared to other gambling and gambling operators. Lotteries think that yes of course but I’m not sure about that at all.

When I joined in Veikkaus, the Finnish national lottery operator, over 25 years ago the lottery and gambling world was quite different than it is now. Gambling was among those words which we weren’t allowed to use when we were talking about our own business. Gambling was something bad and lottery was good. Some lotteries had pool-based sports games like Football Pools and the word we used for whole business was gaming. Nowadays gaming means rather casual and social games not lottery or other gambling verticals. Lotteries weren’t willing to be part of gambling business and believed that their reputation and operation were much better than for example casino companies had. I know that some lotteries are still thinking that way.

Many lotteries are established by the states and have been owned by those states too. In practice all of them have had monopoly situation in lottery business in their own jurisdictions. All lotteries have had lotto games and most of them have also sold scratch cards and some have had those pool-based sports games. Lotteries have had strong position in retail business and important role in the societies thanks to profit/money they have given to the state and/or to their direct beneficiaries.

The gambling world began to change when internet appeared in 1990’s. At the same time some forerunner lotteries decided to introduce fixed odds sports betting. It was huge change when we jumped from traditional retail lottery business to digital sports betting business in mid-1990’s. Internet, and later mobile, has changed our business totally but it has influenced on the legal situation too. There is still monopoly in basic lottery business in all countries but in practice that is not the case anymore. There are nowadays secondary lottery products and sports betting about lottery results which customers could play instead of the original lotteries.

European Union has also caused lots of changes here in Finland and probably in many other EU-member countries too. Monopolies are against the basic principle of EU where we believe on free movement of products and services. The European Court of Justice has accepted the monopoly in lottery business if it is necessary to prevent gambling related problems. Those problems could be gambling problems or crime which is linked to gambling business. I would like to hear how much gambling problems are coming from lottery products and how much crime is linked to those products… There is no monopoly in casino business where gambling problems and criminal actions are much more common than they are in lottery products.

There are still many lotteries where state is the owner of the company, but there are more and more lotteries which are public companies with private owners and in some cases state could be among those owners. If I analyze the World Lottery Association (WLA) and its’ members I would say that it is not homogenous group at all. If I think about how lotteries are trying to target their business goals, I could notice extremely big difference between the most active and the most passive ones. There are lotteries which are acting like real business companies and there are also lotteries which are like state offices – which they actually are. Then there are lots of lotteries between those two groups.

Some lotteries have divided their businesses to two or even more separate companies where the other company is operating in the monopoly environment and the other one is in serious competition (license market). Danske Spil and Svenska Spel are good examples of that kind of structure. There are also companies like IGT, SISAL, FDJ, SAZKA etc. among WLA members and they are like normal publicly listed business companies.

Few other important features where attitude and action among lotteries vary a lot are responsible gaming and profit of the company. Lotteries have taken responsible gaming issues seriously and they still are, but are they really doing things better than the private gambling operators? Some lotteries are but not all of them. There are also some private gambling operators who are doing excellent work in that responsible gaming area. The profit from lotteries is going to the state or/and to good causes. That’s still the case in monopoly part of the business, but in licensed based business that’s not the case.

I don’t believe that it will be possible to keep monopoly and act like normal business company although lots of lotteries are moving towards that kind of action. I think that there are two totally different options available. The first one is to act like monopoly company should do – concentrate mainly on prevention of gambling problems and not be too active with marketing, sale, and development. Then it’s up to the state how well it could protect that monopoly from the competition. The roles of state and lottery company should be separate and clear enough. There are tools for that protection like internet and payment blockings. The other option is to concentrate on real business and offer as good and wide gambling products to customers as possible and trust on own strengths. Thanks to their backgrounds and history, lotteries have some competitive edges compared to private companies and they should try to utilize them and make good business. In that world monopoly won’t be possible, but it doesn’t matter if lotteries would develop their businesses.

In many countries lotteries can’t make that kind of decision by themselves. The final decision maker is the state, but lotteries could influence on that decision. I think that it would be possible to further develop business also in monopoly situation but there the tools are totally different compared to real business world. In both worlds keywords are customer satisfaction, good products and services and digitalization. If lotteries are willing to move towards real competition, they should digitalize their business, introduce customer-oriented systems, and add more gambling verticals to their portfolio. In the monopoly world responsible gaming is the most important issue and it should be clear that it has important role also in business world but not so big than in monopoly.

Marketing of gambling (products)

I just spent long football weekend together with my former colleagues Antti, Erkko and Mika with whom we took care of marketing of sports and horse betting business in ”good old days” here in Finland. We used to have real funny time at the office and we managed to make excellent marketing campaigns. I believe that quite many middle-aged sports fans still remember our ”Maailma on erilainen vakioveikkaajan silmin”-campaign (you could find those Football Pools themed ads with Google or from YouTube…). We didn’t only toot our own horn but also tried to find out ideas for gambling marketing. It’s not easy task at all, but we had interesting discussion about that.

Gambling has always been ”dangerous” business, almost like alcohol and tobacco. Now attitudes against gambling have become even more negative due increase and awaremess of gambling problems. That has effected on marketing and communication a lot. Many countries have lots of restrictions for marketing of gambling products. Italy decided to have total marketing ban of all gambling products. There are similar rules for all gambling verticals like casino, sports betting and lottery. It seems that some countries might follow the example of Italy.

Veikkaus has still possibility to use marketing as a tool to promote its business in Finland. Gambling products have been divided to ”green” and ”red” games. Veikkaus is allowed to have marketing campaigns about ”green” games (for example lottery, football pools and scratch cards) which are not so dangerous ones. It’s not possible to have marketing campaigns of ”red” games (casino games, sports betting, horse betting etc.), but it’s allowed to give product information about those games and sometimes it’s difficult to explain the difference between marketing and product information.

It’s good that people understand better the risks of gambling and are aware of gambling problems. I think that regulator should set up guidelines for gambling operators and supervise those rules. Marketing should be one part of those guidelines (rules). I don’t believe that total ban of gambling marketing would be the best solution. The better one would be something like we have in alcohol business where companies are allowed to market ”not so dangerous” products but not at all those heavy ones.

I have said many times before that companies should know and understand their customers as well as possible. That’s the key issue also in marketing. If you know your customers’ main motivations for gambling, you could make better marketing for them. It’s totally different what kind of messages you should give for ”jackpot dreamers” than for people who is looking for entertainment. It’s another question should it be possible to market those entertaining casino games at all…

Sport is the most important reason for gambling for big group of customers. Of course some of them are dreaming to get big money from sports games and some of them are looking for entertainment by watching sports, but I would say that sport is specific reason to play money games. There are at least two quite separate groups inside sports betting customers. Sports punters are keen on gambling and they are trying to utilize their knowledge of sports to earn money. I think that there is no need to have any marketing actions for that group. The other group is much bigger one and it’s sports fans. For them sports at itself is more important than gambling, which is just ”extra feature” to get more excitement from sports.

What kind of marketing we should do for those sports fans? I don’t like ”buy now”- or ”win 1M€”-style marketing adds and especially in sports games area they are ineffective ones. If you would like to reach sports fans, you should concentrate on sports and try to offer them chance for insight. I think that me and my friends managed to do that in ”good old days” when we published for example ad which was copy of famous painting God’s Hand by Michelangelo and we added blue&white stripes and number 10 to that arm. It’s important that customer would get good feeling when he/she is watching those ads. You should also try to offer that same feeling when they are playing your games. If you manage to do that, you could have good but responsible gambling business.

We discussed also about the possibilities of social media, digital channel and retail network, but those ideas will be the theme of my next blog…

RESPONSIBLE GAMING HAS IMPACT ON THE REPUTATION OF GAMBLING INDUSTRY

I have worked almost 30 years in gambling business and most of that time in lottery world where I was told to use word “gaming” instead of “gambling” when I was talking about our business. I’m not native English-speaking person so I don’t recognize all details in that language, but I believe that it wasn’t only about detail issue but rather about reputation of business. Lottery people have always thought that lottery is much softer and not so dangerous business than casino business is. Sports and Horse Betting are somewhere between those two areas. To me they all are gambling business and it doesn’t matter how soft or hard versions they are. I use gaming when I’m talking about casual and social games like for example Candy Crush Saga.

It is true that lottery games have caused much less, or almost at all, gambling problems than other gambling verticals. That’s one of the main reasons why lottery has had much better brand in the society than other games groups have had. The other reason has been “benefits for the society and good causes” ideology which has been the model all over the lottery world. It’s still very common that states have monopoly for lottery games and profit from those games is going to good causes. In other games groups that hasn’t been the case or if it has it’s not anymore. The gambling world has changed and is going to change.

Responsible gaming has always been important part of gambling business, but its role has increased rapidly during last few years. Especially in Europe responsible gaming has big role in political level discussion and I’m sure that other continents will follow soon or later. It’s important to understand what responsible gaming is about. To be honest I’m not expert on that area, but I have my own view about responsible gaming and I’ll try to explain how it should work.

Problem gambling and responsible gaming are not exactly the same issue but of course those two things are linked together. There are about 3 % of adults who have had gambling problems here in Finland. About 40 % of that group are serious problem gamblers which means that there are 50 – 60 000 people who really suffer. At least in Finland the most of gambling problems are caused by casino games and especially by slot machines. That’s why the former lottery company and horse betting company haven’t thought so much about gambling problems. Of course Horse and Sports Betting are reasons for some of those gambling problems but not at all at the same level than casino games. All game verticals have become quicker and harder and they are not anymore so different than they used to be before. Responsible gaming should be in the agenda of all gambling companies.

Gambling professionals seem to be worried what will happen to the reputation of our industry. There is more and more public discussion about that and unfortunately that discussion sounded to be rather negative one. It looks like gambling will follow the way which has happened in tobacco industry already many years ago. Smoking was very common when I was young adult, but nowadays it’s not acceptable at all. I think that gambling and smoking are not the same. Smoking is unhealthy for everybody, but gambling is not so dangerous for 80 – 95 % of people. Gambling is more like alcohol than tobacco when I think about problems caused by those things. It’s sure that gambling companies should do more in responsible gaming area, but there is no reason to ban whole gambling, because it causes problems for some of customers. We should concentrate on finding effective solutions to prevent those problems!

The problems won’t be solved if just some companies would change their rules, business models or whatever is needed to change. I think that whole industry should take responsible gaming really seriously, because it will affect on the reputation of industry. If there are companies which don’t care about the welfare of their customer, we can’t solve these problems, because problem gamblers would have companies where to move from the responsible companies. How we could solve that?

States, regulators and social welfare bodies, should decide and describe guidelines and the most important features for gambling companies which should operate according to those rules. I would describe that like “box” where companies should stay inside, but there they could run their business quite freely. If there would be any company which is not following those rules, that company should be punished very heavily and finally prevent whole operations of that kind of company. That model would work if whole industry would agree on that and there would be good cooperation between the industry and regulators.

What would be the best way to prevent gambling problems? I believe in personalization where gambling companies could utilize also other data sources than their own customer data. Unfortunately, it’s not legal to combine for example company’s customer data and data of the customers who have got help for gambling problems. In principle GDPR is good thing, but in gambling problem area it prevents to solve even bigger problems than customer’s privacy. One solution could be state level data center which could have “black box” where regulator could combine information about gambling problems, income/tax level and gambling data. The result of that kind of information would be personal level gambling limits and/or bans for gambling which should be mandatory for all license companies.

I believe more in personal limits than general level limits. I’m not sure if customers could really make right decisions by themselves when it’s about gambling limits. Regulators and social authorities & experts together with gambling companies should help customers to set them the best possible limits. Those limits could be separate in different gambling verticals (lottery, casino etc.). Gambling companies have and will have tools like AI and machine learning which could help them to make better work in responsible gaming area. I hope that gambling industry could find out the way to prevent gambling problems in more effective way than it’s the case now and at the same time we could continue to run our business without causing any useless disruption for those customers who could play our games without any problems!

WE SHOULD THINK ABOUT WHAT IS BEST FOR OUR CUSTOMERS

It is obvious that discussion about the future of gambling business is going on all over the world. It doesn’t matter so much what kind of legal structure you have in gambling business. Of course, there are many differences between monopoly based and license-based systems, but the main challenges & problems are same. The Danish gambling expert Morten Ronde, who I appreciate a lot, compared our situation to previous development of tobacco industry and attitudes against it. It’s possible that the public opinion might turn to be even more against gambling.

I agree with Morten that it sounds familiar when I think what has happened in public opinion about tobacco. Anyhow I don’t think that the same should happen. I admit that gambling will cause serious problems and that should effect on the ways how we run our business. But gambling or gaming is not dangerous for all of us. It’s more like alcohol than tobacco. I think that tobacco is dangerous for all smokers, but alcohol is not for all drinkers. I don’t have any facts about that but it’s just my personal feeling. Of course, alcohol like gambling will cause problems if you consume it too much.

What we should do then? It was again Morten Ronde who said that everything should start from operators. We should have serious will to make everything as good and safe as possible for our customers. If gambling companies just do things because regulator has forced them to do, the situation won’t change. Fake actions are not so effective than serious ones!

I’m not trying to tell what gambling companies should do in practice, but I try to describe the principles which could make things to be better. I have got idea about that from the strategy seminar of KPMG. I believe that if companies, in whatever business they are operating, would follow these advices their business would be better in long term!

You should be trustworthy. If your customers don’t trust on your operations, you are in big problems. You should take integrity issues seriously. It’s absolutely not enough if you just do something in that area and write nice text in your Annual Report but act in different way. Customers will notice that for sure and they will lose trust on you.

I believe in personalization! You should understand the needs of your customers and try to offer your products and services in personalized ways. I think that AI technology will help us here a lot. I hope that AI will help us also when it’s about potential gambling problems. I’m not deep expert on that area but I believe that AI could already quite soon recognize potential problem gamblers.

Maybe I say this too many times, but you should know what your customers are looking for. What are their most important expectations? You should have will to give your customers even better service than they expect to get. You could manage to do it, if you listen to them and utilize data what is available about them. Same for everybody is not the solution in that area.

Now gambling companies seem to have quite big problems with their reputation. There could be many reasons why that’s the cause – too much marketing, too less actions in problem gambling area etc… You should know what the main reasons are and try to make much better actions in the areas which have caused those problems. It would be great to see cases where company could turn week actions to strong ones.

As I have wrote in some of my previous blogs, I think that there lots of different customer groups and their have different kinds of expectations. There are some active customers (active sports and horse punters) who are willing to spend lots of time in gambling but in average customers are looking for simple and quick services. You should develop quick and simple processes where everything will work fine and in a way which customers understand.

I admit that I haven’t been very empathic guy but now, maybe thanks to becoming older, I really believe on that. We should really take care of our customers. We should do everything to secure them although some of them are not willing to be secured. That’s extremely important in businesses like gambling!

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.

RESPONSIBILITY – OPPORTUNITY OR THREAT?

Responsibility is ”the theme of the day” in gambling business. My colleague Sami Siltanen wrote about that in his blog www.patakuningas.com (in Finnish) last week. I decided to continue with the same theme but from slightly different perspective. You might think that everything has been said about responsible gaming and it’s impossible to find out any new views. That’s probably the case but it’s so important issue that I should try!

Gambling is so dangerous that states have decided to control that business heavily. Some of customers have big problems to control their own gambling. It’s very similar case than in alcohol consumption. If player can’t control his/her gambling the result could be extremely fatal. Society and gambling companies should do their best to prevent those cases.

EC Court of Justice has stated that the member states have possibility in gambling business to limit the free movement of products and services which is against the main principles of EC. That limitation would be possible if that would help member state to prevent problems related to gambling. That kind of problems could be criminal actions and also gambling problems.

What society could do to prevent gambling problems? Countries like Finland who have monopoly system in gambling business have an idea that monopoly at itself will reduce gambling and that would further reduce gambling problems. There are own gambling laws and rules in all countries and those laws will help states to control also gambling problems in principle level. Authorities have also some tools and they try to do their best to control gambling operations in practical level too. One big challenge is that digitalization has already break the state lines in practical level and it is more difficult to control all gambling.

I would say that there are two kind of problem gamblers. According to surveys there seem to be about 1 % of adults who have serious gambling problem – it’s like disease and their really need treatment for that. That 1 % level is surprisingly same in different countries although gambling legislations are quite different ones. According to surveys there are about 40 000 people who have serious gambling problems in Finland. Totally there are approximately 3 % of adults who suffer somehow from gambling issues. Those serious gambling addicts are included in that 3 %. So, there are totally about 130 000 Finns who have some kind of gambling problems and 1/3 of them have big problems. These numbers have been at the same level already years. There has been surprisingly less change in those numbers although the volume of gambling has increased.

What gambling company could or should do? I listened to the Swedish gambling problem researcher Thomas Nilsson already 25 years ago and I still remember what he said. According to Nilsson there are not so much what gambling company could do to prevent problems of those addicted players. They will find out new way to gamble anyhow and the society should take care of treatment of those people. Gambling companies should concentrate on the group of customers who have some problems and try to prevent them to move to more serious group. There are some tools like gambling limits and marketing pans which companies could use. Companies have nowadays more tools than they had before because there are more data available and that help companies to analyze their customers. From prevention point of view, it would be good to combine information from health care and gambling because then companies could even blog out all gambling addicted consumers. I understand why this is illegal from privacy and information security point of view and won’t happen…

Quite many gambling companies have started to talk about how responsible firms they are. Almost all companies have limits for gambling and they justify those limits with problem gambling reasons. In many cases that’s not the real reason at all! According to researches there seem to be just light correlation between gambling volume (euros) and problem gambling. If company would real like to reduce gambling problems responsibility should set up guidelines for whole business operations. Companies shouldn’t ask are we willing to select our business goals or responsibility! Gambling companies should decide frames for their business operations based on responsible values. Company should operate inside those frames. It should be clear to all employees what company could do and what not. There are for example product development tools which help to analyze how dangerous new game would be and it shouldn’t be allowed to introduce too addicted games. In short term it would be tough to notice that company will lose some customers to more irresponsible operators but in long term more responsible companies will finally win. I believe that responsibility will be one of the most important competitive edge in gambling business. The reason for that is that customers will trust on responsible companies more than the other ones!

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.