Is Private Competition the Boost Needed to Revive Finland’s Gambling Monopoly Veikkaus?

After years of decline, Finland’s gambling monopoly, Veikkaus, could see a resurgence with the introduction of private competition in a re-regulated gaming market. Veikkaus, which has experienced a steady drop in its business performance, reported a 21% decline in group gaming revenue for the first half of the year, as revealed in its H1 earnings on September 2. Group managing director Olli Sarekoski pointed to a lower-than-expected profit margin as one of the reasons for the downturn.

"Veikkaus hasn’t been competitive [for some time]," commented local lawyer Antti Koivula. "And the previous Lotteries Act update in 2022 worsened the situation."

Koivula highlighted the significant decline, adding, "They’ve lost something like 40% of their gross gaming revenue just in the matter of roughly five years. That’s quite significant."

Sarekoski attributed the decline to new player protection measures and decreasing consumer spending. "The visible decline in the purchasing power of consumers has affected Veikkaus’ business," he said. "Our number of customers is still at a good level, but the amount of money played by customers is average." While Veikkaus saw an increase of 15,000 active players during the three-month period, bringing the total to 2.5 million, it was not enough to counterbalance the dip in gaming revenue.

Consumer loyalty to Veikkaus appears to be waning as more players turn to unlicensed operators for non-lottery games. Online casino and betting accounted for 31.5% of Veikkaus’ revenue mix in the first half of 2023, though profits in this segment slipped by 1.5%, driven mainly by a decrease in betting activity.

"In 2021 it was estimated that Veikkaus had roughly a 30% market share in non-lottery categories, which now fall under the licensing system," Koivula explained. "Since then, there’s been considerable decrease in these numbers."

Despite these challenges, Veikkaus remains optimistic about the upcoming liberalization of the market, set for 2027. The company is focusing all its efforts on preparing for the transition to a licensed market, where it hopes to regain its competitive edge and return to growth. As part of the reforms to the Lotteries Act, Veikkaus’ online casino and betting operations will receive a license to compete with private operators, while its retail slots and lottery businesses will retain market exclusivity. The group will be divided into four distinct businesses, though questions remain about which segments the government will retain ownership of.

Veikkaus has initiated a comprehensive restructuring of its operations and is reviewing several departments to consolidate its business. The company announced that up to 620 employees could face redundancy as part of the strategic review. Sarekoski stressed the importance of these changes in the H1 results, stating, "The goal of our strategy is to be both the Finnish market leader and an internationally competitive and growing gambling company in the future."

Discussions around market liberalization in Finland have been ongoing for years. In December 2020, the European Gaming and Betting Association (EGBA) called for an end to Veikkaus’ monopoly. The Finnish government formally announced its intention to open up the gambling market in June 2023. Draft rules were released in July 2024, followed by an industry consultation that closed on August 18. Operator licenses are expected to be awarded in 2026, ahead of the full market launch in 2027.

Some have questioned whether the government is favoring Veikkaus in its draft legislation. Koivula suggested that the legislative process has been rushed, primarily to give Veikkaus a chance to compete against growing competition from unlicensed operators. "The process has been hasty, and it has faced criticism," he told iGB. "Key politicians have publicly stated they are not happy with the draft as it is, but for scheduling reasons, they wanted to put it to the public [for feedback], otherwise it could face delays."

Industry consultant and former Veikkaus executive Jari Vähänen also voiced concerns, warning that Veikkaus could maintain a major competitive advantage if it retains access to its 2.5 million-strong customer base in the open market. In his consultation response, Vähänen urged the ministry of the interior to provide clarity on this issue. "My opinion is that the monopoly company could continue to use its existing customer base," he said, citing the Swedish monopoly Svenska Spel, which contacted its existing players when transitioning to a licensed market. "If they can’t bring those customers with them, the value of Veikkaus’ licensed business will be much lower. But if they start operations with 2.5 million customers, they will dominate the market."

Veikkaus is expected to benefit from its strong brand recognition in Finland as it competes against smaller independent operators in the new market. "Finns love slots," said a source. "And Veikkaus is a household name in Finland." Koivula added that Veikkaus-branded slot machines are omnipresent, even in local supermarkets, and advertisements for its games are common across the country. "Even those that don’t play slots can’t avoid seeing these games," he remarked, noting Veikkaus’ considerable competitive advantage in this area.

Questions have also been raised about the government’s ownership of Veikkaus after the market opens. In a July release, the ministry for the interior hinted at the possibility of selling part of its stake in Veikkaus, stating that the new legislation would provide "more room for manoeuvre in the future ownership decisions of Veikkaus."

Vähänen has advised the government to sell off its interest, arguing that its role as both a regulator and shareholder presents a conflict of interest. "State ownership of a gambling company operating in a competitive market is at least a questionable solution," he said in his consultation response. He suggested that Finland could follow the UK model of organizing public procurement for a monopoly license, as done with the UK lottery.

Overall, the draft legislation has been met with a positive response from the industry, according to Koivula and Vähänen. While there has been some pushback on restrictions regarding bonuses and marketing, Vähänen praised the balance between consumer protection and a high rate of channelization. The draft is expected to reach parliament in its spring session, beginning in February 2025.

For Veikkaus, the end of its monopoly could ultimately provide the conditions needed for stability and growth in Finland’s competitive gaming market.

By fLEXI tEAM