Svenska Spel, Sweden’s state-owned gambling operator, has seen a drop in profits and gaming revenue in the third quarter of 2018, as the market liberalization looms ahead. Losing market share to offshore gambling companies, it is now signing agreements with private operators, most notably Evolution Gaming and NetEnt.
On Wednesday, Svenska Spel reported a 2.3 percent decline in Q3 revenues from the same period last year. In its revenue report, the gambling monopoly reveals that the net gaming revenue was SEK2.12 billion (US$233 million). The drop in profits was similar at 2.2 percent – for the third quarter, it was SEK1.17 billion, while the operating margin of 23.1 percent was slightly lower than the previous year when it was 23.4 percent.
According to the operator, the 20% slump in sales for their Vegas video lottery terminals was the key factor for the falling profits. The sector reported net gaming revenue of only SEK56 million. During the quarter, Svenska Spel had to prepare for the new market, which is opening on January 1, 2019. The cost of implementing changes and innovations along with conversion to GDPR was SEK29 million, the operator admits.
There was a significant increase in the online and mobile segments, however, a trend that is being observed globally and boosted in Sweden by Svenska Spel’s improved user interface and mobile banking facilities. Digital sales surged 22 percent from the same quarter of 2017 to SEK675 million and the 42 percent jump in mobile phone sales largely contributed to this positive performance.
A recent study, however, found that 60 percent of all new online gambling accounts created in Sweden during the past year were registered not with domestic operators like Svenska Spel but with international ones. Offshore gambling companies have become, according to researchers, incredibly popular with gamblers in the country despite operating without being properly licensed.
Still, the Swedish operator is confident that it would see growth in sales even after January 1, when international gambling operators will launch their gaming and betting offerings in the country. According to Marie Loob, Acting President and CEO of Svenska Spel, the Group remains strong in the “tough competition” and is looking forward to seeing the market liberalization when it would play on “equal terms” with other operators.
Strategic Deal with NetEnt
The Swedish gambling sector is experiencing a huge shift as all players, state-run monopolies and offshore companies, are preparing for January 1 when the market will open. Earlier this month, the country’s gambling regulator Lotteriinspektionen said it had received license applications from approximately 60 online operators. Those who receive a permit will operate with an 18% tax on revenues, while the state-run companies will pay no tax.
Regulations, on the other hand, are still vague – in June, the Swedish parliament, Riksdagen, passed the new legislation but many details still remain unknown. More changes would be made in January when the law comes into force and applicants are concerned what further requirements or restrictions would be introduced. Svenska Spel is also expected to lose even more of its market share, as its monopoly will end. In order to remain attractive to customers and stay competitive after January 1, it entered partnerships with several operators.
Recently, the state-run monopoly signed an agreement with Stockholm-headquartered Evolution Gaming for the delivery of live casino. This week, it announced a deal with NetEnt through its subsidiary Svenska Spel Sport and Casino. The gaming software giant, which is also based in Sweden, was selected as the supplier of online casino games in 2019. Commenting on the agreement, Fredrik Wastenson, Managing Director and Head of the Business Unit at Svenska Spel Sport and Casino, said that they hope NetEnt will become an important partner with its high-quality games and software.
The deal with NetEnt would allow Svenska Spel to diversify its product line with top-quality online casino offerings in a time when multiple companies are competing to attract customers. The commercial launch is expected at the beginning of 2019.
