Finnish Gambling Market Reform: Veikkaus Resurgent vs Kindred's Leadership

Could competition from private companies in Finland's regulated gambling market aid in revitalising the Veikkaus monopoly, which has experienced years of decline and losses? Experts share their insights in a special article from the industry publication IGB.

Veikkaus' monopoly operations have been experiencing a steady decline for several years. In the half-year report released on September 2, CEO Olli Sarekoski highlighted disappointing profit margins, with the company's gambling revenue decreasing by 21% compared to the previous year. Lawyer Antti Koivula commented, "Veikkaus has struggled to remain competitive for quite some time. Furthermore, the updates to the Lottery Act in 2022 have exacerbated the situation. Over the past five years, the group has seen its gross gambling revenue decline by approximately 40%, which is a substantial decrease."

Minus 40% at Veikkaus - why?

Sarekoski pointed to decreased player spending and new protective measures for gamers as key factors behind the substantial losses: "The notable drop in consumer purchasing power has impacted Veikkaus’ operations. While our customer base remains strong, the amount spent on gambling has fallen below average." Recent statistics show an increase of 15,000 active players over three months, bringing the total to 2.5 million.

It seems that consumer loyalty to Veikkaus may be waning, as many are turning to unlicensed operators for non-lottery gaming options. In the first half of the year, Veikkaus’ revenue from online casinos and betting accounted for 31.5% of total earnings, yet profits from this segment fell by 1.5%, primarily due to a reduction in betting activity.

"In 2021, experts estimated that Veikkaus held roughly 30% of the market share in non-lottery categories, which are now regulated under a licensing system. Those numbers have since dropped significantly," Koivula noted in an interview with iGB.

Veikkaus hopes for market liberalisation

Although Veikkaus has faced disappointing operating results, the company maintains a positive outlook for the future of the licensed market. The introduction of a liberal gambling framework in Finland is set for 2027, and Veikkaus is concentrating its efforts on preparing for these changes. The group is hopeful that it can reverse its current trajectory and achieve revenue growth.

As part of the Lottery Act reform, Veikkaus will be granted a licence for its online casino and betting operations, allowing it to compete with private operators. However, retail slot machines and lotteries will remain exclusive to the company. Additionally, other divisions will be separated, ultimately resulting in the group being divided into four distinct entities. Uncertainties persist regarding which segments of the business the government will continue to hold shares in.

Veikkaus has initiated a comprehensive reorganisation of its operations, currently reviewing various departments with the goal of streamlining its structure. Company representatives have indicated that this strategic assessment may lead to the layoff of up to 620 employees. "Our strategy is focused on being the leading player in the Finnish market while also becoming an internationally competitive and growing gaming entity,"  stated Sarekoski during the presentation of the company’s first half-year results. Discussions about market liberalisation in Finland have been ongoing for several years, with the European Gambling and Betting Association (EGBA) advocating for an end to Veikkaus's monopoly since December 2020. The government first expressed its intention to open up the gambling sector in June 2023, with a bill published in July 2024. This was followed by a consultation period with industry stakeholders that concluded on August 18. Operator licences are expected to be issued in 2026, leading to the full market launch in 2027.

New bill and state priority for Veikkaus

Koivula contends that the government expedited the bill primarily to revitalise Veikkaus and afford the company an opportunity to flourish amid intensifying competition from the grey market. Ultimately, however, the government's stake in the enterprise may diminish. "The bill's discussion process was hurried and faced criticism. Prominent politicians openly expressed their dissatisfaction with the draft as it stood, but for the sake of planning, they decided to put it out for public feedback to avoid potential delays," Koivula stated.

Other stakeholders identified numerous provisions within the bill that could greatly benefit Veikkaus in the open market. Jari Vähänen, an industry consultant and former CEO of Veikkaus, cautioned the Ministry of the Interior during the legislative discussions that granting Veikkaus access to a database of 2.5 million customers would create a significant competitive edge for its licensed operations. He sought clarification on this matter in the subsequent legislative phase: “I believe a monopoly company should be allowed to leverage its existing customer base.” Vähänen referenced the approach used by the Swedish monopoly Svenska Spel, which invites players to register for new licensing offers. By clicking on the link, the company could potentially engage up to 2.5 million customers. "If the company is unable to attract its own customers, the value of Veikkaus’s licensed business will diminish considerably. However, if they can engage with 2.5 million gamers, they will have a substantial market advantage," Vähänen elaborates.

Finns love slots

The market's opening will create opportunities for promoting licensed brands. Both Koivula and Vähänen believe that Veikkaus will leverage its brand recognition to gain an edge over smaller independent operators. Veikkaus-branded slot machines are ubiquitous throughout Finland. 

Koivula points out that it's nearly impossible to exit a local supermarket without encountering a slot machine. He also highlights the extensive advertising for Veikkaus games, featuring their popular characters across the country. 

"Finns have a strong affinity for slot machines," notes an anonymous expert. "Veikkaus is a well-known name in Finland." 

Koivula adds, "Even individuals who don’t play slots are likely to come across these games. It’s evident that Veikkaus holds a considerable competitive advantage in this area."

Should the Finnish government sell its stake in Veikkaus?

Questions have also arisen about what the government will own after Veikkaus splits up its businesses. In a July press release, the Ministry of the Interior hinted that it might sell some of its stake in the group. The ministry said the new legislation would give the government “more room to manoeuvre when making decisions about the ownership of Veikkaus in the future.” Vähänen has publicly advised the government to sell its stake. He believes that his role in shaping the new rules as a shareholder in Veikkaus is a serious conflict of interest.

"In his response to the bill, Jari Vähänen stated that state ownership of a gambling company in a competitive market raises significant concerns. He proposed that the government might consider conducting a public procurement process for a monopoly licence, akin to the UK's tendering system for lottery licences. Vähänen also sought clarification on whether the government plans to maintain ownership of Veikkaus' licensed operations. While he noted that the government could continue as co-owner of these businesses, he emphasised that selling their shares would likely simplify various legal and regulatory issues."

Kindred and the positive reaction to the bill

Koivula indicates that Veikkaus holds a 20-25% share of the Finnish online casino market, while fixed-odds sports betting contributes only 10%. Kindred, a leading European operator, has secured a strong foothold in Finland, aided by a partnership with renowned Finnish Formula 1 driver Mika Häkkinen, which commenced in 2020.

Given Veikkaus's monopoly background, Koivula anticipates its market share in the newly licensed environment to range from 20-25%. He suggests that achieving more than 30% would be an unexpectedly positive outcome, whereas falling below 20% could spell trouble. He references the Swedish market's liberalisation, highlighting how Svenska Spel managed to boost its market share by transitioning to a licensed operator.