Responsible gaming strategy lowers Svenska Spel profits

The dilemma facing Sweden’s state online and land gambling monopoly Svenska Spel – how to hold back to avoid problem gambling and at the same time press forward to be successful – surfaced this week when the company reported net gaming revenues in decline for the second consecutive year.
Major changes to management in years past, and a Board strategy more in line with Svenska Spel’s claims that it maintained a monopoly to protect Swedish citizens, are probably the main causes for the decline, although competition has been growing on the internet.
It now appears that management wants to convince the Board that the company should seek a licence to offer a broader range of games in order to remain competitive, as net gaming revenues for the year ended December 31st 2010 down 2.8 percent at SEK9.62 billion.
The Svenska Spel group’s profit after financial items and tax for 2010 was SEK 4,766 million, a reduction of SEK 211 million (4.2 percent) compared with 2009.
“Given the conditions in the market, with an ever increasing selection of games, and given that we are taking measures to limit gambling, this is a fully acceptable result,” said Anders Hägg, acting CEO of Svenska Spel.
“To be able to develop in line with the market, we need to be innovative in our development within the framework of existing permits, but we also need to be given the opportunity to offer new forms of gaming that are in demand,” he added.
Net gaming revenue fell by SEK 281 million (2.8 percent), from SEK 9,905 million in 2009 to SEK 9,624 million last year. Net sales from gaming operations for 2010 amounted to SEK 7,885 million (8,096 in 2009), a reduction of SEK 211 million (2.6 percent).
Developments during the fourth quarter show that growth in the market is currently occurring with operators other than Svenska Spel, Hagg claimed. In Q4, net gaming revenue fell by 6.8 percent compared with Q4 2009 and the operating profit for the quarter was SEK 1,186 million (1,338 in Q4 2009), a fall of SEK 152 million (11.4 percent).
“In order to be competitive, it is important to be creative and to constantly develop our range of games, so that we can give the customer the best gaming experience while maintaining integral responsible gaming. This chiefly applies within the framework of existing permits, but hopefully in future we can also be given the opportunity to have new permits for new forms of gaming that are in demand,” said Hägg.
“We are convinced that we can handle all forms of gaming on the market with the best opportunity for the customer to maintain control over his or her gaming, in terms of both time and money. That we are also a company that does not have the maximisation of profits as a goal increases our potential for introducing and handling responsible gambling measures, even when these have a negative effect on revenue.”
Internally, 2010 was a busy year for Svenska Spel, with a process that began in the autumn with the intention to increase efficiency and decrease costs in the organisation, in accordance with the requirements of both the owners and the board. Responsibility in gambling measures were further sharpened, including the acquisition of the responsible gaming subsidiary Playscan AB and the imposition of an 18 year age limit for buying lottery tickets.
Svenska Spel’s casinos implemented a new initiative during the year, with responsible gaming weeks in all the casino locations. The number of discussions with guests about their gambling habits increased, as did the number of voluntary suspensions.
In related news, the company announced this week that it has established a research council that will provide funding of five million kronor a year to increase knowledge about gaming and preventive measures against problem gambling.
The research council is made up of experienced researchers from public interests, who adjudicate research applications on the basis of scientific quality and social relevance.
“It is high time we gave researchers the opportunity to gain knowledge about gaming and preventive measures for problem gambling. This is a complex and urgent question, not least for the two percent of the population with a gaming problem and their families,” said Margareta Winberg, chair of Svenska Spel.
“Gaming is a young area of research in Sweden that suffers from a lack of resources. Compared with alcohol and narcotics dependency, problem gambling has received little attention.”
Svenska Spel director, chair of the research council and senior lecturer at Karolinska Institutet, Stefan Borg added: “As a public corporation, Svenska Spel has a special duty to focus on and prevent problem gambling. With the input of the research council, we hope to increase knowledge and find out more about gaming and preventive work on problem gambling.”

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