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Gaming market shrank with obligatory registration

Svenska Spel competes both with Swedish regulated gaming companies and unregulated, offshore gaming companies – and an illegal market. Competition is most intense in online gaming.

After more than ten years of continuous growth, the total Swedish gaming market declined in 2014. A major underlying reason for the decline was Svenska Spel’s launch of obligatory game registration. First and foremost, the registration requirement has led to a reduction in gaming with the video lottery terminal (VLT) Vegas, but has also resulted in a more general decline among sporadic customers.

Net gaming revenue for the regulated Swedish gaming companies totalled SEK 16,500 million (17,248) according to the Swedish Gambling Authority. After adding the offshore online operators’ net gaming revenue to that of the Swedish gaming market, about SEK 4,200 million (3,600), according to Svenska Spel’s estimates, the total known Swedish gaming market amounted in 2014 to about SEK 20,600 million (20,800).

In a declining market, the offshore online operators further increased their market shares in 2014. Growth and competition are strongest within fast online games, such as online casinos, a gaming form that is currently not in Svenska Spel’s offering. To a great extent, market growth depends on the launch of new games.

Obligatory registration

In 2014, the Swedish gaming market declined due to Svenska Spel’s launch of obligatory registration for all gaming. It was primarily gaming on the Vegas VLT that declined ­during the year.

Social considerations motivate regulation

According to Swedish law, it is fundamentally illegal to organise gaming for monetary gain for the general public. The State has granted exemptions and issued permits to a few gaming companies that conduct regulated operations in which social considerations, supervision and inspection are  assigned priority. The Swedish Gambling Authority bears overall responsibility for ensuring that the Swedish market is legal, safe and reliable. However, they can only conduct inspections of companies with permits to operate in Sweden.

Over the past ten years, the proportion of people in Sweden with gaming problems has been 1–2% of the population, while a further 5% are at risk of developing gaming problems. While gaming problems have decreased among some groups, they have increased among others. For example, among young men aged 18–24, almost one in ten is struggling with gaming problems.

However, possibilities for obtaining help with gambling addiction have long been limited due to uncertainty as to who bears responsibility for care and treatment. In 2012, the National Board of Health and Welfare was tasked with reviewing how care and preventive initiatives to combat gambling addiction should be implemented and how these initiatives could be funded. The question is whether the diagnosis of gambling addiction will be classified in the same way as alcohol and drug addiction, which would give individuals with a gambling addiction the right to get treatment under the Social Services Act.

Domestic and offshore gaming companies

Both domestic, regulated companies and unregulated, offshore gaming companies are active in the Swedish market. The wholly state-owned Svenska Spel, the state-controlled AB Trav and Galopp (ATG), Folkspel, bingo halls, Postkod­Lotteriet, Kombispel and Miljonlotteriet are the largest ­Swedish operators. Private operators of restaurant casinos also account for a minor share of the market.

There are many offshore gaming companies that target Swedish customers. Examples include the UK company ­Ladbrokes, which is based in Gibraltar, and Unibet and ­Betsson, which are based in Malta. Those companies lack ­permits to operate in Sweden and are not subject to the same laws, tax regulations, regulatory inspections and restrictions that apply to companies that comply with Swedish gaming regulations. Primarily, they compete with gaming forms, such as poker, bingo, sports games and online casino games. The ongoing consolidation of online gaming at international level means fewer but larger companies.

Problems with match fixing are increasing in line with the pace of growth in international gaming. Read more about Svenska Spel’s efforts to stem this here.

Extensive illegal gaming market

In parallel with the known gaming market, there is an illegal market with gaming machines and illegal clubs. The Swedish Gambling Authority estimates that there are a few thousand illegal gaming machines nationwide that have a combined annual turnover measured in billions. Organised crime syndicates are often behind the illegal gaming machines. Police crackdowns are conducted every year and machines confiscated, but the operations have proved difficult to stop.

The Supreme Court ruled that gaming machines that offer monetary gains and that are linked to offshore servers are illegal. This means that only state-owned companies can secure permits to organise games for monetary gain on gaming machines. In other words, the law supports taking action against illegal gaming machines.

Svenska Spel applies for an online casino permit

The marketing of offshore gaming companies in the Swedish media increased substantially during the year and online casinos continue to be the most promoted gaming form.

In 2014, online casino was the fastest growing gaming form and accounted for about 12% of the Swedish net gaming market. This is one of the gaming forms assessed as entailing a high risk of developing gaming problems and, at present, all gaming is exclusively offered by unregulated, offshore gaming companies.

So far, Svenska Spel has lacked permits for online casino but, in 2014, submitted a permit application to the Government. The aim is to channel customers from the unregulated gaming companies to safer online casinos run by Svenska Spel that provide improved conditions for countering risky gaming in Sweden.

Trend in the Swedish gaming market

The Swedish gaming market is characterised by ever increasing competition, which is reflected, not least, by the substantial increase in marketing of gaming. In 2014, gaming advertising in the market increased 69% to a gross amount of almost SEK 3.6 billion according to TNS SIFO Market Research’s advertising surveys. Of this amount, offshore companies account for 72%. The market share for companies without permits in Sweden increased 3% and now amounts to 20% of the total known gaming market, which corresponds to about SEK 4.2 billion.

The trend in the gaming market showcased the need to modernise and tighten gaming regulations in Sweden. The new Government announced in October that efforts to identify a functioning licensing system must be accelerated. The 2015 budget proposal stated that the aim of gaming policy is still to achieve a healthy and safe gaming market in which social considerations and meeting the demand for games are held under controlled forms.

Ahead of a decision on any amendment to gaming regulation, on the initiative of the former Government a study was undertaken of a number of countries that have changed their regulation in recent years. The development of the markets in Denmark, Norway and Finland have been, and still are, of particular interest.

In 2015, a separate investigator will report on the possibilities that are available to tighten the ban on advertising under the Swedish Lotteries Act and, if possible, to propose legislative amendments. The investigator will also address if, and if so how, culpability can include all breaches of the ban on advertising irrespective of whether the promotion pertains to a Swedish or offshore lottery. A system with directly applicable fines will also be considered. The Government is also investigating transferring the authorisation procedures – from the Government to the Swedish Gambling Authority – and also intends to take a more composed approach to the treatment of ­gambling addiction.

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