Operations

The Company’s mandate and permits

The overriding goal of Sweden’s gaming policies is to achieve a sound and secure gaming market in which social protection considerations are heeded by meeting the demand for games under controlled forms. The aim is to counteract excessive gaming, which can lead individuals into gambling addiction, and to stop fraud and criminality in the gaming industry. Svenska Spel has a mandate from the State, after securing permits from the Government, to organise games and lotteries in a responsible manner.

The Company is tasked with:

  • meeting customers’ demand for attractive gaming activities;
  • providing gaming forms that are deemed to entail risks of a social nature, within the framework for social responsibility, when this is believed to be able to curb illegal gaming in uncontrolled forms;
  • providing a credible but also attractive alternative to, first and foremost, uncontrolled gaming operations;
  • taking into account social protection considerations, fraud risks and customer interests when gaming forms are being developed and in all other aspects of operations;
  • endeavouring to provide a well-developed service in both urban and rural areas; and
  • focussing on social responsibility in its marketing so as to avoid being perceived as excessively intrusive.

The 2012 Annual General Meeting adopted a financial goal aimed at ensuring cost-effective operations. Over the course of an economic cycle, Svenska Spel should achieve an operating margin of at least 22%. The operating margin is calculated as the operating profit in relation to all revenue, meaning gross gaming revenue and other operating revenue.
The Swedish Government grants a number of permits that form the basis of Svenska Spel’s operations. The applicable permits govern the following areas:

  • Lotteries and betting on sports competitions
  • VLTs
  • Casino games and the locations of casino games
  • Online Poker

Legal structure

AB Svenska Spel was founded in 1997 following a merger of AB Tipstjänst (established in 1934) and Svenska Penning­lotteriet AB (formed in 1897), and is 100% owned by the Swedish State.

The Svenska Spel Group comprises the Parent Company AB Svenska Spel and the subsidiaries Svenska Spels Förvaltnings AB and Casino Cosmopol AB. Svenska Spels Förvaltnings AB forms a sub-group with the subsidiaries Casino ­Cosmopols Fastighets AB and CC Casino Restaurang AB.

As of 2 November 2015, Playscan AB merged with the Parent Company AB Svenska Spel.

Operational structure

The Group is organised as two business areas: Customer ­Interaction and Casino Cosmopol, as well as five operating areas (Business Support, HR, IT, Communication & CSR and Marketing).

Customer Interaction business area

The business area is responsible for selling all games and lotteries through the sales channels: retailers, arenas, online, mobile phone, corporate customers, subscriptions, restaurants and bingo halls. At 31 December 2015, Svenska Spel had 5,248 retailers (5,423).

Customer Interaction offers a broad gaming range in the form of games of chance, sports games and casino games. The games of chance category includes Lotto, Keno, Joker, Viking Lotto, Eurojackpot and the online games Bingo and Pick’n Click. Games of chance also include the Triss, Tia, ­Penning and scratch games. The offering also includes a pre-packaged set of lottery tickets with Triss and temporary campaign lottery tickets.

Customer Interaction is responsible for the Vegas VLTs, which are the only gaming machines legally allowed in ­Sweden, except for the slot machines at Casino Cosmopol.

The VLTs are installed in specially selected restaurants with alcohol permits and bingo halls with bingo permits. A gaming location may not have more than five Vegas VLTs and the income from these may not dominate the operation. Under Svenska Spel’s permit, the total number of VLTs that Svenska Spel can install is restricted to 7,500 and at 31 December 2015, there were 5,431 (5,872) VLTs installed at restaurants and bingo halls nationwide. These VLTs are distributed among 1,802 (1,952) business partners.

The business area accounts for 86.8% (87.0) of Svenska Spel’s total net gaming revenue. In the 2015 financial year, net gaming revenue for the Customer Interaction business area totalled SEK 7,781 million (7,782).

Casino Cosmopol business area

Svenska Spel’s subsidiary Casino Cosmopol AB has been operating international casinos since 2001. The four casinos enjoy unique premises in Stockholm, Gothenburg, Malmö and Sundsvall, with a varied entertainment offering in terms of casino games, restaurants, bars and entertainment.

The games on offer at the casinos are table games (roulette, dice and card games), as well as slot machines. In 2015, Casino Cosmopol had 1,104,496 visitors (1,119,398).

In 2015, net gaming revenue for the Casino Cosmopol business area amounted to SEK 1,180 million (1,159), up 1.8% year-on-year.

Employees

The average number of employees was 1,657 (1,664), of whom 59% (58) are men. The average number of employees in the Parent Company was 661 (668), of whom 65% (65) are men. For further information about the employees, refer to Note 4.

Significant events in 2015

  • A new agreement was signed with the Swedish Ice Hockey Association. The six-year agreement is valued at over SEK 121 million.
  • A new agreement was signed with HockeyAllsvenskan. The six-year agreement is valued at over SEK 50 million.
  • Existing systems and terminals for the Vegas product have reached the end of their technical lives. A decision was made to invest in replacements.
  • A new agreement was signed with the Swedish Handball Federation. The three-year agreement is valued at over SEK 30 million.
  • AB Svenska Spel has purchased the shares in Playscan AB from its subsidiary Svenska Spels Förvaltnings AB. There­after, Playscan AB merged with AB Svenska Spel on 2 November 2015.
  • A permit has been received to combine online poker with poker games at the Company’s physical casinos.

Events after the balance-sheet date

No significant events occurred after the balance-sheet date.

Future outlook

The Swedish gaming market has been out of step with the market for a long time. Swedish regulated gaming companies, NGOs and unregulated, offshore gaming companies do not compete on equal terms.

To a great extent, gaming market growth depends on the launch of new forms of gaming. Competition is greatest within fast online games, such as online casinos, a gaming form that Svenska Spel does not have a permit to offer. Online casino is today the largest gaming market product, despite the fact that no regulated company has a permit to offer this product. Online sports betting is also continuing to grow, and several gaming companies are competing for customers. To a great extent, customers demand games with high wins and high jackpots.

Turnover in the regulated Swedish gaming market has declined in recent years to the advantage of the unregulated, offshore gaming companies that continue to grow and gain market shares.

An increasing amount of gaming is taking place via digital channels, while gaming in physical environments at retailers and restaurants is declining. Among the digital channels, the sales trend via mobile phones has been extensive in recent years.

The gaming market designs services primarily for mobile phones, thereby increasing access for the customers.

The gaming industry’s advertising investments (gross) for the January–September 2015 period dropped 11% year-on-year. The calculation model for investments in television advertising has been adjusted by Sifo for 2015, which probably explains the industry’s dip in investments. Competition is expected to remain challenging since all companies aggressively recruit customers and strengthen their positions ahead of the future re-regulation of the gaming market.

Svenska Spel welcomes the new investigation which is intended to create a gaming market distinguished by a high level of customer protection, high safety in gaming and clear terms and conditions for operating in the market.

Irrespective of market developments and the future political direction chosen to create working gaming regulations in Sweden, Svenska Spel will continue to prioritise a strong customer offering with the market’s best responsible gaming. The market trend underlines the significance of the comprehensive approach to social protection considerations still taken by Svenska Spel as a large operator and which represent customer protection in the gaming investigation.

Svenska Spel’s legal structure

Svenska Spel’s operational structure