Can Veikkaus thrive in Finland’s liberalised gambling market?

Veikkaus’ monopoly business has been in steady decline for years. In its H1 earnings released on 2 September, group managing director Olli Sarekoski pointed to a lower-than-expected profit margin, while its group gaming revenue suffered a 21% drop on the previous year.

“Veikkaus hasn’t been competitive [for some time],” says local lawyer Antti Koivula. “And the previous Lotteries Act update in 2022 worsened the situation.”

“They’ve lost something like 40% of their gross gaming revenue just in the matter of roughly five years. That’s quite significant.”

40%

Drop in Veikkaus’ GGR over the past five years

Sarekoski cited decreasing player spend and new protection measures as reasons for the H1 decline. “The visible decline in the purchasing power of consumers has affected Veikkaus’ business,” he explained. “Our number of customers is still at a good level, but the amount of money played by customers is average.” Active players increased by 15,000 during the three-month period, coming to 2.5 million.

One possibility is consumers’ loyalty to Veikkaus has waned as they turn to unlicensed operators to play non-lottery games. Online casino and betting made up 31.5% of the monopoly’s revenue mix in H1, while the segment’s profit slipped 1.5%. The issue stems predominantly from a drop in spending on betting.

“In 2021 it was estimated that Veikkaus had roughly a 30% market share in non-lottery categories which now go under the licensing system,” Koivula tells iGB. “Since then, there’s been considerable decrease in these numbers.”

Veikkaus bullish on liberalised market

Despite its disappointing results Veikkaus is bullish about the upcoming licensed market, to launch in 2027. All operational efforts are being invested in preparing for the change and the The group is optimistic it can turn its luck around and return to growth.

As part of the Lotteries Act reform, Veikkaus’ online casino and betting business will be given a licence to compete against other private operators. Meanwhile its retail slots and lottery arms will maintain an exclusivity in the market. Other business arms will be carved out and the group will be ultimately split into four. Questions remain around which parts of the business the government will maintain its stake in.

Veikkaus has initiated a total turnaround of its business and is in the middle of reviewing various departments to consolidate its operations. Up to 620 employees could face redundancy as part of the strategic review, the company said.

“The goal of our strategy is to be both the Finnish market leader and an internationally competitive and growing gambling company in the future,” Sarekoski noted in the H1 results.

Market liberalisation has been in discussion in Finland for years. The European Gaming and Betting Association (EGBA) called for an end to Veikkaus’ monopoly in December 2020. The first formal announcement from the government on its intentions to open up gambling came in June 2023. Draft rules were released in July 2024 followed by an industry consultation period which closed on 18 August. Operator licenses are to be awarded in 2026, ahead of a full market launch in 2027.

Is the government favouring Veikkaus in its draft legislation?

Koivula believes the government has rushed into its legislative process largely to revive Veikkaus and give it a chance to thrive against growing competition from the grey market. After all, its shareholding in the business is likely suffering.

“The process has been hasty and it has faced criticism,” he tells iGB. “Key politicians have publicly stated they are not happy with the draft as it is, but for scheduling reasons they wanted to put it to the public [for feedback], otherwise it could face delays.”

Other stakeholders have flagged a number of policies in the draft rules that could significantly benefit Veikkaus in the open market.

Industry consultant and former Veikkaus executive Jari Vähänen warned the ministry of the interior in his consultation response that Veikkaus’ licensed business will maintain a major competitive advantage if it has access to its 2.5 million-strong customer base. He asked for clarity around this as the next phase of legislation.  

“My opinion is that the monopoly company could continue to use its existing customer base.” He cites Swedish monopoly Svenska Spel’s method of contacting monopoly players to sign up to their new licensed offering. If they click through, the business has potential to upsell up to 2.5 million customers.”

“If they can’t bring those customers with them, the value of Veikkaus’ licensed business will be much lower. But if they start operations with 2.5 million customers, they will dominate the market,” he says.

Finns love slots

With an open market will come the opportunity to market licensed brands. Both Koivula and Vähänen expect Veikkaus to benefit from its vast brand recognition against smaller independent operators. In Finland, Veikkaus branded slot machines are everywhere.

Koivula says you can’t visit the local supermarket without bumping into a slot machine on your way out. He notes advertisements for Veikkaus games, including their well-known characters, are prolific in the country.

“Finns love slots,” says another source. “And Veikkaus is a household name in Finland.”

“Even those that don’t play slots can’t avoid seeing these games,” Koivula insists. “It’s quite clear that from this point of view, Veikkaus has a considerable competitive advantage.”

Should Finland’s government sell off its Veikkaus stake?

Questions have also been raised around the government’s ownership of Veikkaus once it carves out its various businesses. In a July release, the ministry for the interior hinted it could sell part of its stake in the group. It said the new legislation would give the government “more room for manoeuvre in the future ownership decisions of Veikkaus”.

“State ownership of a gambling company operating in a competitive market is at least a questionable solution”

Jari Vähänen, gaming consultant

Vähänen has publicly advised the government to sell off its interest. He believes its role in forming new regulations as a Veikkaus shareholder is a major conflict of interest. “State ownership of a gambling company operating in a competitive market is at least a questionable solution,” he wrote in his draft response.

“In future [the government] could organise a public procurement process for a monopoly licence like the lottery license bidding process the UK,” he suggests. Vähänen has called for clarification around whether the government will maintain any ownership of Veikkaus’ licensed businesses.

“They could remain as a part-owner of those companies. But it would be much easier for many [legal and regulatory reasons] if they sell their part in those companies,” says Vähänen.

Industry has an overall positive response to draft legislation

Veikkaus estimates it has a 20%-25% share of Finland’s online casino market today, according to Koivula. And only a 10% share for fixed-odds sports betting. European leader Kindred has maintained a significant hold in Finland aided by a partnership with legendary Finnish F1 driver Mika Häkkinen dating back to 2020.

Thanks to its monopoly legacy, Koivula expects Veikkaus to enter the licensed market with a 20%-25% market share. “Anything above 30% would be a considerably positive surprise and anything below 20% could be catastrophic.” He uses Sweden’s market liberalisation as an example, noting Svenska Spel was able to grow its market share when becoming a licensed operator.  

“Anything above 30% [market share] would be a considerably positive surprise and anything below 20% could be catastrophic”

Atti Koivula, Finnish lawyer

But Kindred said on 4 September that it aims to become a leader in Finland’s liberalised market via its Unibet brand.

“Finland’s transition to a licensing system is a unique opportunity to create a world-class regulatory framework. All stakeholders must work together to create and protect a thriving online gambling market,” it said.

Overall, the stakeholder response to draft rules has been positive, both Koivula and Vähänen insist. There has been reasonable pushback against restrictions on bonuses and marketing, but Vähänen says there is a good balance between consumer protection and plans for a high rate of channelisation. The draft is expected to hit parliament in its spring session next year, which commences in February.

For Veikkaus, re-regulation ends its monopoly. But that may in fact provide conditions that finally guarantee some stability.