The task seems impossible. A bit like trying to fist from the heavyweight world championship with one hand tied behind your back.
Gambling company Veikkaus is currently taking heavy blows from here to here. A company in a monopoly position in Finland is trying to dodge laws, but the means are one-handed.
Veikkaus has reached the brink of crisis, according to an extensive IS report. How can a state-owned company cope with the ever-intensifying international competition in gambling while at the same time requiring a monopoly position to reduce gambling problems?
In relation to the number of inhabitants, Veikkaus has for years been one of the most productive gambling companies in Europe. The state-owned company has generated a pot of about one billion euros a year, especially for sports activities, arts, culture and science.
In the future, Veikkaus' annual income threatens to fall by as much as about a third, to EUR 600-700 million.
Behind the drop is a gambling addiction debate that arose last year, which resulted in a decision to significantly reduce slot machines and introduce coercive identification. This is estimated to lead to an annual deficit of between EUR 200 million and EUR 300 million, depending on the final reduction in vending machines.
After Veikkaus has had to focus on the issue of gambling responsibility, the company is now taking more of the turmoil in the ever-growing digital market. In 2019, Veikkaus' share of the competitive online market was only 49 per cent, while in 2013–2018 it was still at its highest at 58 per cent and at its lowest at 53 per cent.
In June, Veikkaus announced that it would increase its responsibility to gamble in order to reduce its total number of 8,000 slot machines by the end of 2020.
- Social pressure is such that in the future slot machines may no longer be found in casinos. At the same time, when Veikkaus has had to reduce its marketing for the same reason, the company's revenue actually threatens to fall by as much as a third in the future, says Sinuhe Wallinheimo (Kok), Member of Veikkaus' Supervisory Board.
- From the point of view of game disadvantages, the development is good, but from the point of view of the company's situation it is troublesome.
Veikkaus' CEO Velipekka Nummikoski.
Photo: Vesa Moilanen / IS
Veikkaus' Deputy CEO Velipekka Nummikoski argues that the equation is kimurant for the company. Finland is free to play games from foreign gaming companies, and now Veikkaus' share of the entire digital market is only 63 percent.
- When the gaming of Finns is channeled in ever-increasing amounts into informal, ie foreign, systems and no longer to the same extent into the services of an official actor, the situation is undeniably challenging, Nummikoski says.
- We are in a situation where a political decision is urgently needed on what role Veikkaus wants to see in the future.
The social pressure to reduce gambling began to flow in the summer of 2019, largely from Veikkaus' advertisement, which said that gambling was part of the daily routines of many wherever I went for coffee.
The ad buzz sparked a debate about gambling addiction. According to the latest study by the National Institute for Health and Welfare (THL), about three percent of the population in Finland has gambling problems.
Shortly after the uproar began, Veikkaus put some of its advertising on the ice, and the company's CEO Olli Sarekoski admitted that the company had made mistakes in its marketing.
- Because of one single stupid ad, a terrible halo rose. If someone had presented or read it to me, I would have said immediately stop - there is no need for such a shooter here, says MP Jukka Gustafsson (sd), Chairman of the Board of Veikkaus' Supervisory Board.
- The social benefits generated by Veikkaus were completely forgotten in the discussion.
Member of Parliament Jukka Gustafsson (sdp).
Photo: Heikki Saukkomaa / Lehtikuva
The FCA has investigated Veikkaus' operations. According to its research director Tuulia Hakola-Uusitalo, there has been room for improvement in the company's game-fighting measures.
- The reason for Veikkaus' monopoly position is that the company's number one priority is to reduce gambling addiction. Veikkaus' task is therefore not to maximize returns, Hakola-Uusitalo reminds.
- I understand that this may be particularly surprising to those for whom Veikkaus' profits are important. However, this is legally the case. There are a lot of gambling problems in Finland, and that is why the topic should be discussed now.
One of the problems within Veikkaus is that the company does not feel that there are opportunities to develop. Significant brain drain has rolled out of the company in a short time.
Jari Vähänen, who has been responsible for international relations, Reijo Anttila, who has worked in product development, Pekka Ilmivalta, Director of Legal and Responsibility, Asko Heiskanen, Online Casino Business Manager, Mari Mustakosen, Director of Business Legal Affairs, and Mari Mustakosaja, Business Director,
Some of the starters interviewed by IS needed purely new challenges, but for many, the desire to leave was driven by Veikkaus' desperate situation.
- All the guns have been taken from Veikkaus. The current Minister of the Interior (Maria Ohisalo, Green) has not approved any of Veikkaus' applications for changes to the rules for a year - or none during his entire term. He has approved one change in the rules concerning Veikkaus, and it concerns this Korona period, one of Veikkaus' insiders regrets.
- There have been some basic reform ideas, completely harmless stuff that would not have increased the number of disadvantages in the game. When the social atmosphere around Veikkaus is now negative, it does not terribly inspire employees. Veikkaus is threateningly falling behind in international development.
The entrants seem to have been disturbed by the developmental brakes on the company, not, for example, by the actions of its operational management.
- I've been following for a long time Finnish gaming policy, and its current situation, I am very concerned about, transferred Pekka Ilmivalta says Floorball Federation Executive Director.
- In a sharp increase in international competition, not all development projects should be put on ice. Veikkaus' channeling task should now be clarified and strengthened so that the company can also develop more experiential and entertaining games, Jari Vähänen thinks.
The beak man of Veikkaus 'Supervisory Board sees that Veikkaus' future is at the mercy of a new lottery law that is currently being prepared.
- Finland is becoming a freak in the gambling market if the law reform does not bring about the necessary changes, he underlines.
Minister of the Interior Maria Ohisalo.
Photo: Heikki Saukkomaa / Lehtikuva
Minister of the Interior Maria Ohisalo (Green) responds to the criticism from Veikkaus that the attitude of the Ministry of the Interior and the Police Board under its authority to reform projects would be sluggish.
- We have been cautious in approving new gambling and related regulations of the Ministry of the Interior, because the fight against gambling harms and Veikkaus' so-called the channeling capacity must be considered in parallel, the Ohisalo line.
- We are currently investigating the need to reform the Lottery Act in the draft law, especially in order to improve the prevention and reduction of harm. At the same time, ways are being explored to support Veikkaus' operating preconditions.
According to the Minister, the development of Veikkaus' online business and the fight against illegal gambling abroad are the government's goals.
- Veikkaus' income supports a lot of very valuable activities, Ohisalo emphasizes.
- There is, of course, the question of the extent to which support for socially essential activities in general must depend on the income of the gambling company and, in particular, on the gambling of people who play a lot and suffer from gambling problems.
Image: Magazine image, image processing IS
The Supervisory Board consists of representatives from all parliamentary parties. There is a unanimous desire in their insiders to save Veikkaus from the canvas threat, but there is enough torque in the emergency measures of the crisis.
Based on the government program entry, Veikkaus' monopoly position is to be strengthened politically, but there is by no means unanimity in the Supervisory Board. Some politicians see that the monopoly of the state gambling company in Finland should also be broken in accordance with the Swedish model.
There are currently almost 90 international gambling companies in Sweden, from which the state collects revenue for itself through license and tax fees. Their combined marketing budget was immediately over € 500 million a year.
- With the licensing system, the Finnish state would probably be able to raise EUR 600–700 million in gambling companies' license fees and other revenues - ie practically the same pot as Veikkaus with its weakened monopoly position in the future. In a free system, the state pot could be emphatically distributed among those beneficiaries who would not have enough support from the marketing budgets of gaming companies, Wallinheimo explains.
- Everyone could win, but it's certainly not black and white. There are both pros and cons to both systems. It is now important to discuss whether it is worth keeping the monopoly artificially upright or making a previously controlled transition to a licensing system that regulates everyone by the same rules of the game.
Member of Parliament Sinuhe Wallinheimo (Kok).
Photo: Martti Kainulainen / Lehtikuva
Veikkaus has about 4,000 beneficiary communities. According to Gustafsson, the Supervisory Board is committed to Veikkaus' exclusivity, which he believes should be defended as long as "it makes economic and operational sense".
- Veikkaus must be allowed a new business model, which means business-to-business in Europe. Veikkaus would not go into people's skin, but would offer its services to legitimate foreign gaming companies, Gustafsson suggests.
- I consider it particularly important that Finland be prevented from gambling on unauthorized gambling sites - and that money transfers to unauthorized sites should also be blocked in the new lottery law. Such restrictions are already in place in 21 European countries.
The reform of the lottery law is being prepared until the end of November and is due to enter into force in July 2021. Wallinheimo is not at all sure that the prevention of gambling will go through in Finland.
- I think that there will be such a big halo in that debate that other means must also be considered. In a free but strictly controlled licensing system, gaming companies operating without a license would remain on the beach, and through that the game would be fair to all players - also from Veikkaus' point of view, he said.
According to the interviewees, Veikkaus would probably do better in the current situation as a company in a free system than in the current monopoly system.
According to an IS study, even everyone within Veikkaus no longer supports exclusivity. In any case, the position of the Executive Vice President will remain open.
- Veikkaus would certainly succeed in an international competition based on a license system. We have enough expertise, says Nummikoski, Executive Vice President.
- But Veikkaus will also succeed as a monopoly in the future, if political solutions can be used to channel gaming into official and supervised services, in other words, to prevent the flow of revenues to foreign informal actors. As a company, we have no official position on the matter. It is a political decision.
The FCA is currently carrying out its own study of which system would work better in Finland, for example from the point of view of the goal of reducing gambling harm.
- So far, our position has been that the fight against gambling addictions is as successful in a monopoly as in a licensing system, Hakola-Uusitalo sums up.