Sweden faces difficulties with the re-regulation of casino market

Cvetanka Cvetanovska | Published 14 Feb 2020, 2:02 p.m.

This Wednesday was unofficially declared the “National Sweden Casino Day” in the gambling industry. Within 24 hours of notice, the biggest gambling providers as Kambi, NetEnt, Betsson, Kindred and Evolution Gaming posted their Q4 success and financial year updates.

There were some internally published varying rates of success that appeared as a trend in these Swedish-based companies. However, there were regulatory decision patterns that influenced the gambling and marketing sector.
In other words, there were impressive individual points amidst the presented financial information.

The Rise of Live Casino Stock Market

The main subject of discussion was the impact of lower sports betting margins, affecting operators like Kindred and Betsson. The CEO of Kindred Henrik Tjärnström expressed his thoughts on this matter. During the Q3 they had the Championship League days where a lot of favourites won. From October until the mid of December, the margins were much below the long-term average predictions. 

For Evolution Gaming however that was not the case. They reported around 50% of revenue growth for Q4 and for the entire year. This supplier continues to grow in the industry as its innovative live games took the gaming market by storm. The company’s share price rose from SEK 329 (£25) up to SEK 376 (£30). This is not a surprising outcome, compared to what generally has been an upward trend since the data went public.

In this financial report, NetEnt described the business as continually weak, mainly in Sweden and Norway. As a result, even the acquisition of Red Tiger in September did little to increase the operator growth with total revenue of£143.3 million.
Kindred also attributed the challenging year to the Swedish regulation updates, reporting a marginal revenue rise of 1% for the last year. Kindred’s CEO explained how the challenging market took its toll, adding that their company is slightly falling behind.

Merger and Acquisition (M&A) is showing results with a yielding note

From NetEnt acquisition of Red Tiger last year and numerous examples of gaming consolidation, we can see that this strategy works. We bear in mind that if this merge did not happen, NetEnt could have faced a profit loss and negative market rates. 

As analysts pointed, this boosts the overall progress but does not address any issues causing the lack of organic growth of this business. They predict this will continue to be the case in the short term. Naturally, longer-term synergies will benefit both parties.

Recovery of the Swedish gaming market

The troubles of the re-regulation process have been obvious, especially looking over the financial reports.
The publication of the latest set of results was slightly one-sided than in previous quarters. Analysts were optimistic, saying that there is a point where everyone is taking comfort from the tax number. They showed that it’s a normal development process and that the margin pressure gradually fades away.

Betsson’s CEO P.Lindwall however, says they expected some recovery in the closing fourth quarter but did not meet the expectations. One year after the Swedish re-regulation, they have not felt the market consolidation due to the great number of non-profitable operators.

Experts had a panel discussion at ICE London 2020, reviewing the regulatory changes in Sweden over the past year. A representative of the SGA expressed her admiration on reduced gambling content in Sweden, outlining future plans that involve even greater countermeasures. However, the senior council for the Malta Gaming Authority pointed out loud that a strict ban regime might do a lot for the public appeal, but not a lot for market channelisation rates.

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