Q&A: Betsson CEO on a challenging 2019 and how sportsbook might aid a 2020 recovery

Malta-headquartered operator Betsson Group recently revealed a challenging end to 2019, with Q4 revenues dropping by 10% year-on-year due to weak performance in the Swedish, Dutch and Norwegian markets. Despite the revenue decreases in its online casino and sportsbook operations, CEO Pontus Lindwall hailed the firm’s strong full-year operating profits, figures which he attributed to a significant geographical spread and an efficient organisation.

EGR Intel chats to Lindwall about a difficult 2019 and how the constantly improved sportsbook performance is leading to further B2B supply deals.

EGR Intel: Which of the various markets Betsson Group operates in impacted Q4 revenues most negatively?

Pontus Lindwall (PL): First of it all, it hasn’t been a tough quarter really. If you analyse the composition of our revenues and where they come from, it is obvious if you are in the industry that Sweden has gone through changes compared to what it was in the comparison Q4 a year earlier.

Other markets have experienced other changes as well, the Netherlands being one of them, which as you know is a big market. The fact that we managed to maintain revenues that good and still deliver a strong profitability in terms of money, we are quite happy about that.

Nevertheless, the revenues are lower, and the EBIT is lower than last year, which was by the way the all-time high for the company in its history, so that is also good to remember when comparing with the toughest quarter ever. I am still happy with the profits and we gave strong dividends to the shareholders. We showed a strong profit, which is not the case for most companies operating in the markets where we are active.

EGR Intel: Do you see this trend of decrease continuing into the future?

PL: What we have seen in 2019 is a bit of a perfect storm. Our revenues consist of revenues from a large number of markets, but some markets are bigger and some are smaller. When we had external impact on three of our six biggest markets, that had an impact on the total numbers.

There are other big markets that are performing quite well and managed to match this. I am very optimistic for 2020 in terms of development.

EGR Intel: Several operators have reported declining sportsbook margins, so do you think sportsbooks are becoming more difficult to operate due to taxation and regulatory burdens?

PL: I don’t think they are becoming more difficult to operate in relation to regulation. For Q4, we were a little bit below our rolling average which meant we converted a little bit less. On the other hand, we had an all-time high on the turnover in the sportsbook which shows it is a strong performing product and the interest from the user is there. Of course, compliance-wise it becomes more complex but that is a different story.

EGR Intel: Which of your jurisdictions had the lowest sportsbook margin during the period?

PL: I haven’t analysed that in the detail, but it was across the line lower than average. It’s not that the margin varied that much but a few decimals is enough to change the revenue quite a bit.

EGR Intel: You mentioned in your statement accompanying the results that you’ve seen declining channelisation rates in the Swedish market. What would you estimate them to be currently?

PL: It is very hard to make an estimate but what we can see from within the industry is that it is lower than the goal that was presented in the pre-legislative text, which was like 90% channelisation. We have been lower than that. That is unfortunate because the clients which are in most need to be under regulation and that protection are the ones who end up outside of the regulation.

EGR Intel: Are the Swedish authorities doing enough to ensure channelisation towards licensed operators?

PL: I think the Swedish authorities focused a lot on the licensed operators in the first half of 2019. You could see that from the outside by the different fines. From what we hear, they are now looking into channelisation and how to address that. From the industry we are hoping that they look into that so that we can have a successful regulation.

EGR Intel: How is the Italian sportsbook performing and how challenging is this market?

PL: The sportsbook started out as a casino in the Italian markets, which was a little bit unique. It gave us a solid place in the market and now we have added the sportsbook. Obviously, we’ve started from zero but the interest is very big in Italy. We are picking up but it will take some time before it has a big impact on revenues.

Regarding the marketing ban, we always think it is unfortunate when the authorities go after that part of our operation. Being licensed, being scrutinised and paying the taxes should give you the right to communicate to the market. That is what differentiates us from those operators which are not inside the regulations.

It puts us in a very hard situation. We are supposed to pay high taxes, which have been raised in Italy, and at the same time we are not allowed to inform our customers in Italy that we exist. It is not a functional equation.

Betsson CEO cheering his Italian team

EGR Intel: Do you think you’ll be able to challenge the big operators in Italy such as bet365 and SKS365?

PL: I think in a way we are. We have been one of the strongest growing operators in the Italian market for some time. We are definitely gaining a market share. If you look back a couple of years, we have gained market share. Now, we must rethink our strategy because we have lost the opportunity to do the marketing how we used to do it.

We have a great Italian team; they are really optimistic and I’m sure we will be able to reach the market in one way or another.

EGR Intel: You’ve migrated the UK-based NetPlay brand to the Techsson platform. How has that gone and are there any challenges?

PL: It is always a challenge to migrate customers from one platform to another. It is not an easy operation but we have done it many times in the past and it has gone well. It gives us a better opportunity to monetise those customer bases and it saves us a lot of effort and fees to pay to platform providers. It was good that we finally managed to do it.

EGR Intel: In what ways is your increased focus on sustainability impacting your business model?

PL: I think as a gaming company we had to take into consideration the expectations on us as a company in terms of sustainability, which means equality, anti-money laundering and the environment. On top of that, we have the more industry specific matters such as responsible gaming and we realised a very long time ago that being a private gaming operator comes with an automatic responsibility that we need to take care of our clients.

That is in line with our business intention because we want to have long-term clients that play for fun and play for amounts they can afford. We have been investing a lot in technical tools and education for 15 years and we are implementing new things all the time.

This is an integrated part of our operation and we are really good, but we can become even better and we will strive to do so.

EGR Intel: When do you expect the NordicBet appeal to be heard and are you confident in the outcome of the case?

PL: I don’t know when the final decision will be made as it may continue after this appeal. We believe that we have done whatever is expected of us in terms of how to read the regulation and we have also looked into regulations from other markets and the interpretation of that.

Obviously, the authority came to a different conclusion. They have one picture and we have another picture and those are not aligned. That is what happens with new legislation when it is not crystal clear, which it cannot always be. Then there must be some court cases in order to set the boundaries for interpretation.

EGR Intel: Anything else you’d like to add on Betsson Group’s performance?

PL: I still think it is quite a strong report. We have been facing those impacts in a few of our main markets but they are external impacts. We have 15-20 markets where we have grown strongly.

Our view is that we have been doing well despite these challenges. The fact that we as a company are not relying heavily on one or two markets shows that if we have a big negative impact in a few markets. We can still uphold a very solid profitability and give dividends to the shareholders which is the purpose of any company,

There are so many companies in this industry that don’t fulfil the purpose of a company as they don’t operate in profits. But we do.