Folkspel Not Quite Ready to 'Conquer' in Sweden

15 July 2004

When a journalist receives a press release stating "Folkspel Conquers the Digital Lottery and Gaming World with New Partnership," he becomes very intrigued. And when he reads statements like, "And now, Folkspel is to be No. 1 in Sweden within Internet gaming," and "Folkspel is now entering this highly interesting and exciting digital world," he becomes very excited to write a story.

But a journalist has to check the facts. And the fact is that Folkspel is a lottery and gaming company owned by more than 70 Swedish national nonprofit organizations, which together administrate 35,000 associations and have a total of 5 million members.

Another fact is that Folkspel's turnover in 2003 was 2.3 billion Swedish Krona, which equals US$310 million--and that happens to be exactly the amount that operator Novamedia Sweden, a subsidiary of Novamedia in The Netherlands, raised for Folkspel. So the future "Conquerors of the Digital Lottery and Gaming World" actually generated no money at all.

Going back another year, Folkspel in 2002 introduced "Yee-Haa!!," a scratch-card product with SMS interactivity. It was probably the biggest European flop in the lottery and gaming history.

Boudewijn Poelmann, the CEO and a shareholder of Novamedia, at the time pointed out that the investments for the new game "are coming directly from the income realized by Novamedia Sweden. So, Folkspel, with the money generated by Novamedia Sweden, is financing a potential competitor: NetGames Factory. Of course, Folkspel is free to do whatever they want, however, we do not like this development. I have been in Sweden and, let's say, we had a serious discussion."

Now, l'histoire se repete. Folkspel has entered into a new partnership with Veikkaus, the lottery and gaming company owned by the Finnish state. Veikkaus has spent 10 years developing the OnNet digital gaming platform, a system designed to handle transactions for digital games and lotteries over the Internet.

Poelmann once again has weighed in with same criticism. "I still have the same objections as two years ago," he said." It is cannibalism, and it costs too much money."

Then there's the Svenska Spel factor. Svenska Spel, Sweden's national lottery, is the largest gaming company in the country. Its market share is 54 percent, and its an annual turnover for 2003 was 19.5 billion SEK, (US$2.6 billion). In addition to lottery games, Svenska Spel carries sports betting products, such as Stryktipset and Oddset. The group's marketing budget of $96.4 million makes it Sweden's second largest consumer advertiser.

Above that, the Swedish Gaming Board says the government has granted Svenska Spel and ATG (a state-controlled company owned by horse racing associations) exclusive permits to arrange certain lotteries. Svenska Spel has the sole right to arrange sports betting (with a few exceptions for local events), and ATG has the sole right to arrange race betting.

Patrik Gustavsson, a spokesman for the board, confirmed that Folkspel has no license. So, how will Folkspel become "No. 1" in Sweden's Internet gaming market?

Folkspel's Anders WestgÄrdh said the group is working on obtaining a sports betting license.

"It is correct that we do not have a license for Internet sports betting," Gustavsson said. "As you already know, this license is held exclusively by Svenska Spel and ATG.

"We have, however, turned in an application asking the Swedish Gaming Board to give us license to arrange a digital lottery based on the technical platform provided by Veikkaus. We expect a decision by the end of summer/early fall.

"The path that Folkspel now is following is to transform the company from a one-product company (BingoLotto) into a more diversified actor on the market."

Perhaps the press bulletin with the heading "Folkspel Conquers the Digital Lottery and Gaming World with New Partnership" should have waited until Folkspel obtained a license. For now, it looks like a lottery.

Obstacles aside, however, Folkspel has partnered with a company that exemplifies the growing Internet-based gaming market. Internet games represent more than 10 percent of Veikkaus' total sales in Finland, and the company has more than 310,000 registered OnNet players.

"There's no need to reinvent the wheel," Veikkaus' Risto Rautee explained. "We were the first to launch an Internet lottery back in 1996, and we've been developing the platform since the early 1990s, so Folkspel will now benefit from this experience."

Softplan, a Finnish IT company, has adapted the system to Swedish conditions for Folkspel. The company is part of the HiQ Group, and, in practice, acts as systems developer for Veikkaus.

Veikkaus, meanwhile, is working on getting its live betting platform off the ground in Finland.

"Currently due to the government, we had to postpone slightly the launch of our live betting in Finland," explained Joni Sihvola, Oy Veikkaus' manager for international partnerships. "Having said that, the government gave us the license to run live betting just in mid June, and we are currently re-testing the service with restricted test group who, however, are placing real bets with their own money. Now we are aiming to get the license in order to be able to launch the service to our big market in August, either during the Olympic Games or the World Cup Hockey. From the service point of view, the first reactions have been positive, and our technical department is working without any problems. Yet there are some technical details which need to be improved and the speed and capacity of mobile networks/telecommunication seems to be the critical point."

The Product

Veikkaus' OnNet gaming system enables registered players to place in-game bets, including propositions such as "Which team is going to score next?" or "How may goals will be scored during the next period?"

The live betting component of the OnNet Interactive Gaming Platform enables a gaming administrator to open and close new betting targets in real time, set the odds and control the game. In the pilot setting, the new betting targets consumers using text messages or a graphical user interface via mobile phones, depending on the phone model of the player.

Players using a smart phone equipped with the Series 60 system (such as Nokia's 3650 and 7650 models) can download an easy-to-use colorful graphical user interface for placing bets Players with ordinary mobile phones can place bets via text messages.

The outcome is communicated to the players in real time after the betting target is closed and the result is known. Each player receives a personal message with match results as well as his personal betting results.

Payments are debited from--and prizes credited to--the player's OnNet account in real time.

OnNet will also eventually enable fast-paced betting using the Internet, interactive digital television and any telephone using either VRU (voice response unit) or speech command.

Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.