Online gambling technology providers NetEnt are the latest to report declines in revenue and profit due to challenges in adjusting to Sweden’s new regulated market.
On Thursday, the Stockholm-based NetEnt reported revenue of SEK418m (US$43.8m) in the three months ending March 31, a modest 2.8% decline from the same period last year. Earnings improved 7.7% to SEK196m as margins gained nearly five points to 47%, but operating profit dipped 6% to SEK126m and net profit was down 10.5% to SEK120m.
In mid-February, NetEnt reported that its game win was off 5% since the January 1 launch of Sweden’s new regulated online gambling market, and the company said Thursday that its Nordic markets “accounted for almost the entire slowdown [in Q1], mainly due to lower volumes in Sweden.”
NetEnt said the gambling taxes paid under Sweden’s new regulatory scheme lowered its overall revenue by 2% in Q1, but the changes also “impacted our customers and players to an extent that we had not foreseen.” (NetEnt isn’t alone in having difficulties adjusting to the new Swedish reality.)
NetEnt reported “fewer players and lower average revenue per user” in Sweden, despite the company having signed up the country’s former betting monopoly Svenska Spel, which, along with ATG, is crushing the new online market.
NetEnt derives around half of its overall revenue from regulated markets, and excluding Sweden, NetEnt’s regulated market growth was up 5% during the period, although Italy’s recent ban on advertising has resulted in “market weakness.” On the plus side, NetEnt says it continues to see “strong growth” in New Jersey’s regulated online market, especially given its new deal with DraftKings.
NetEnt said total game win to date in April has been “at about the same level” as Q1 and the company warned of a “challenging growth outlook” in several markets due to stricter regulations. But the company is putting faith on a steady stream of new game products and a new management team overseeing NetEnt’s live casino product.
Looking ahead, the current quarter will see NetEnt launch operations with Finland’s Veikkaus gambling monopoly and more games with Norway’s Norsk Tipping monopoly. NetEnt also hopes Pennsylvania follows through on its promise to launch the state’s online casino operations in July.