Data published today (23 November) by ATG shows channelisation rates for regulated online gambling in Q3 was between 70% and 82%. This rate refers to the igaming market as a whole but fluctuates for different gambling types.

Online sports betting had a channelisation rate of 88% in Q3, whereas online casino was lower at 74%. ATG added that channelisation for both sectors, as well as the entire market, has been decreasing steadily since 2019 when legal betting launched in Sweden.

These rates are based on the assumption spend per visit is 10 times higher with unlicensed sites than licensed. When this assumption is raised to 20 times higher, the channelisation rates fall further.

For the entire market with the higher spend assumption, channelisation rate is 70%. Sports betting rate is 78% but online casino is much lower at 59%. This suggests almost half of online casino spend in Sweden is with illegal gambling sites.

The data was also used to estimate the value of the unlicensed market. ATG said the illegal market is worth between SEK3.4bn (£258.4m/€297.4m/$324.6m) and SEK6.7bn annually.

Where is illegal Swedish gambling taking place?

ATG said two groups, Infiniza Limited and North Point Management Ltd, account for 60% of illegal gambling visitor traffic in Q3. 

It also found 18 of the 20 most visited sites in Q3 had the same game providers as licensed operators. Perhaps of more concern to regulators is that none of the most visited sites were on the Spelinspektionen’s banned list.

The most popular site was Unlimitcasino.com from Infiniza, which drew 150,890 visits in Q3. Second was Refuelcasino.com, also run by Infiniza, with 122,135 visits, then Quick.bet from North Point on 108,290.

ATG went on to say none of these sites offer direct deposits from a Swedish bank account via BankID. However, in Q2, six sites presented visitors with such depositing options.

As for the total number of visitors, this was estimated at just over one million in Q3. This was lower than a market peak of around 1.5 million in Q2 after six consecutive quarters of growth. 

In contrast, illegal Swedish gambling site visits were fewer than 100,000 when the legal market launched in Q1 of 2019.

ATG vows to take action on illegal Swedish gambling

ATG CEO Hasse Lord Skarplöth voiced his concerns over illegal Swedish gambling figures. He said ATG will do what it can to tackle the issue moving forward.

“The results of our quarterly surveys are alarming and indicate that a significant percentage of problem gamblers in Sweden are linked to unlicensed gambling sites,” Skarplöth said. 

“We want people to feel good about their gaming. And we work for a gaming market that will do better tomorrow than it does today. Therefore, ATG will do what we can to help ensure that the fight against the unlicensed gambling companies continues day by day, month by month.”

Government says potential tax increase can reduce illegal gambling

Sweden’s government (Regeringen) in September proposed higher tax rates in the country from 18% to 22% of gross gaming revenue. It said this could help address channelisation concerns.

If approved, the tax rise will come into effect in Sweden from 1 July 2024. Regeringen says such a move could bring in an additional SEK540.0m in additional tax revenue each year.

Regeringen adds that the decision to raise tax is based on the belief that the market should have stabilised since reregulation in 2019.

In addition, Regeringen highlighted concerns over channelisation in Sweden and the impact of this rate on the market. Regeringen says a new tax rate in excess of 20% will help achieve channelisation of at least 90%.

ATG posts Q3 growth in Q3 despite economy concerns

The report comes after ATG recently reported a year-on-year increase in revenue and net profit in Q3. This was despite it saying that concerns over the wider economy continued to “cloud” its operating environment.

ATG said group revenue during the three months to 30 September amounted to SEK1.35bn. This was 4.6% higher than SEK1.29bn in Q3 last year and the second highest Q3 revenue total on record.

This came despite ATG having to contend with wider economic issues, which have continued to impact the business throughout 2023. These include increased prices, interest rates and the recession, with these all hitting customers’ wallets.

Skarplöth said these concerns remain for the business, but the group has continued to grow regardless. He added that ATG is on track to post full-year results in line with last year.

“Following a decline in the first quarter impacted by the economy and the pandemic effects of the preceding year, we noted continued growth in the third quarter,” Skarplöth said. “We are increasing revenue and cutting our costs. 

“This is a result of continued customer focus, strict prioritisations, replacing consultants and cost control. However continued concerns cloud our operating environment. High prices, interest rates and the recession are all impacting our customers’ entertainment wallets.

“It is gratifying that the number of customers and customer satisfaction remain at stable levels. We retain our position as the largest betting company in the commercial licence market.”

ATG reports growth across all segments

Breaking down Q3, ATG posted year-on-year growth across all business segments. Horse betting accounted for SEK1.02bn of all revenue, up 1.8% from SEK1.00bn last year.

Casino games revenue increased 24.3% to become the second highest source of revenue at SEK169m. The remaining SEK159 came from sports betting, up 5.3% from Q3 in 2022.

ATG also said that SEK1.20bn of all revenue was generated via digital channels. Just SEK154m of group revenue in Q3 came from its retail stores across Sweden and Denmark.

On the subject of geographical performance, Swedish operations generated SEK1.26bn in Q3 revenue, up 3.7%. Denmark’s share at stood at SEK92m, a rise of 18.0% year-on-year.

Rising costs fail to stunt net profit growth

Turning to expenses and ATG said spending was higher in almost all areas. Gambling tax was up to SEK278m but its main outgoing, listed as “other expenses” fell 6.6% to SEK548m.

After including SEK9m in profit from financial items, this left a pre-tax profit of SEK506m, up 12.4% from last year. ATG paid SEK13m in tax and noted an SEK1m positive impact of foreign translation. This left a net profit of SEK494m, an increase of 14.6% from 2022.

The group also said EBITDA for Q3 was 12.1% higher at SEK576m.

Year-to-date: ATG operating in line with previous year

Looking at year-to-date performance, revenue in the nine months to 30 September reached SEK4.44bn. This was just 1.1% lower than in the previous year despite the economic issues referenced by Skarplöth.

Horse betting revenue was 4.7% lower at SEK2.88bn. However, this was partially offset by growth elsewhere. Sports betting revenue climbed 11.1% to SEK532m and casino games revenue 22.7% to SEK471m.

ATG was able to reduce a number of costs including gambling tax and other expenses. Only personnel expenses and depreciation, amortisation and impairment costs were higher year-on-year.

Finance profit reached SEK29m, resulting in a pre-tax profit of SEK1.27bn, up 1.4%. Income tax payments totalled SEK39m and negative foreign translation SEK1m. As such, net profit for the period was SEK1.23bn, an increase of 1.2%.

In addition, EBITDA for the nine months was 0.6% higher at SEK1.48bn.

“ATG’s assignment is to create long-term prospects for our owners, the Swedish Trotting Association and the Swedish Jockey Club and, by extension, to the entire Swedish horse industry,” Skarplöth said.

“With the outlook for the economy uncertain, the path forward to safeguard our assignment comprises continued focus on long-term sustainable revenue, replacing consultants and cost control.”