In 2012, as part of its coalition agreement, the Dutch government decided to lessen its direct involvement in the lottery market in the Netherlands. Currently, a single operator, Nederlandse Loterij, of which the Dutch state is the main shareholder, operates no less than four distinct lottery and betting monopolies.

In late 2016, the Ministry of Security and Justice commissioned research company SEO Economisch Onderzoek to map the effects of four previously specified policy options on:

  1. overall state income;
  2. contributions to good causes;
  3. player payouts.

The resulting report was finally published last week.

However, as the current Dutch government is under resignation, it will be up to the next government coalition to decide what steps to take in order to reform the Dutch lottery market, State Secretary Klaas Dijkhoff noted in the cover letter accompanying the report.

Current situation

At present, the Dutch lottery regime is built on two distinct pillars. The first pillar consists of an open licensing regime for charity lotteries, which are legally obligated to contribute 50% of their total revenues to good causes.

The second pillar consists of four separate, legally specified monopolies that are brought together under the umbrella of a single operator, “Nederlandse Loterij.”

Nederlandse Loterij, the result of a recent merger between the Dutch State Lottery and Lotto BV, operates the following monopolies:

  1. Dutch State Lottery
  2. (Sports) lottery De Lotto
  3. TOTO (sports betting)
  4. Instant lottery (scratch cards)

Both the State Lottery and De Lotto are able – as well as obligated – to pay out a considerably higher proportion of their gross gaming revenue (GGR) in prize money than charity lotteries, giving the aforementioned two lotteries a notable competitive advantage.

Assumptions

The report’s findings are based, among other things, on the following assumptions:

  • Between 2017 and 2026, the total Dutch lottery market will experience a cumulative growth of almost 50%. GGR will increase from €2 billion to almost €3 billion.
  • In 2026, Nederlandse Loterij will hold a market share of 50%. Presently active charity lotteries will hold a 41% share, with new market entrants holding the remainder.
  • Legalization of online sports betting and casino games will not lead to a meaningful decrease in popularity of existing lottery products, with the exception of land-based sports betting.

Policy options

The report assesses the impact of the following four (six if variants are included) policy options. It can be safely assumed that one these options will be selected as a starting point for further discussion.

Policy option 1 “Business as usual”

This scenario assumes no policy change. It is only used as a benchmark with which the other scenarios are compared.

Policy option 2a “Operator”

In this scenario, Nederlandse Loterij will remain (majority) state-owned, but its management will be contracted out to the lowest bidding private party, which, in exchange, will receive an annual management fee. This should, in theory, lead to greater efficiency and lower operating costs. Nederlandse Loterij will keep its current monopolies and will keep contributing directly to the state’s coffers, as well as NOC*NSF and Stichting Aanwending Nederlandse Loterijgelden.

Policy option 2b “Private monopoly”

Nederlandse Loterij, including its current monopolies, will be auctioned off to the highest bidder for a period of five years. Nederlandse Loterij will cease to contribute directly to the state and (sports-related) good causes. The operator of Nederlandse Loterij is expected to recoup and, if possible, to exceed, its initial investment by pocketing the company’s profits during the term of the deal.

Policy option 3 “Uniform regime (50%)”

All lottery-related monopolies will be abolished. Any number of operators can apply for lottery or land-based sports betting licenses. There will be no predefined ceiling to the number of available licenses. All licensed lottery operators will be treated in an identical manner and will have to contribute 50% of GGR to good causes or sports. Nederlandse Loterij will be privatized and become a charity lottery. There will be no mandatory minimum player payouts.

Policy option 3 (var) “Uniform regime (25%)”

Identical to “Uniform regime (50%),” but with mandatory contributions to good causes of only 25% of GGR.

Policy option 4 “Open market”

Identical to the “Uniform regime” option, but without any mandatory contributions to good causes or sports.

Impact

The following table shows the estimated impact of each policy option on overall state income, contributions to good causes, and player payouts.

GIH-Table-S.1-v2

Interestingly enough, there is only a single scenario (policy option “Operator”) in which both state income and contributions to good causes will not suffer. Will this rather unimaginative option become the default in subsequent discussions?

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