Iwo Bulski spoke to Adam Lamentowicz, CEO of Totolotek S.A, about the current and future situation of the Polish bookmaking market and about directing two companies – in Poland and the Netherlands.
Iwo Bulski: TOTOLOTEK was founded over 20 years ago and it is currently one of the biggest bookmaking brands in Poland. You own over 320 bookmaking shops and run operations online. During the five years when you have been Chairman of the Board, you have introduced new business solutions and you have a leading position in the company. How did you come to work for TOTOLOTEK?
Adam Lamentowicz: I joined Intralot and Totolotek in May 2012. It was a difficult time, as the company had to cease operations for a few months. The company was in need of reorganization and changes in terms of its processes. At the same time, we had to obtain new licenses (for an online shop) as well as launch new products and a internet platform.
I was invited to work by Intralot and I happily agreed to the task, which let me prove myself on the Polish gambling market after having returned from a long stay abroad.
The first two years were very difficult. The entire team was fighting shoulder to shoulder to make the changes necessary for boosting revenues, gaining competence, improving the company’s economical situation and changing our service profile as well as making changes within the staff.
Today I can say that the company owns a stable 19% of the legal bookmaking market. Apart from our strong branding, we also have dedicated team and the biggest product portfolio (Toto-Mix; Live; Toto-Gol/Toto-Liga; race games – Irish and British horse/dog races transmitted live in shops and Lotto games in cooperation with Totalizator Sportowy); an online channel which is growing dynamically, as well as a retail chain with good average sales. It is also worth noting that Totolotek was the only bookmaking company to win a Responsible Gaming Certificate from European Lotteries.
Hard times have passed. New challenges lie ahead…
IB: The company you manage has been a part of the Intralot group since 2005. It operates in 57 countries throughout 5 continents. In Poland, as well as in a few other countries, the group had decided to function in a B2C system, that is direct operation. The main aim however, will be to work in a B2B system, provide business solutions to other market entities. Why did Intralot dramatically change its policy in Poland?
AL: Intralot is a global player on the lottery market dedicated to providing innovative and sophisticated system solutions in most of it’s markets.
Intralot operates lotteries and bookmakers in a few countries. It usually operates the back-end system or supports the operator by providing specialized services, i.e. process management (retail chain supervision), risk management, VLT terminal management. It also remains the system designer for lottery games, scratch cards, race games and sports betting.
Totolotek’s situation is a bit different. Totolotek is one of the few independent operators within Intralot. It holds a license and operates the sales of its products.
Intralot has always taken the Polish market seriously. We have cooperated with the Polish Lottery Monopoly. We also took part in a tender to provide a system and terminals to Totalizator Sportowy before taking over Totolotek.
Our investment in Totolotek was to do with Intralot’s long term plans for the Polish market. Unfortunately, the Polish bookmaking market is dominated by companies from outside of Poland that do not comply with the Minister of Finance’s regulations. As a representative of Totolotek and Intralot, I am hopeful about the Gambling Act amendment and look forward to a time of market stabilization.
IB: Managing such a big number of shops and operating online requires a trained team. What can you say about your operation structure in Poland?
AL: I’m very proud of our team. The company runs 7 days a week in retail chains and 24 hours a day online throughout the whole year. Our large range of retail chains in Poland and shift system mean that everyone is kept busy. The team consists of 57, which is a big structure.
We pride ourselves in a friendly working environment and in our employees’ sense of being part of the company. Let’s not forget that 260 of the 320 shops belong to us. That’s 500 workers. We pay attention to products and sales training, as well as creating interesting motivation schemes. The chain is supervised by an experienced team of retail specialists.
Iwo Bulski: The newly adopted law creates new challenges. The planned tax relief for bookmakers will increase competition in the market. Six applications from companies operating in Poland with European licenses have already been submitted to the Ministry of Finance. What difficulties do you expect to face in terms of your own business and how do you think the market will change after the new law comes into force?
Adam Lamentowicz: Today, over 90% of the bookmaking market is controlled by off-shore companies, ie. companies located outside Poland. These companies do not pay taxes in Poland (12% of turnover, the highest gambling tax in the EU). This is a strange situation, unique on a global scale. It is worth noting that even Romania and Bulgaria have drastically limited informal business in their markets by blocking illegal gambling operators and normalising tax rates.
Companies such as Lotto and other members of the Association of Employers and Employees of Bookmakers associating legitimate Polish operators,have a very hard time competing with companies that do not pay taxes in Poland. I believe that legislative changes are necessary to normalize the Polish market, that is to protect the interests of players, legitimate operators and the Treasury.
Liczę, że podobnie jak w Danii czy we Włoszech, na naszym rynku również stopniowo odwrócą się proporcje i 60-80% rynku będzie w strefie legalnej. Projekt ustawy zakłada blokowanie płatności i domen nielegalnych. Jest to krok w dobrą stronę. O ile to blokowanie będzie skuteczne i szybko wprowadzone w życie, w takim przypadku uważam że na rynku polskim będzie miejsce dla Totolotka i innych legalnie działających firm a także dla nowych rynkowych graczy którzy mogą zdecydować się na ten rynek wejść. My już dzisiaj konkurujemy z firmami typu .com oferującym swoje usługi z Malty i Cypru – tylko dzisiaj jest to walka na nierównych zasadach – co liczę że zmieni się przy nowej ustawie hazardowej.
I hope that the proportions in our market will gradually turn around, like they did in Denmark or Italy, where 60-80% of companies in the market operate legally. The new bill will allow blocking illegal domains and payments made to them. This is a step in the right direction. If these actions are effective and implemented quickly, I think that there will be space on the Polish market for the Lottery and other legitimate companies as well as new market players who decide to enter this market. We are already competing with online companies operating from Malta and Cyprus, but our chances are not equal. I hope things will change under the new gambling law.
Retail networks are and will be an important element which are both a significant barrier for entering a market and strong carrier of brand credibility. Totolotek’s network and over 20 years of experience on the Polish market will be a strong asset for us when competing with new, less experienced companies.
Iwo Bulski: You are also responsible for INTRALOT’s operations in the Netherlands. How do you combine these two important business challenges? Which one is more important in your opinion?
Adam Lamentowicz: Combining these roles for the past year and a half has not been easy, as it requires frequent travel between Poland and the Netherlands. The greater challenge, however, lies in the fact that the two companies are very different. The scale of operations in the Netherlands is several times higher than in Poland, but this does not necessarily determine the scale of difficulty or complexity of the project.
In the Netherlands, Intralot is not an operator. We deliver a very large complex system and we serve a large number of games (including bookmaking and risk management) for Nederlandse Loterij or the Dutch Lottery (the equivalent of Poland’s Totalizator Sportowy, only with a larger portfolio of games). In the Netherlands, we work like a large software company – we manage systems and terminals at sales points. We also support the development of the Dutch Lottery by providing know-how. We supply services, solutions and systems.
Totolotek is an operator, which means that beyond dealing with technology, we are also responsible for marketing and branding. We also have to be in touch with regulators, ie. the Ministry of Finance, Customs Chambers and Customs Offices. Above all, we have to run our own sales in outlets as well as online.
Being an operator requires knowledge in each area of activity, from sales and marketing through legal issues and IT. This is a much larger responsibility than supplying systems and technological solutions. I like challenging projects, so acting as a private operator is a little closer to my heart. My experience with Totolotek helps me during my daily work for Nederlandse Loterij. I think that the two companies (Lotto and Intralot Nederland) gain a lot from my dual role.
Iwo Bulski: Should we expect a revolution in the gambling market after the law changes? Also, what do you think about the state monopoly on slot machines and online casinos?
Adam Lamentowicz: I do not support market monopolies in any field. I am all for proper market surveillance and policing gaming operators by the regulator or the State in order to eliminate informal business, illegal online casinos and bookmaking. Monopolization is a rather utopian mission, which doesn’t work in the long term.
Criminal groups will always find a way to bend the law. A state monopoly prevents legitimate companies from entering the market. It also hampers legal competition, which is in my opinion the best regulator and supervisor, as it offers customers a wide range of legal solutions. In a competitive market, which forces operators to offer high quality services and professional attitudes, customers will not choose illegal offers.
The state should introduce more transparent and predictable laws (even very severe ones) and take care of the proper supervision and enforcement of these laws. Improvement in terms of customer services leading to higher budget revenues will only be possible if the Polish legislator allows for the controlled deregulation of the market based on licensed operators, who could be effectively supervised by state services while protecting legitimate operators from unlicensed competition.
I’m afraid that the introduction of a monopoly on online casino games and slot machines will not cause illegal vending machines to disappear from Polish streets as swiftly as the legislators expect. Online casino games will largely remain in the hands of informal businesses instead of coming under the supervision of the Treasury in accordance with the Act.