Olgierd Cieślik: Challenges are natural in any business
The Editors of Igaming Express had the pleasure of talking with Olgierd Cieślik, President of the Management Board of Totalizator Sportowy – Poland’s largest gambling operator and a member of such organizations as European Lotteries and World Lottery Association. Olgierd Cieślik, with his experience and knowledge, is the right person to guide us through the Polish entertainment market. We invite you to read the entire interview from which you will also be able to learn more about cooperation with, among others, one of the best footballers in the world – Robert Lewandowski, who is also an ambassador of Totalizator Sportowy.
How would you characterize the Polish gambling market?
The gambling market in our country, viewed through the prism of the 2017 amendment to the Gambling Act, is very dynamic and, to some extent, is in the process of adapting to the desired framework for its functioning, which is very clearly defined by this legislation. The amendment to the regulations was necessary, as prior to 2017 the Polish gambling market was struggling with two major issues – the expansion of the grey economy and the resulting need to increase player safety. In my opinion, the amendment became a milestone for the entire industry and set the tone of activity for all entities related to gambling in the broadest sense. It prompted a change in strategy – not only for Totalizator Sportowy, but also for bookmaking operators who appeared on the market in increasing numbers. This breath of fresh air in the industry is its huge advantage – it keeps us open to innovation and modern solutions, which is also exemplified by Totalizator Sportowy itself. Generally, the changes resulting from the amendment have completely changed the perception of the gambling industry by both players and operators.
What was the impact of the amendment to the Gambling Act on Totalizator Sportowy?
For our company, it was first and foremost a huge opportunity to enter new market areas. Previously, we implemented the state monopoly in the organization of number games and cash lotteries. Thanks to the amendment, we were able to expand this activity to the same areas, but on the Internet, not only within the traditional retail network as earlier. This is how we launched the LOTTO online service in December 2018 – a big success for us, because we built this e-commerce platform form scratch in less than 1.5 years after the amendment. Thanks to it, we opened the omnichannel chapter in our business.
In addition, the amended law gave us the possibility to operate in two completely new areas – online casinos and slot machine parlors outside of casinos. We undertook both tasks. Parallel to LOTTO online, we launched Total Casino, which is the only legal online casino in our country. And even earlier, in mid-2018, we began to open our slot machine parlors. This kind of business was new to us, but by the end of 2022 there were already 1,280 such points across Poland, and by the end of 2023 we want to open 400 more.
And finally, under the amendment, Totalizator Sportowy was also given the ability to co-organize the multijurisdictional lottery – Eurojackpot. The entire company takes great pride in it – we did it in half a year and this is the fastest implementation in the history of the entire Eurojackpot consortium. We acted so quickly because we knew how much Poles wanted to get their chance in winning huge cash prizes offered by Eurojackpot.
And how do you assess the impact of the amended law on the other entities in the market?
I appreciate that it facilities the advertising of legitimate bookmaking operators and their communication with their customers. Thanks to these changes the betting segment has been able to grow significantly, as we already have 24 legal operators. This proves that the ability to inform a wider audience that an entity is legal, even in such a limited form as we already have, benefits the functioning of the legal market.
It is worth mentioning here that the entire Polish gambling market has developed incredibly over the past years. Its value increased by more than 50% in 2021 – from 27 billion zlotys to more than 41 billion zlotys. One cannot miss the fact that this follows the amendment to the law. However, observing the development of the industry, I can’t help thinking that the regulations may need further modification in the future. It may be necessary to adapt them to ongoing technological changes, as well as other challenges – such as the fight against the grey economy. After all, we should bear in mind that the Polish market is comprised not only of legal entities, but also those operating without a licence.
Speaking of challenges – what challenges does Totalizator Sportowy face?
Challenges are natural in any business, and overcoming them gives great satisfaction. At the moment we are facing a few challenges, including the issue of communication with players. We are subject to restrictions that make it difficult for us to inform customers about what kind of entertainment is actually legal. We cannot advertise Total Casino as the only legal online casino in Poland. Of course, we comply with these regulations, meanwhile, on the Internet or during sports broadcasts you can come across advertisements of entities that cannot legally offer their services to people in Poland.
Managing such a large player base as Totalizator Sportowy has is also a big challenge. It is one of the largest bases among European Union countries. At the end of 2022 the number of users registered in our online channels exceeded 1.6 million people. GGR generated in the online channel in Poland was in turn, in 2021, the seventh largest among European Lotteries members and amounted to 216 million euros. We are very pleased with these numbers, as they indicate excellent growth of our business, but we do not forget that the more players we have, the higher the bar is set. Managing this group, expanding our offer to meet its diverse needs, and striving to create a model in which we identify customers from different channels as a single customer of Totalizator Sportowy – these are our challenges related to this.
Another challenge is the rapid development of our network of machine gaming parlors. We are very pleased with the growth in the number of parlors, but under the current conditions, all of the investment effort falls on Totalizator Sportowy. At the same time, we are aware that a well-functioning, attractive network of our parlors for players is an effective weapon in the fight against the grey market.
To sum up our extended discussion of the igaming market in Poland, in light of what we’ve said so far, I guess we can describe it as a young and growing market?
Yes, the 2017 amendment to the Gambling Act brought many changes to the gambling market, especially in the online area, thus giving all entities the space to grow. Looking at the example of Totalizator Sportowy, which launched LOTTO online sales at the end of 2018, we can see how favorably the new business lines have affected our financial results. Importantly, online channels did not cannibalize our traditional retail channels. We observe this in the example of Zdrapki – traditional scratch cards. Another example is Gierki – a relatively new instant win product available on lotto.pl. Both products are growing in popularity: Gierki by more than 90% in 2022 compared to 2021, Zdrapki by more than 10% in 2022 compared to 2021. This shows that indeed there is space to develop both channels.
The success of Total Casino proves that the market is not fully saturated and that there is still some room for development. In four years, starting from scratch, we reached a level of annual sales close to 30 billion zlotys. The bookmaking market, too, shows that it is not yet mature and stabilized. There are more than twenty legitimate operators in Poland, but there are still various ownership changes, and local operators are still experiencing interest from major international brands. Finally, it is important to note that development is not just about numbers. It is also the quality of the products and services offered. Poland does not stand apart from other markets in this regard, on the contrary: in the case of games, sales support products or KYC, we are even considered pioneers. To sum up: yes, the Polish gambling market has a lot of energy in it, and its legal participants – including Totalizator Sportowy – are very enthusiastic about its development.
So what are the latest achievements of Totalizator Sportowy? What was achieved in 2022?
We have done a lot of solid, internal work on our business strategy for 2022-2026. Based on it, we will evolve in the company’s strategic directions, and – after the digital revolution of the past few years – we want to continue this work already on an evolutionary path, especially in terms of business and organization. Thus, the past year was primarily internally the time for careful and ambitious planning, which is the basis of success.
In terms of what you can see from the outside – in 2022, we were doing business in a post-pandemic COVID-19 world, which was devastating for many industries and markets. We can compare ourselves with our partners from European Lotteries, that is, entities with activities similar to ours in European countries. Data from its 69 members show GGR growth of 13.3% compared to 2020. At the same time, however, this represents a 2.9% lower result in comparison to 2019. Poland, compared to other EL members, was characterized by greater resilience to the effects of the pandemic. Poland’s GGR growth in 2021 as compared to 2020 was 22.2%, while for 2019 it increased by as much as 26.9%. So throughout the past year we have been building on this foundation, developing services in line with player expectations to support and improve the customer experience, both in the stationary and online channels.
It was also a year of further development of the ffVC Tech & Gaming powered by Totalizator Sportowy fund, which was established on our initiative. We take great pride in this project, not only because we were the second European lottery to launch a CVC fund, right after Française des Jeux. Above all, ffVC Tech & Gaming is an extension of our mission in a new dynamic world where we focus on innovation and talent. Thanks to it, we continued our support for startups that contain a Polish element and that operate in industries related to ours, such as gaming, fintech, AI, machine learning or computer vision. We are already planning the first implementations of solutions offered by our fund’s portfolio companies. Through this initiative we are also building awareness among startups, who can perceive Totalizator Sportowy as a partner open to implementing innovations.
I could talk about the last year for a long time, but I would like to highlight that we closed 2022 with new records. Once again, we achieved the highest turnover and contributions to the state budget in our history. Our online casino also had unparalleled financial results. The growth of the online channel by no means meant stagnation in the retail channel. Poland has one of the largest PoS networks in Europe and in 2022 we reached almost 23,000 points. On top of that, our subsidies for sports and culture, which are the core of our social mission, were also record-breaking. In 2022, we transferred more than one billion zlotys to the Physical Culture Development Fund, and more than 270 million zlotys to the Cultural Promotion Fund. So, in the case of subsidies, we see increases of more than 10% within just one year, all thanks to the LOTTO players. We have also beaten other records, which may be less measurable, but our entire company is proud of its commitment to helping Ukraine, namely providing material, voluntary and even business support. These kinds of actions are also a marker of success for us, because we firmly believe that business that turns away from social responsibility is simply pointless.
With all these achievements, what do your plans for 2023 look like?
We want to focus on developing an omnichannel business model. Totalizator Sportowy is no longer just about being able to sell LOTTO games at traditional, brick-and-mortar lottery points. It is also the lotto.pl website and LOTTO mobile app, online casino with its app, and a network of gaming parlors that consists of more than 1,280 outlets. We want the division between retail and online players to disappear. In 2023, thanks to new technological solutions we will build consistent profiles of our players. This will make it even easier for us to merge sales channels.
Digital solutions will also be implemented to develop services across the retail sales network. In this channel, we aim to ensure that in the future any customer will be able to use our online offer in a traditional PoS. We are the largest provider of cash games on the Polish market and we want our players to be able to move seamlessly among all the products we offer. The size of our customer base means that we work very diligently to ensure player safety. And to make this all effective, we also want to continue implementing the best practices of Responsible Gaming. We consider this as our duty, because the best offer on the market is also the safest one.
However, to all of those who are curious about product news, I can reveal that in the sphere of igaming we will be introducing new games and even new categories of games. We would also like to simplify the formalities related to player registration and offer promotions that are tailor-made for a given customer profile. In addition, we will be focusing on more effective communication and reinforcing the strength of our brands, although, of course, some challenges remain in this area, as I have mentioned in the context of Total Casino and slot machine parlors.
Totalizator Sportowy is a company that operates exclusively in the Polish market, but at the same time it uses global technology providers. Leaving aside the formal requirements and bidding stages, what are the desirable features of working with such entities?
Regardless of industry specifics, what always matters is a good, mutual understanding – and especially awareness of one’s own needs, knowledge of customer expectations, and thus recognizing whether the solutions offered by the supplier match them. Above all, we are looking for quality and flexibility in implementing further solutions for our customers. The best examples are the implementations already carried out, which had already met our expectations. Whether it’s the first in Europe implementation of payment of winnings to payment cards – in cooperation with IGT, our provider of the lottery system, as well as Visa and Mastercard, or the online verification of player identity through mojeID (English: “myID”) system, which was provided to us by KIR – all these projects launched with our partners met these requirements. They were innovative, of the highest quality and they took into account our expectations, which is something we care about a lot, because, after all, we ourselves know our business best.
Robert Lewandowski is the ambassador of Totalizator Sportowy. There is probably no other such extensive cooperation of a gambling company with an active and such a high-ranking athlete. What does the cooperation with Lewandowski look like and how does it affect the company’s business?
Last year, Robert Lewandowski was the face of our “Wygrywamy zaczyna się od WY” (English: “Winning starts with YOU”) campaign, which combined social activities with the sales of our products. Our players, when buying LOTTO products – both online and at the lottery outlets – at the same time received a chance to win lottery prizes, as well as cast their vote for selected sports or cultural initiatives. Thanks to the campaign, 27 facilities that serve local communities have received financial support.
Apart from the social initiative, we managed to create products that are branded with the image of the best Polish footballer. Robert Lewandowski appears on the “Wygrywamy!” (English: „We win!”) – a scratchcard – and in “Piłka w Grze” (English: “The Ball’s in the Game”) – an e-instant. We are pleased that we have succeeded in developing this cooperation also on a product level. As the largest patron of sports and culture in Poland, we have been endowed with the trust of a global star who perfectly understands our mission and shares our values.
Totalizator Sportowy is a member of the European Lotteries and World Lottery Association. What does your presence among the largest lottery industry players give to you?
This is a unique cooperation that – due to the nature of lottery markets across Europe – is devoid of competition and is based on pure comradeship and exchange of knowledge. Each country has its own legislation related to the organization of gambling, so we are competing with each other because we operate in separate markets. Therefore, the axis of cooperation – especially within the European Lotteries – is sharing experiences through which we can all develop. Projects conducted by our partners inspire us, but we are just as eager to share our own ideas. We were the first of the EL members to introduce the possibility of withdrawing winnings to payment cards, and we are happy to help anyone who wants to follow us.
The aspect of public affairs in the European Union is also important when talking about European Lotteries. EL is a well-established representative of the industry, and thanks to its international character, it can conduct effective dialogue with officials and politicians at the European level. This is an extremely valuable partnership.
I believe that direct contacts are the most effective form of cooperation and co-shaping of the organization and its activities, which is why the employees of Totalizator Sportowy are active in the internal bodies of these organizations. They contribute to the European Lotteries working groups and are active in the Eurojackpot consortium. We also operate at Executive Committee European Lotteries level. As a member of this body, I have the opportunity to exchange know-how with our European partners. I believe that such a cooperation is done in accordance with the slogan of European Lotteries – For the Benefit of Society.
Being a member of the European Lotteries allowed you to quickly agree on a common stance on Russia’s invasion of Ukraine. Can you shed some light on the behind-the-scenes of this initiative?
Cooperation is only possible when all the involved entities share common values. In the case of the lottery business, where operators are often companies working for or on behalf of the state, and who also largely support charities, sports initiatives or social programmes in their countries, these values are indeed very much in line with ours.
On February 24, 2022, it became clear to me that we could not continue cooperation with companies from Russia and Belarus. After all the revenue from the sales of their products funds the regimes that invaded Ukraine or actively support the military operations. I cannot possibly imagine meeting and talking to representatives of these entities as if nothing had happened. In business, of course, we can naturally differ, but violating common values must be met with a strong reaction.
Thanks to the fact that I have been a member of ExComm for four years, I was able to initiate an action by the European Lotteries to exclude Russian and Belarusian companies from the structures of international organizations. From the beginning, Totalizator Sportowy has worked with its industry partners from Ukraine, as well as Lithuania, Latvia and Estonia. Our countries understand the significance of what happened in February 2022 like no other. I think EL can be proud to have taken such a strong stand at such an early stage (suspending members from Russia and Belarus), to have expressed its support for Ukraine, and to have condemned Russian aggression. A similar joint success was achieved with the World Lottery Association. Within this organization, Russian and Belarusian companies were also suspended from their rights.
Personally, I am also proud that Totalizator Sportowy and lottery operators in other countries have taken a number of actions in support of Ukraine and its citizens. In this way, we have shown that the i social solidarity in our industry reaches across the country borders.
One of the biggest challenges for operators in regulated markets is the grey economy. Is international cooperation possible in this area and what are the possible solutions to this problem?
That’s true, the online grey market is cross-border in its nature. The biggest threat to it is when an illegal operator loses shares not in one, but in several markets at the same time. As always, I would like to remind you that the most effective way to take away the influence of the grey market is to improve the offer of legal operators and to make it more attractive. However, it must be remembered that a customer is able to get acquainted with it. International cooperation is a great support in this matter, because by sharing our best practices, we facilitate one other’s development.
In the case of the Polish online market, it is in the phase of a constant battle with illegal operators. In 2016, before the amendment of the Gambling Act, 80% of the online market belonged to illegal entities, and currently it dropped to about 20%. However, there is still a lot of work to be done. Totalizator Sportowy is obviously engaged in the support of this fight by constantly monitoring trends and offering top-quality entertainment that meets player expectations. In addition, we direct operational support to public administration entities leading the fight against the grey economy, such as the National Revenue Administration.
Legislation gives us a lot of hope for an even more effective fight against the grey economy. We expect that once member states adopt the Digital Services Act into their legal systems, the effectiveness of some methods of combating the grey market will be raised, for instance blocking domains or eliminating advertisements of illegal operators. However, we must remind ourselves that the gambling industry is not subject to the European Community law and is regulated by each member state separately, so the DSA or other directives are not a sufficient solution. This is where I see room for some new activity within the EL, but I would like to go over the details with our partners inside the organization first. As you can see – there is a lot going on in the gambling industry, as usual, and I hope that the coming year will bring only positive resolutions to the numerous issues we are constantly working on.