Gambling Insider Interview with Mr.George Zenzefilis

The chance to win a life-changing amount of money for a modest outlay is the carrot on the stick that keeps players hooked to the lottery. It’s the game’s raison d’être and explains why games of chance date back to the era of Trojan War, where ancient Greeks played the dice (kyveia) in the 12th century BC. Lotteries can be also be traced back to the Chinese Han Dynasty of 200BC. Numbers games are even believed to have bankrolled construction of the Great Wall of China. But despite lotteries’ longstanding and widespread appeal, player demographics and habits are shifting, so operators need to be agile enough to adapt to their changing needs and gambling desires, especially in the digital age.

Athens-based Intralot, one of the world’s leading lottery systems and gaming suppliers with revenues of €1.1bn in 2010, established subsidiary Intralot Interactive in 2009 to help lottery operators embrace the interactive era of gaming. The launch of the company coincided with governments relaxing the laws regarding internet gambling, including online lotteries.

“We wanted to consolidate all assets of the group that were related to interactive technology and create a sole entity in order to manage, optimise and better advance these technologies,” says George Zenzefilis, who heads up Intralot Interactive. “Although we have been active in this space more than 10 years, the market was changing. Interactive technologies were being developed alongside our traditional markets. The regulatory initiatives taking place in Europe and elsewhere in the world are a key driver for change and invite interactive technologies as a mainstream activity.”

Intralot Interactive’s burgeoning online portfolio currently boasts more than 400 types of games, including traditional and instant lotteries, racing, interactive games, poker, live casino and interactive TV gaming (iTV). There is also a sports book that exceeds $4bn a year. “Lotteries and the sports book are key for us because they reach mass levels of the population,” says Zenzefilis. “Poker is significant, too.” Unlike retail operations, these interactive channels allow for better analysis of player behaviour, which can be correlated with demographics to tailor game offerings and promotions.

Zenzefilis, who joined the company in 2008 following a career information technology and telecoms, oil and gas, and transport and logistics, believes one of the key pillars to Intralot’s success is technology. It’s the bedrock of his division’s operations, he says, which is reinforced by Intralot Interactive’s tagline: ‘where experience meets technology’. Intralot Interactive recently unveiled its new flagship technology venture – the Universal Gaming Experience (UGE), to be demonstrated at the upcoming ICE expo in January 2012, which integrates multiple channels with state-of-the-art gaming content.  Zenzefilis says the UGE assists customers to compete in the “demanding new environment” in order to better engage with and entertain their players.

“One of our core strengths is the way we have always excelled in technology,” Zenzefilis explains, “so we are fostering convergence with the Universal Gaming Experience, which has many components – be it iTV, desktop applications or mobile, because we feel our platform is unique and built by design. This suits the user, whether he or she is on a desktop or relaxing at home.”

Indeed, the proliferation of smartphones offers significant business opportunities for Intralot. Sports betting, casino and instant games are all accessible with a few clicks and swipes of a smartphone or iPad, which suits today’s generation of internet-savvy players. Zenzefilis reinforces the view that mobile devices are finally coming of age, opening up gaming to a whole new market of potential customers.

“There have been big discussions about mobile for quite some time, and although it has failed to reach expectations, we strongly believe that there will be a significant ramping up of mobile in the future,” he says. “But mobile isn’t just about smartphones – it’s tablets too. Mobile is one of the highest growth segments but we feel there needs to be support for the technology and it is important that the customer feels secure.”

In fact, confidence is key for players, which means established lottery operators have an edge over rival gaming operators. “There is going to be a dominant role for lotteries, given their widely accepted role in society,” Zenzeflis remarks. “But lotteries need new technologies,” he adds. Some lotteries have relied too heavily on traditional retail transactions and been slow of the mark when realising the potential of interactive channels to attract new players and boost revenues. It’s not just because converging retail operations with e-gaming can prove technologically challenging and costly. Put simply: “Some big organisations have an inertia to change,” suggests Zenzefilis. “I don’t think the future for operations is one channel – it needs to be multichannel,” he states. “I am a strong believer that lotteries will play a pivotal role by utilising all their assets and combining them with interactive technologies.” This is where Intralot Interactive can help.

As a group, Intralot’s footprint spans 53 countries and all five continents – everywhere from Argentina to Russia. The Athens-listed multinational, which turns 20 this year and employs 5,400 people around the world, avoids putting all its eggs in one basket when venturing into new territories. As Zenzefilis points out: “We always ensure we have a diversification strategy to capitalise on the strong opportunities out there.”

Although Europe is one of the company’s core markets, he enthuses over the potential in the developing world. “Europe is going through a financial crisis but the BRIC [Brazil, Russia, China, India] nations are showing significant growth. We are very strong in the US [a presence in 11 states] and Europe, and we are developing further in Asia, which is a huge region with many individual countries. South America, where we already have a strong presence, and especially Brazil, is exciting because of its great opportunity. But we are an agile company and we always respect each individual country because a one-size-fits-all approach doesn’t work; we are flexible and understand different regions.”

Intralot Interactive recently teamed up with NeoGames – a leading provider of interactive scratch and instant games – to expand its product portfolio in Peru with new games dubbed ‘Clic & Gana’. The games are all branded and customised for the Peruvian market – a market boasting high internet usage. “Peru is an interesting country and I am optimistic about its potential. Some countries go for sports books and others, like Peru, go for scratch cards.” This development reaffirms Intralot’s commitment to taking advantage of gambling opportunities in emerging markets like South America (Intralot also has operations in Brazil, Argentina and Suriname among others).

On top of this, the creation of regulated markets and relaxation of gambling laws, particularly in Europe, has been a boon for Intralot. Italy, for instance, has been a pioneer in rolling out regulated internet gaming, making the South European nation a significant market. There has been phenomenal liberalisation in Italy, where we have a very strong presence,” says Zenzefilis. “However, France has been criticised for its liberated market and tax levels, hence we have decided to suspend our licence until the regulatory framework improves.”

Despite Intralot’s global ambitions, this year’s Q3 profits plunged by a whopping 71% to €3.4m, mainly due to increasing payouts to winners to keep punters playing amid the European economic malaise (although the company notes that Q3 EBITDA was up 2.1% on the same period in 2010). Profits for the same period last year were €11.3m, although this coincided with the football World Cup. Sales for Q3 rose by 5.2% on the back on new contracts but the group’s shares are down 68% percent this year.

Although Intralot are headquartered in debt-ridden Greece, as well as the Eurozone teetering on the brink of collapse, Zenzefilis shrugs off suggestion that his country’s economic woes are damaging business.

“We don’t see the economic crisis affecting us because we are an international company – 93% of our business is outside Greece,” he asserts. “The performance for the year is very good and we are very happy with our financials. If you focus on just one quarter within any company you will find ups and downs, so you have to look at the yearly performance.”

In October, Intralot took the decision to sell its 35% stake in California-based CyberArts. The group’s subsidiary, Intralot Interactive USA, acquired the stake in the online software gaming business in 2009. Two years ago, Zenzefilis described it as a “milestone investment” but now says the company chose to channel resources on its own suite of technology and services, such as the UGE. “We had the option to increase the stake to 51% but decided not to follow the CyberArts model, choosing instead to focus on our own assets.”

For Intralot, a member of the World Lottery Association (WLA), innovation is crucial to this strategy. “If you want to have organic growth then you have to allow space for innovation. We have also launched partnerships with small companies and this makes the whole ecosystem stronger. It’s also very important for us to always listen to
our customers; we have never been distracted from this customercentricity.

I also believe our engineering products are the best and far more advanced than our competitors but we couldn’t achieve this without the people here. From the management down, there is a devotion to what we do.” And with new regulated markets sprouting up around the world and internet usage snowballing in developing countries, Intralot and Intralot Interactive look a sure bet to help shape the future of gaming.