Mateusz Juroszek, owner and Chief Executive of STS, Poland’s biggest bookmaker tells SBC that his company is coming out of lockdown stronger having completed key management objectives in expanding the firm’s proprietary technology capacity acquiring long-term Czech IT partner Betsy.
Accelerating STS European expansion projects and initiatives, Juroszek states that his firm will be the one-to-watch for the remainder of 2020.
SBC: Hi, Mateusz, thanks for this interview. It has been a busy period for you leading STS under these unprecedented circumstances. Can you reflect on your company’s development under lockdown?
Mateusz Juroszek (CEO STS): STS was well prepared for the crisis because as the leading bookmaker in Poland we have a 50% market share and we have been doing very well for ourselves in the past few years with high growth, nice profits and a decent amount cash reserves. We could have coped for a few years in the Covid-19 situation if necessary.
During the crisis and lockdown, we were able to gain market share because our competitors are not so good with virtual sports, betting games and live betting. So, we improved our market share, and some of our Polish competitors folded. Even though most of the staff in our head office were working from home, we kept working on technology improvements. In the end, very little was stopped, and the budgets remained the same. We only stopped some of our marketing activities because we didn’t put out as many adverts during this period.
SBC: STS continues to pursue a European expansion, has this project been interrupted by the global COVID-19 pandemic?
MJ: STS currently caters to several European markets, of which the UK is its fastest growing. We are providing betting services to over 1 million customers in Europe. We are not only the first domestic company in this industry that operates outside the local market but the first Polish bookmaking business to secure a gaming licence in the UK regulated market. Obtaining the license is part of STS’s broader international long-term growth strategy. We boast an enviable portfolio that includes sportsbook, virtual games, online casinos, as well as a wide range of esports.
We are always looking at other prospective foreign markets. STS is currently conducting advanced activities aimed at obtaining its own licences in other markets.
SBC: Why is the development of proprietary technologies key to STS expansion, having acquired Czech systems partner Betsys?
MJ: Our strategy is to lead the way in development in terms of technology that constantly pushes to do things better. We implement modern solutions and developing our functionalities to ensure that our customers have access to a unique offer. That’s why we decided to finalise a takeover of Betsys, in which STS already holds the majority of shares. It is a significant investment which secures our further development. The proprietary bookmaking system, and the possibility for its in-house development, constitute a key advantage in our industry. We have already been generating more than 85% of revenues via online channels, so further growth in IT solutions is of strategic value to us. Only the best European bookmaking companies can boast of their own technology and platform. This is another area that clearly distinguishes us from other operators both in Poland and in Europe.
SBC: Do you feel that STS has reached ‘peak capacity’ in its home market of Poland?
MJ: We are the largest bookmaker in Poland, and we have invested heavily in development and innovation, including an attractive offer of bets. As the industry leader, we set trends, and nearly half of the Polish market uses our services.
The STS offer is highly competitive in comparison to other entities holding a Polish license. Our profile is very well suited to a Polish customer. We are distinguished by a wide range of national league competitions – we offer, among other things, the first divisions of the futsal and ice hockey leagues, second division volleyball and basketball, winter sports, speedway competitions at various levels, as well as the table tennis super league.
Despite an adverse competitive environment, we keep expanding by offering new functionalities to our clients. Our aim is continued organic growth that will allow us to respond even better to our clients’ needs.
SBC: Post pandemic, how are you assessing which markets STS Poland will look to enter? Where do you see viable opportunities arising?
MJ: STS is currently conducting advanced activities aimed at obtaining its own licences in other markets – outside of Poland and the UK. Our strategy next year will be to concentrate on licensed markets, but I can’t say anything more right now.
SBC: What industry shortcomings did you see during the pandemic period, and how have they changed your strategy and approach to betting?
MJ: We had two significant obstacles during Covid-19. The first obstacle was that there weren’t as many sports events and, secondly, we don’t have an online casino section on our Polish website. Nevertheless, we do have virtual sports, which comes to about 15% of our income, and we have BetGames – a game that is like live betting on cards. That game became more popular during the lockdown. Therefore, we are expanding our BetGames section with a new product – a Polish poker table, something that other operators don’t have. Also, our esports investments have played an even bigger part in our recent offering. Our live betting product has plenty of variety leading us to offer all kinds of events around Belarusian football and table tennis in Russia and Ukraine.
SBC: You are leading an STS expansion, during a period in which governments are actively reassessing their regulatory frameworks… Is this a concern for you and the future ambitions of STS?
MJ: In fact, it is a concern for STS future ambitions and opportunities for development. When lockdown began, the government was talking to industries about their concerns. The associations for betting companies sent a letter to the government saying that a 12% tax turnover is one of the highest in Europe and the world. We suggested that it should come down because of the current crisis. There are 19 licensed betting companies in Poland, but at the moment, only two of them are making a profit. It is a complex market with STS having 50% of the market and the second company with 28% making a profit. Some of the rest are losing significant amounts of money. It’s primarily because of the high tax rate. However, the Finance Ministry was reluctant to discuss the tax rate as they wanted to focus on supporting businesses trying to keep their employees at work. The tax issue was simply not up for discussion.
SBC: As an industry leader, what key factors and dynamics do you feel the sector has to tackle in order to help its recovery?
MJ: Betting is subject to a turnover tax of up to 12% in Poland which is one of the highest in Europe. The grey market is responsible for an estimated 60% of the Polish betting market. A significant chunk of the domestic market is taken up by non-licensed operators. They do not pay taxes or conform with strict Polish bookmaking laws. We have to carry on speaking to the Finance Ministry by expressing to them that we are dealing with a challenging situation, not only because of COVID but because the tax is extremely high – a 12% tax on turnover is more than 50% on GGR.
Mateusz Juroszek – CEO – STS