Q&A: STS’ Mateusz Juroszek on rising to the challenges in Poland

As a regulated market with no online casino gaming to fall back on during lockdown and the sporting famine, conditions were inevitably going to be tough for legal operators in Poland. Yet for bookmaking giant STS, which shuttered its retail estate of 440 betting shops in Poland for up to two months, the impact on the online side of the business was less dramatic, with turnover slipping to 50%-70% of normal levels.

Indeed, STS was able to draw upon its brand, proprietary platform and products like virtual sports and esports betting to keep customers entertained, even if top-level sport was in extreme short supply. But with major football leagues back up and running, turnover is now around 20% higher than 12 months ago at the privately owned operator. EGR catches up with CEO Mateusz Juroszek to hear about STS’ progress these past few months and the recent acquisition of Czech betting software company Betsys.

EGR: How was STS impacted by lockdown and the decimation of the sporting calendar?  

Mateusz Juroszek (MJ): We had two big concerns during Covid-19. The first one was that there were far fewer sporting events and, secondly, we don’t have online casino in Poland. However, we do have virtual sports, which is about 15% of our income, and we have a game that is like live betting on cards – BetGames. That game did very well during lockdown. Also, we invested in esports about five years ago and so this has been a big part of our offering. And because our live betting product is very well diversified, we were able to offer all kinds of events around football in Belarus and table tennis in Russia and Ukraine.

What’s more, we didn’t have to close our shops in Poland from a legal point of view, but we decided to close them for six weeks to two months and we received funds from the government to support our employees so that we kept the staff. We didn’t decide to close any shops permanently because we believe in retail, although 85% of our income comes from online.

EGR: What about the financial hit to the business?

MJ: STS was pretty well prepared for the crisis because, as the main bookmaker in Poland, we have 50% of the market and we have been doing very well in the last year and growing a lot, with a very nice profit and big cash reserves on the balance sheet. We could have operated for a couple of years in the Covid-19 situation if we needed to.

But I would say we were initially making about 70% of our normal income and then we went down to about 50%. When we opened the shops in May, we saw a big comeback and also in our turnover online. Right now, I would say it is pretty good because all the leagues are playing and every day there is a lot of football. The main league in Poland was one of the first to come back after [Germany’s] Bundesliga, which is pretty good for STS as it’s one of our top leagues. Right now, I would say we have 20% higher turnover than last year.

The important thing for me during the crisis and lockdown was we were able to gain market share because our competitors are not so good with virtual sports, betting games and live betting. So, we actually gained market share and some of our competitors went bankrupt here in Poland. Even though most of our staff in the head office was working from home, we continued to work on technology, so we didn’t stop anything or cut any budgets. We only stopped part of the marketing activities because we didn’t advertise that much.

EGR Intel: STS has just completed the purchase of Czech betting software company Betsys. What was the rationale behind this acquisition?

MJ: We spend millions of euros per year on STS technology development. Together with our Czech partners, we decided it was the right time, while 80% of their income is thanks to STS. I run a company worth billions of PLN [Polish zloty] and I do not want to be dependent on a supplier in such a key issue. Only the best European bookmaking companies can boast of their own technology and platform – this clearly distinguishes us from other operators both in Poland and in Europe. It was a win-win situation that also shows our priorities. We are also keen on new technology at STS.

EGR: Back in March, licensed Polish operators lobbied the government to temporarily cut turnover tax from 12% to 10%. How did that go?

MJ: When lockdown started, the government was talking to industries about their biggest problems. The associations for betting companies sent a letter to the government saying that 12% turnover tax is one of the highest in Europe and the world. We said that maybe because of the crisis it should come down. You have 19 licensed companies in Poland but right now, only two of them make a profit. It is a super difficult market because you have STS, which has 50% of the market, Fortuna with 28% making a profit, and some of the rest are losing a lot of money. It’s mainly because the tax rate is so high. However, the Ministry of Finance was not so happy to talk about the tax rate because they wanted to concentrate on supporting businesses to keep employees at work. They would not even discuss the tax issue.

We need to keep speaking to the Ministry of Finance and telling them, ‘look, we are really working in a very difficult environment, not only because of Covid but because the tax is super high. A 12% tax on turnover is more than 50% on GGR – it’s crazy’. We hear the voices that people who care about odds will never want to be with licensed bookmakers. They are saying that we are a recreational bookmaker; we aren’t for professional gamblers.

EGR: With such a high effective tax rate, how large is the online black market in Poland?

MJ: In 2017, when the legislation in Poland changed, the big international bookmakers left Poland because they couldn’t operate here, and from that moment the situation started to change. The companies that wanted to operate here had to get a licence. Our government started IP-blocking and some kind of payment-blocking and so the market started growing but it is very difficult to say right now what percentage of the market is white and what percentage is black. Some governmental agencies are saying that the black market is about 40%-50%. Some of them say it is lower. But nobody today will sign an advertising deal with an unlicensed bookmaker because it is too risky.

There are still some companies that operate from Malta and their domains are blocked but they change their domains. I would say 60%-65% is the white market and about 40% is the black market. If you have a 12% turnover tax, there will always be a black market because some people don’t want to pay 12% on their bets. So, we are pushing the government to do more around IP-blocking, to make the banks do more and educate people in Poland. But the market has changed a lot because compared to a couple of years ago there are not so many adverts by unlicensed sites.

EGR Intel: You launched in the UK market 18 months ago. Have you managed to make inroads there?

MJ: We have been in the UK about 18 months. We were first operating on a white label, but we then got our own licence from the UKGC. From that moment, our turnover and GGR went up. We are learning a lot about the UK and the market. It is completely different to the Polish market, but we have a very good team that has a great knowledge of casino. We have a lot of Polish clients in the UK and they choose to bet with us. We are growing 100% year-on-year in the UK. It’s still not a big part of our business but we are improving all the time. We are working on some licences outside of Poland and the UK, but I can’t say anything more right now. I can say that the strategy next year will be to concentrate on licensed markets.

EGR Intel: Why enter a market like the UK when it’s so competitive and mature?

MJ: Because we achieved so much in Poland, we wanted to go outside the country and to the UK to test ourselves. It was something challenging for our staff because we have very talented people and we wanted to give them a chance to do something outside Poland. Three years ago, there was a huge population of Polish people in the UK. We did some analysis and most of them knew us and they watch the Polish national team, which we sponsor, and so we decided to try the UK. We thought we would have a good starting point with the Polish population. Of course, we will not be competitive with the biggest brands right now because it is a difficult market, but we do well. We offer some niche sports and we have very good casino content.

EGR Intel: How has the hiring of ex-Manchester United goalkeeper Peter Schmeichel helped with marketing?

MJ: As a new brand we wanted to have a brand ambassador. We wanted to have somebody who is well-known in the UK but who would be known in Poland. Peter actually has Polish roots – his father is Polish. So, for him and for us it was very easy to agree a deal. We use him in all our marketing, and he comes to industry events where we have a stand. It’s working really well. I think it is a good way for new brands to be different from other bookmakers.

Mateusz Juroszek and Peter Schmeichel

EGR Intel: STS has been nominated in a number of categories at the EGR Marketing and Innovation Virtual Awards 2020, including for omni-channel solution, affiliate marketing campaign, brand of the year, and sportsbook marketing campaign. What does this say about STS?

MJ: The last couple of years have been really successful for us. When we started marketing our business outside Poland, people realised from that moment there is a big company with its own technology and product. It was then that we really became the core part of the European betting industry. Being nominated is a success but, of course, we want more and to get better and better. I hope in the next couple of years we will be in at least four categories all the time.