Economy 28 May 2024, 12:15pm

Hungarian lottery fever generates gigantic revenue for Szerencsejáték Zrt.

Portfolio

Szerencsejáték Zrt. pays out close to HUF 2 billion a day to customers, said Andrea Mager, Chairman-CEO of the Hungarian gambling operator in an interview with Portfolio. She has also revealed other exclusive data about the state-owned company's business year 2023. The CEO also talked about how many billion forints needs to be in the pool to trigger a lottery fever. The former member of the central bank's (MNB) Monetary Council also spoke about the new situation in the online sports betting market that started last year, the importance of players cards, the role of the physical network and the digital space, the performance of lottery tickets and the numbers game. In this context, we also asked about the two gamblers who took the last two huge jackpots in the 5/90 (Ötöslottó) lottery. She noted predicted that they will soon open a new type of shop, which will be the lottery of the future.

Andrea Mager said 2023 was a year of records, either in terms of the company's revenues or its payments into the state budget.

"All three segments, sports betting, numbers games and lottery tickets, saw double-digit growth. Sports betting grew by 23% year-on-year, while the growth rate for lottery tickets was 14% and for numbers games 15%. The latter is not only a strong increase in itself, but is also outstanding by international standards, where the trends are different in Europe," she said.

Mager noted that national lottery companies everywhere are struggling with the declining demand for lotteries. On average, they are expecting an increase of around 4%, which is why the double-digit growth rate is so significant.

Key 2023 figures:

revenue up 19.1% yr/yr at HUF 980 billion (Q1 2024 revenue up 17% yr/yr);
net gaming revenue increased by 14% to HUF 276 billion;
the part between the revenue and the net gaming revenue is the amount that remains with the players. This was 72% of the company's turnover last year, which means that

we pay out close to HUF 2 billion to our players every day.

taxes, contributions and supervisory fees paid into the state budget amounted to HUF 170 bn, 14.9% more than in 2022;
the number of registered gamblers holding a Players Card exceeded 1.1 million last year and is already up at around 1.35 million, aiming for up to 2 million by the end of 2024.

In the last 10 years, Szerencsejáték Zrt. has quadrupled its revenue, and since 2019 it has doubled, and the company 'entered the fast lane' after Covid, having introduced new digital products and renewed its internal processes.

At the moment, our main challenge is the revenue mix: 59.1% of our revenue comes from sports betting, 21% from numbers and 19.9% from lottery tickets,

said Mager. Of the three product groups, sports betting is the one with lower revenue-generating potential, is more competitive and its share is increasing, she explained.

Asked about this segment's progress in terms of revenue, Mager replied:

Over the past 10 years, the share of revenue from sports betting has increased to nearly 60% from 30%. Our aim is to stabilise at around this proportion.

"It is important for the company's ability to generate stable income that the share of lotteries and scratch cards does not decrease. This can only be maintained through massive product development, and it should not be denied that it helps to have luck on your side, because

the accumulation of jackpots is a key factor in the revenues of lotteries.

"At a jackpot of one billion forints, we do not yet see a growing appetite for gambling. Between one and three billion forints, players may start to buy several tickets, and when the jackpot is over HUF 3 billion, a psychological effect can be observed, and players not only buy more tickets, but they also significantly grow in number. And around HUF 4 billion, gamblers from outside the country, e.g. tourists on the borders with Ukraine, Romania, and Serbia appear."

While there were no extreme jackpot accumulations in 2022, the past period has been marked by several. In April 2023, an outstanding jackpot of HUF 4.57 billion was won, and very soon afterwards another accumulation started, resulting in the highest ever 5/90 (Ötöslottó) jackpot in February 2024, after 29 weeks of accumulation. It was over HUF 6.5 billion, but the cumulative effect started already in 2023. All in all. last year was a year of massive accumulation.

The identity of the winners is strictly classified, even the CEO has no idea who they are. There are voluntary and anonymous questionnaires they might choose to fill out, but they are generally extremely taciturn and share the news of their winnings only with their close family, said Mager. The winnings are transferred to a local bank account and no information about the winners has ever been leaked either from the company or the banks before.

Digital solutions making inroads

Asked about the new services and the role of the digital channels, Mager said the rise of online sports betting is an important trend, but in our country

the network still has a very dominant role to play. 70% of our turnover is generated in our physical network, and 30% comes from online channels.

"More interestingly, 84% of our pure gaming revenue is generated in the [physical] network and 16% in online systems, because we sell lottery and scratch cards in our network, and the profitability of those is higher than what you can get in online sports betting."

However, it should be stressed that

digital solutions are really making inroads,

she said.

"If we look at the average over the last 10 years, we can talk about a digital revolution. In fact, the average annual growth rate in our network has been 12%, and the same growth rate in digital channels is 40%, although I must add that we obviously started from a low base."

Mager also said that new families of lottery tickets will be launched, with different prize amounts and different ways to play. They are trying more expensive tickets with proportionally much higher jackpots, and also something like the Prize Stream (Nyereményözön), where players can win lots of small prizes. "2024 is also about renewing our non-permanent ticket portfolio, with each new ticket we release offering something special."

We are currently following our five-year lottery development strategy, and when launching a new product, we are careful not to cannibalize our existing successful products.

"Also, in 2024, we will be trying to change the way we look. One element of this is that we will soon be opening a new type of store in MOM Park, the lottery of the future."

Chances of winning

There's a saying that the only way you can win in a casino is if you OWN the casino. This goes basically for lottery companies too. Your odds to win the jackpot are astronomically small, yet you keep on betting, ticking off those numbers, week after week, year after year, playing the same numbers again and again or choosing a different set every week. Teaching statistics and probability is not the forte of schools in general.

There are even online calculators which give you endless lists of numbers that had or had not been drawn so you can calculate worse/better odds of them being drawn again. As if it mattered one bit. It doesn't. On the roulette table you can pick any number just for the reason the little ball hasn't stumbled into that particular pocket for a long time. You say black 11 is due. No, it's not. Your odds remain 35 to 1.

But enough of the casino, let's see the lottery!

As Mager said, the bigger the jackpot, the more people play and the more tickets they buy. That's great for the lottery company but the odds to hit the jackpot are extremely shoddy.

In the case of the 5/90 lottery (Ötöslottó) your chance of winning is 1 to nearly 44 million. But how big that number is? Let's pretend that you are in the Puskás Arena, but there's no game. The soccer field is far from being full, but you are in a nice little crowd of 2,000 people. Now, an airplane flies over and drops a ping-pong ball, and whoever it hits wins the jackpot.

These are your odds...

IF THE PLANE FLIES OVER 22,000 STADIUMS!

And if you play the EuroJackpot the odds are way worse: the same aircraft, the same ping-pong ball, the same crowd of 2,000 but this time in 70,000 stadiums!

Happy betting, folks!