The Company

Szerencsejáték Zrt is the largest gambling service provider in Hungary. It has exclusive rights to distribute number draw games, sports bets and prize draw tickets throughout the entire territory of the country and, through its investments; it also has interests in four Hungarian casinos. The lottery company operates an online sales technology with national coverage and extensive retail network. The majority of products are available by phone, on the Internet and via SMS, too. Currently, the lottery company operates seven number draw games (five-number draw lottery, six-number draw lottery, Scandinavian Lotto, Joker, Keno, Luxor and Puttó), three types of sports bets (Toto Pools, Tippmix and Goal Toto), and a portfolio of 15-20 prize draw tickets. Two thirds of the Hungarian adult population, which is approximately five million people, are regular customers of the Company. The company has a more than 50% market share in the Hungarian gambling market. At the moment, staff consists of approximately 1,200 employees, 700 whereof work in the Company's own commercial network, while there is also an extensive group of related resellers. As a result of the company's dynamic growth, the average gambling revenues per resident is the highest among the lottery companies of Central Eastern European countries who joined the European Union in May 2004. Szerencsejáték Zrt has increased its turnover by nearly 70% over the past two years.

Association, Ownership, Supervision

In Hungary, the organization of draws has a long tradition of over two hundred years. The first lottery draw was organized in Buda in 1770. After a period interspersed with shorter and longer breaks, the latest history of Hungarian games of chance started in 1947, when the pools were introduced. Pools were followed by the five-number draw lottery in 1957, which is still the most popular game in Hungary. Prize draw tickets were introduced in the Hungarian market in envelopes in 1967. For many years, the National Savings Bank (Országos Takarékpénztár) was responsible for organizing the traditional lottery and pools. This activity was separated, giving birth to the national lottery company, Szerencsejáték Rt. in 1991. Since its foundation, the company has been fully owned by the Hungarian state, while owner's rights have been exercised by the Hungarian Privatization and State Holding Company (Állami Privatizációs és Vagyonkezelo Rt). Since 1991, professional supervision over the gambling operations has been performed by the Gambling Supervisory Authority, an institution of the Ministry of Finance.

Market Environment, Alignment

Until the end of the 1980s, the Hungarian gambling market was characterized by a monopolist environment. The product range consisted of traditional pools and lottery, and a few prize draw tickets, which were very popular among the population. The other segments of the gambling market, such as horse racing and casinos, attracted only a minor group of players.
Szerencsejáték Rt was founded in a period, which coincided with the liberalization of a considerable part of the market. As a result, private and foreign operators appeared on the markets of both draw games and prize draw tickets. An oversupply developed in gambling. The number of operating licenses for casinos exceeded market demand, and the slot machines formerly allowed only in exclusive casinos were made available to the general public in more and more public places. The tax regulations implemented by the Act on Gambling Operations passed in August 1991 created a detrimental position mainly for lottery and pools. The purchasing power of the population declined, and players became less interested in traditional games. The expansion of game management activities and the participation in the organization of the horseracing bets showing a decline were not successful either. Consequently, the revenue of Szerencsejáték Zrt in real terms kept falling until 1994. The lottery company found a way out of the pressing situation through technological development aimed at strengthening trust, the extension of the range of traditional games, and the modernization of its sales network. Through the rationalization of the business policy, the gambling profile became clearer, and the organization of horseracing bets was taken out of its scope of activities. The amendments of the Act on Gambling Operations also made its contribution to the consolidation of the market. The sale of draw games, sports bets and prize draw tickets were assigned under the company's exclusive competence, restrictions were imposed on market participants with an unclear background, stricter conditions were introduced for the issue of casino licenses, while under the new conditions of taxation, slot machines emerging fr0m illegality began to dynamically develop. By the end of the 1990s, the Hungarian gambling market had developed a bipolar nature.

Extension of the Product Range, New Games

During the past decades, new games were introduced in the Hungarian market every ten years, on average. During the 1990s, the diversification of customer demands, and international development trends called for a fast expansion in the range of games. Thereby tasking game developers with a heavy burden. The new technology, i.e. the introduction of computerized sales created an opportunity for an extension of the product range. Simultaneously, with the introduction of such new technology, Joker and Goal Toto appeared amongst the games offered, and they were followed by the first product really making use of the features of a faster technology, the daily Keno, which was launched in 1996. The sports betting group was also extended with a new member in 1997, when the first bookmaker type bet, Tippmix was launched. In 1999, lottery games gained a new member with draws every Wednesday; it was the Scandinavian lottery, which brought about a rather special mood. Bingo-type games were missing fr0m the product range for a long time. This gap was filled with Luxor game introduction in 2001, which was combined with a spectacular show, and involved particular excitement, due to the evaluation taking place simultaneously with the draw. Finally, as the last member in the product range since November 2005, Puttó with draws every five minutes is by now an option for those fancying quick games. The supply of prize draw tickets has significantly expanded and changed. As games developed, vision and television coverage became increasingly important. At the end of 1995, Szerencsejáték Zrt launched Telemázli, its first and most successful prize draw ticket series combined with a television game. It was later followed by new games. However, their popularity could not match that of the upcoming cash prize game shows launched on commercial channels. The television publicity given to draw games with the draws of five-number lottery put into a spectacular TV show (1997, Lotto-show) was a conceptual step. With the Luxor game introduced, the draws for the two games now take place within the framework of a joint program. In addition to traditional number draws, sports bets and prize draw ticket sales, Szerencsejáték Zrt. also strengthened its presence in the casino market segment. After the restructuring of the casino market, Tropicana Casino in Budapest, and the casinos in Sopron, Gyõr and Kecskemét opened recently, altogether represent approximately 50% share in that market.

Sales Developments

Szerencsejáték Zrt pays particular attention to the safety of games, in order to retain the trust of players. Manual evaluation was discontinued in 1997, and the sale of off-line tickets, which were collected and transported manually, then processed using computers, was terminated in 2001. Sales and processing are exclusively performed electronically these days, whereby any bet made at any point in the country is entered into the central computer system within five seconds. The security of the system is guaranteed by strict internal regulations, and the fairness of the games is ensured by the presence of a Public Notary, as well as overall control by the Gambling Supervisory Authority. The coverage of the network is now almost complete. The full range of games is available at altogether 3,600 points of sale, of which 298 are Szerencsejáték Zrt outlets. The rest are comprised of lottery offices operated by private contractors, post offices, and other commercial outlets with different profiles selling games of chance, including newspaper stands, and savings co-operative branches in the countryside. In addition, there are 3,000 points of sale selling only prize draw tickets. One of the most important development objectives is to improve the conditions of sale, and uqdate the image of outlets. The majority of games can be played - comfortably, even fr0m home 24 hours a day and by phone since 1997, and they were made available on the Internet in November 1998, and via SMS too, in 2003. In parallel with the extension of the technological options, and the spread of the Internet and mobile services, developments have been initiated in the field of interactive games. In addition to the central organization, five regional units are also involved in the co-ordination of the work of the diverse sales network, as well as the supply of the necessary materials and supervision. In mid 2003, Szerencsejáték Zrt started the establishment of a sales network employing people with reduced working capabilities, which by now offers job opportunities to 800 people.

Contribution to Financing Community Objectives

The company is convinced that its services are useful for the Hungarian players and society. All residents of a medium-sized city could become millionaires fr0m the amount of winnings paid out in 2003, 2004, and 2005. However, it is not only the money that counts for a great number of people, but the amusement involved in participating in the games too. One of the outstanding events in 2003 was the record prize in the Hungarian history of games, the jackpot of 5 billion HUF on the five-number draw lottery. A considerable part of the net sales revenues, reduced by the winnings, contribute to the central budget in the form of special taxes. Together with the general taxes and dividends, Szerencsejáték Zrt has been one of the leading Hungarian taxpayers for years. Out of its total contributions, billions of forints are dedicated every year to raising upcoming sports generations, financing sports and leisure activities, and supporting the Hungarian Olympic movement. The majority of the contributions are indirectly used for social welfare and cultural purposes through the main budgetary distribution systems. Apart fr0m the direct budgetary contributions, the company is also involved in sponsoring activities at a proportionally lower rate, but with remarkable results. These include, for example, contribution to the reconstruction of small settlements in Szatmár County, which suffered fr0m flooding in 2001, the provision of IT equipment to local institutions and schools. Additionally, an increasing emphasis over the last two years on the regular support of the National Health System, cancer detection and children's health institutions.
Objective: to Remain the Market Leader
The Hungarian gambling market was consolidated prior to the country's accession to the European Union. As purchasing power increased, the bipolar nature of the gambling market further strengthened. Szerencsejáték Zrt takes one pole with its special games portfolio, while the other is taken by the approximately 35,000 slot machines operated by approximately 1,000 enterprises. In respect of the scale of special taxes, the two market segments are more or less balanced, covering together 90% of the market. With its fair, professional business policy, and ongoing investments for the future, Szerencsejáték Zrt endeavours to remain the largest service provider for Hungarian players. In order to achieve this objective, the company will continue to develop its games, increasingly exploit the opportunities offered by electronic commerce, and extend the services related with the games. Considered as permanent tasks, it will also continue to modernize the image of its sales network, and strengthen security. The company was prepared for the country's accession to the European Union, and is now, a recognized and reputable member of the national lottery companies of Europe and the world.