By Alva Edwards, Business Co-ordinator
George
SUPREME Ventures president and CEO, Brian George, is to spearhead the lottery company's ambitions to become a regional player and to maintain its hold as the number one lottery company in the Jamaican market.
The immediate plans for 2004 is the recovery of sales in the aftermath of the Government's decision to impose taxes on winnings. "Although we had a tremendous rebounding we are nowhere near where we were prior to the introduction of the tax and we are not where we would have been if we did not have the tax. The first commitment therefore is the re-establishment of the gains we made. The second commitment is determining the optimal business model for the Supreme Ventures, Jamaica Lottery Company (JLC) relationship," he said, speaking with the Financial Gleaner in an exclusive interview earlier this week.
Supreme Ventures acquired the majority shares in the JLC as of December 18, 2003. "We now have two entities in the same business and we now have to find ways to identify the potential synergies that will allow us to maximise the opportunities in the marketplace. But at the same time we must guard against acting in a monopolistic way. We are very anxious as a company operating in Jamaica not to be perceived as a monopolistic monolith and that has to do with how we deliver customer service and relate to our agents and employees. Being dynamic in the marketplace is ultimately the best test of whether you are acting as a monopoly or not."
Mr. George would not be drawn on how the merger would work in essence, but did say that the company was in the process of coming up with the right model and management cadre to drive what would be Jamaica's largest lottery company by far.
The plan is to run two separate companies with a board of directors which happens to be the same board for both companies. Brian George will serve as the president and chief executive officer for both companies. The management of JLC will stay intact with a chief operating officer in charge of the day-to-day management of the JLC, thereby taking off a bit of the burden from Mr. George. There is no process in place right now to integrate the management of both companies.
JLC boss, Howard Mitchell, and the board of directors resigned when that company was acquired. Upon their resignation a new board was appointed. Mr. Mitchell's contract with the JLC expired at the end of December last year but he has agreed to stay on as a consultant for a period of three months initially in order to facilitate the smooth transition from JLC into the new board and executive team. Although Mr. Mitchell will not be retaining a seat on the board, his expertise is greatly valued.
How does he view the gaming industry in Jamaica?
"One thing Supreme Ventures recognised when coming into the industry was that gaming was underexploited in Jamaica. With 1.3 million people in Trinidad and Tobago, at their peak (1995) they did US$160 million in online lottery sales. In Barbados with a population 260,000 people they did US$40 million (1997) in online sales. Looking at these numbers you see Jamaica with 2.8 million people and prior to our arrival the lottery market earned US$45 million. When you look at the elements here we were always convinced there was tremendous growth opportunities and we identified the Cash Pot game as a key tool in our strategy of making an impact in the gaming market.
"I think we have gone a long way in exploiting the opportunities in this market and we can go further with the introduction of new innovative products. The JLC Lotto and Pick 3 games can still help to grow this market and will still play a significant role in that area."
On testing the market bingo came second after Cash Pot in consumer acceptance and Supreme Ventures has plans to add an online bingo game to its portfolio.
"If you look at the per capita average of the lottery sales in the U.S. at about US$163, in states were there is an active lottery programme (referred to as SLOTS) the per capita average is about four times the average. We see video lottery in Jamaica as the next horizon for growth in this business."
CASINOS
There are many who feel that casinos would be a fillip to the Jamaican tourism product and that in fact many hotels have gaming halls to great effect to their establishments. However, both the Government and the churches exhibit a marked reticence toward the full introduction of casinos and have resisted them. How does Mr. George view the operation of casinos in Jamaica?
"Every Caribbean Government has struggled with the issue of casinos. The influence of the church, which is a positive one, has sought to argue against the proliferation of gambling. I think one has to decide what one wants. Casino markets, whether it be in the Bahamas or elsewhere, does really well and is a big assist to tourism. I've always felt that the day that Cuba opens up as a market you may find a sucking sound coming from the rest of the Caribbean because the Cuban market will embrace casinos. I've always felt that casinos represent a significant opportunity for tourism growth. I don't believe that casinos bring bad things, they are manageable. I don't see casinos causing moral decay there. I'm not so sure there is real evidence of the negative impact of casinos because I have not seen it. What I have seen is the positive impact such as the growth in employment and tourism and all the spin-off businesses such as transport and food.
"What I am seeing in the Caribbean is a pent-up demand for entertainment options and it is something that should be addressed. At the end of the day governments must ask themselves, are you in the business of generating revenue, employment opportunities and all of the spin-offs that come from these things, and if you are, you have to look at these businesses in a dispassionate way and say, does this make good business sense."
WHAT NOW FOR SUPREME VENTURES?
Brian George now views Supreme Ventures as a premier company in the gaming and entertainment business. It perceives itself as a regional player which acknowledges the entertainment business as an adjunct to the gaming industry just like in Las Vegas. He sees a natural hand and glove relationship between gaming and entertainment.
Speaking to Paul Hoo a year ago, who was then the president of Supreme Ventures, he told me that the company posted revenues of $12 billion. With the acquisition of JLC, Brian George expects both entities to post revenues of between $15 billion and $16 billion for 2004. He was at pains to temper perceptions that Supreme Ventures is this cash rich company doing billions of dollars in revenue.
"Over 75 per cent of our money goes back into prizes. Then a percentage of our revenues goes into the Government's Culture Arts Sports Education (CHASE) Fund. There-fore between the CHASE fund, agents commissions and prize payments, you have to look at those revenue figures in that context. The dynamics of this business is very different from the phone card business. When I pay a $100 for a phone card that is consumed and there is no recovery of it. Therefore, the card operator can measure his or her sales discreetly from one card to the next. In this business, I play $10, I win $260, I then re-invest $20. The system treats that as I have played $30 because I spent $10 and re-invested $20 more. That's the element of 'churning', when the winnings comes back into the business and so it gives you a sense of higher revenue numbers."
Part 2 of this interview next week.
