The first and to date only surviving lottery which finances the Lithuanian Olympic movement turned 25 in 2017. Here are some of the most important historical facts on how Olifėja was born, came of age and survived to now
There are still two years and three months left to the restoration of statehood of the Republic of Lithuania. In December 1988, the National Olympic Committee (NOC) of Lithuania is solemnly restored. Lithuanian flag at the Olympics will be seen in Barcelona four years later. But how to cross that long bridge?
When the NOC of Lithuania was restored, it had practically no funds. There was a shortage of everything – even file binders or paper clips were at short supply. We had no idea how to invent a stable funding of sports. But why invent a bicycle when it has already been invented?
The Olympic movement has long been supported by means collected through the selling of lotteries all over the world. The only difference is the status of their organisers – in Poland, Estonia, Latvia they are state enterprises, whereas in Austria, Italy and the Czech Republic these are private companies; elsewhere it might be a mixed ownership.
In terms of running lotteries, Olifėja’s experience was very modest to say the least. Only four years ago, in 1984, the first sports lotteries emerged during sports matches, when it became possible to win in a lottery by simply having an entrance ticket to the matches played by Vilnius’ Žalgiris and Klaipėda’s Atlantas football clubs; the main prize was a “Zhiguli” car.
The establishment of the lotteries was supervised by the chief of the Accounting and Departmental Control Division of the Fitness and Sports Committee Antanas Muraška. He, by the way, also handled the first financial documents of the NOC of Lithuania. Antanas was the person who came to the president of the NOC of Lithuania Antanas Poviliūnas in 1990 and said: “I want to work for you. I will do everything to make sure that the NOC of Lithuania has funds”.
The lottery business in Lithuania was making its baby steps on a shaky ground. Soviet branch of Sportloto was still operating in Lithuania, somebody tried to organise the first guessing lotto, and even first Bingo salons were opened.
The opportunity to print first lottery tickets was found in Kiev; Antanas brought them from Kiev to Lithuania in the trunk of his personal car. The prizes of the first lottery, Olimpas, were modest when looked upon from today but luxurious at that time of shortages, for instance, four Opel Kadett cars. However, it was a start. The second edition lottery tickets were brought from Kiev by Donatas Kazlauskas, who also contributed to the revival of the lottery.
After the successful debut, the NOC of Lithuania decided that this would be the key source of funding the Olympic movement and the non-profit organisation Olifėja was established. The name of the organisation had to reflect the expectation of a miracle – not only lottery wins but also victories in Olympic Games.
Actually, victories came easier than the fetters of regulation that had to be disentangled. Before the establishment of Olifėja, one could be issued with a licence for annual sales up to LTL 10 million. If you wanted to sell more or operate for longer than 10 years, you had to wait for the Government’s approval.
The only way to speed up this process was to engage reliable foreign partners and to launch the most advanced lottery system available. To that end, Olifėja invited a global lottery technology supplier, GTech which has now merged with the international company IGT, and is the leader not only in the lottery industry but in the market of gambling solutions as well.
Negotiation with the Americans took a full year. To start with, the Americans installed 200 terminals and trained the staff how to operate them. Compare this to the 2,400 terminals in operation today which can carry out many more operations than the software allowed. It was an exactly that time that the lotteries Kenoloto and Jėga emerged.
The attitude to ownership forms and modes changed as did the laws. This is how in 1995, the non-profit organisation Olifėja was transformed into a private limited liability company. Nevertheless, the key points did not change since the owner of the organisation remained the NOC of Lithuania.
The start of Teleloto brought a new wind into the world of lotteries in Lithuania. It was a new form of family entertainment – crossing out the boxes on a ticket in front of a weekend evening TV: people not only expected to win but they also wanted to have a good time.
Times changed for worse. After we eventually emerged from the banking crisis, another one – the Russian financial crisis – hit. Sales of lottery tickets dropped more than 30%. Olifėja was preparing to construct a new building, financed by a bank loan, and suddenly found itself facing bankruptcy.
What if we increase the authorised capital of Olifėja by LTL 900,000? And use that to fix the holes? But who would be brave enough to buy the shares? A number of potential investors did not qualify since almost everyone lacked working capital, the “frozen” projects were haemorrhaging meagre resources and nobody would take up this risky adventure.
Antanas Muraška and Donatas Kazlauskas had doubts about buying in as minority shareholders. It was difficult to find money for the investment. Antanas himself had to sell his apartment and anything of value that he had at the time from his other businesses, whereas Donatas took a loan and mortgaged his apartment as collateral. But the managers saw the potential prospects and decided to undertake this step at the hardest time for the company.
Previously, Olifėja’s staff was solely responsible for the lottery licences and their administration. Expansion of the sales network, terminals, software, marketing, filming of TV shows, etc. was the responsibility of the Americans. But the Lithuanians saw they could increase sales, optimise costs; in other words, to increase the funding meant for the Olympic movement considerably. For this reason, they decided to buy out everything from their US partners. Besides, the services offered by the Americans had become more expensive due to the new VAT tax; and the partners did not want to negotiate. Any further work with them would have led to more losses.
Results were soon reaped – profits went through the roof immediately. However, there remained many other ways to take advantage of the available technical base and know-how. Unfortunately, the new Lottery Law restricted Olifėja to one activity only, namely, lotteries. In fact, any new activities would have required investments, and the NOC of Lithuania could not invest sports’ money in business in which success wasn’t guaranteed.
For this specific reason, the Lotelita company was set up. It purchased the terminal system from Olifėja retaining the same lottery distribution system, it started expanding and modernising the sales network and systems and provided other services which resulted in the emergence of Perlas Services: payments for utility services and other payments, servicing insurance and credits, ATM services, etc.
The old terminals which were bought from Olifėja for the price established by appraisers in 2004 by its private shareholders were soon replaced by new ones, as the old ones had been in use in Lithuania and the USA for 20 years. Investments continued – more than LTL 40 million were invested in the first decade of operations alone. In addition, the company’s building was bought from Olifėja for the market price – the organiser could no longer engage in leasing of surplus area due to legal restrictions.
Emergence of payments and other additional services which supplemented Perlas terminals provided a stimulus to lotteries – it became cost-effective to install terminals even in the smallest of towns, and so their number grew to 2,400, which expanded the network of serviced lotteries. It is estimated that the reorganisation of lottery distribution allowed the distribution costs to be halved and circulation quadrupled. All this brought direct benefits for the Olympic movement.
Now the life of numerous small towns cannot be imagined without a terminal, because people can use them for all their day-to-day financial services. A terminal in a local shop replaced the increasing number of closed banks branches and local post offices.
Changes brought new games, e.g. Vikinglotto lottery which started in 2011 in Lithuania and Eurojackpot which emerged in 2013. Lithuanians had more chances to win bigger amounts and at the same time to support the Lithuanian Olympic movement even more.
The results of Olifėja’s performance are public and transparent. Independent auditors conduct financial and tax audits of the lottery organiser annually. At the same time, costs of services purchased by the company are compared to other countries – thus ensuring that Olifėja’s profitability is no smaller than the average of other European lottery organisers. Transparency is demanded not only by the lottery participants but the legislation as well, the Gaming Control Authority, the State Tax Inspectorate and the majority shareholder, the NOC of Lithuania.
Funding of the Lithuanian Olympic movement is based on a clear and transparent formula – 8% of every sold lottery ticket price goes from Olifėja directly to the NOC of Lithuania. Another 5% of the total turnover of tickets goes to the state budget as a lottery tax. In addition, 51% of the company’s profit dividends go to the majority shareholder, the NOC of Lithuania.
The history of Olifėja could be summed up with a single figure – EUR 83 million. This is the amount collected over 26 years until the end of 2018 and transferred to the Lithuanian Olympic movement. Lottery players were paid EUR 439 million in prize money over this period.
The future story of the organisation has not been written yet, the big changes taking place in fintech, gaming and gambling expansion and regulation areas require only one thing – to take a brave look at technical opportunities, to look at human nature carefully and to never forget the purpose for which Olifėja was set up.