Stéphane Pallez (FDJ United) | Podcast de l’Hypertransformation by Sia – Saison 2 Épisode 2

I believe that when we don't transform, we risk disappearing. Digital isn't about pulling customers away from the physical network—it's about offering them a choice and also offering the physical network simplified and enriched ways to interact with their customers. So digital is actually good for the physical network. Once again, our goal is to maintain this mesh and this closeness with all French people, because we believe it's truly fundamental in our business. It was also important to embody the fact that when you're an international company, you have an international name, collective values, you create a new corporate culture, a new organization, and you have new projects, including technology investment projects. An international company with an international culture needs to be led not only by French people. So I believe enormously in the diversity of teams. The player experience must be increasingly personalized. For example, our online sports betting customers will increasingly see proposals on their app that match their profile and preferences. We're very close to that kind of product. Our goal is to train all our employees because we believe everyone needs it. Everyone must make it their own, and it's something a company must do if it wants to bring its employees along in these transformations. Gaming regulation exists to ensure people are always incentivized to play within legal and controlled frameworks and not get scammed.

Hello Marc.

No errors. So far, so good.

The hypertransformation at FDJ United, as you said, consists first of all of transforming a French company, a very beautiful heritage French company as they say, called la Française des Jeux, into an international company, a digital company, a company that is both present in monopoly activities and in competition, and increasingly in competition. And ultimately, for me, it's about connecting and always keeping, if I may say, both ends of the chain—being faithful to our roots, faithful to our history, which makes up a great part of our strength, our DNA, our connection with the French people in particular, and then always incorporating the transformations of the world around us. So it was first digital, that was the first phase of transformation, which was in a certain way crystallized at the time of our IPO in 2019. And then today, we're indeed in a second hypertransformation, which as I often tell my employees, consists in creating a new company, because going from a company that was primarily French and primarily in the physical network to an international company present in 10 European countries where 30% of activity is online—that's a model hypertransformation.

The next 10 years—actually, I was more talking about what we've done, so it's indeed how to fulfill the promise we made to ourselves and to our shareholders and stakeholders of creating a European champion in gaming, gambling, and entertainment in a world where there are now very, very large players present. It's how to be one of these major players at the European level and if possible, obviously, the best.

It was a very beautiful company. It's still a very beautiful company, but I believe that when you don't transform, you risk disappearing. It's as simple as that. I think the role of a CEO, precisely, is to anticipate this risk by projecting into the future. And when I arrived at la Française des Jeux, I started saying that we needed to digitalize the company. People told me, 'But why? There's a formidable network—won't it kill the network?' I said because if we don't do it, at some point we'll enter a form of attrition. We'll have fewer and fewer customers. We won't be able to incorporate innovation and simply the consumption habits of our customers, which had changed in the meantime. Because when I arrived, the company was very little digital. On its main activity, less than 3% of lottery bets were made online, and there was a history behind this fear that digital would kill the physical network. And what we demonstrated is that in reality, we can make the two coexist, and we can even benefit our customers from having both. The physical network itself has been enormously enriched by digital. So digital isn't about pulling customers away from the physical network—it's about offering them a choice and also offering the physical network simplified and enriched ways to interact with their customers. So digital is actually good for the physical network. That's what we demonstrated.

So, of the 27 million customers, we today have 6 million online players, of whom we estimate about half also frequent our physical network. I'm talking about the lottery activity. So our customers, in a way, are ahead of us—they're already omnichannel. And so our project is indeed to offer them more and more the advantages of omnichannel. We'll come back to that in the second part.

Oh, it changes everything, actually. It's clear. No, it changes everything because—I think the first thing it changed is that before the IPO, we were a company with a sort of paradox: very well known by the French—everyone knows la Française des Jeux—but relatively unknown as a company and what it does. And many people used to tell me, 'What do you do at la Française des Jeux? Oh, you watch the lottery draw.' So there was a very abstract side because the company was very present in the daily lives of the French through its network, its advertising campaigns, but it didn't really talk about itself. And privatization and the IPO forced us to talk about ourselves—to say what our project was, to talk about our history, our future, our technologies, our innovation projects. Many people discovered all of this. So it gave us visibility, absolutely—it got us out of our shell. It was a sleeping beauty, a sleeping beauty that was quite discreet about itself. And I remember when we did this campaign for the privatization, it was called 'Odyssée' (Odyssey), where we started from the 'gueules cassées'—the origin of the lottery's creation—and we said, 'And we're still here, and it continues through innovation and transformation.' People told us they had rediscovered this history and that they understood it and embraced it. So I believe it gave us visibility and perhaps also a particular collective pride. Since we were talking about my bedside reading earlier, the privatization project was called 'Odyssée.'

A big question. So, thank you William for asking me this question, and it pleases me that it's William asking a question since I'm a member of Raséo's supervisory board. So, regarding the success of this operation, I think there are fundamentally three elements. The first—why do we do an operation like this, which is a transformative operation? A tender offer on a company listed on the Stockholm stock exchange worth 2.6 billion. You don't do that every day. So why did we do it? The first thing is because we have—and in particular I developed with my executive committee—a vision of the sector's transformation and this ongoing transformation that will continue, in which it appeared necessary, beyond our success on the French market, to project ourselves onto the European market and also into a much more diversified company, much more present in digital. So the first condition is having a vision. The second condition is executing an operation that was actually quite complicated. Once again, you don't every day do a tender offer on a listed company on a foreign market and succeed within the timelines while also obtaining French competition authority approval, since we already had a sports betting activity in France. We needed that approval before we could conclude this operation. So we announced the operation in January 2024 and closed it in October. So it's been exactly one year. That's the art of executing the operation, and it's an achievement that we can now discuss.

After that, I think the most critical part—and it's the phase we're in—is how, from two quite different companies if we simplify—and la Française des Jeux, which is more la Française des Jeux. Knowing that in the meantime, we had also acquired the Irish lottery, so we were already abroad, but it was a more modest operation than the Kindred one. So how, once we've done this operation, do we create this new international company and in a way show proof that the vision we had from the start is embodied in results and in what for me is a new company? And that's also why we changed our name, because Française des Jeux is a very beautiful name and it remains our name in France because we are still predominantly French and our roots are in France. But it was also important to embody the fact that when you're an international company, you have an international name, collective values, you create a new corporate culture, a new organization, and you have new projects, including technology investment projects. And that's all we're doing today. And I'm convinced that this kind of thing doesn't happen with a wave of a magic wand—you have to be extremely committed, extremely humble, because it's first and foremost about people, men and women who want to create a collective adventure together. And so I think every morning you have to tell yourself: how do we work together in this new entity, this new group? And once again, through very concrete projects that we'll be able to discuss.

Well, first, what we can note is that today France is one of two European countries where online casino is not authorized. So it's rather the rule abroad, or the norm. That said, it's explained, I think, by a French specificity that relates entirely to your question: France is the European country with the most physical casinos—I believe there are more than 200—that play a very important role in French territories, in tourist communities. So we have characteristics on this that obviously need to be taken into account. I don't operate casinos, so it's not for me to speak about them, but clearly it's something that needs to be taken into account, and I think it's one of the reasons why today we haven't yet—well, at least the legislature and government haven't yet decided, but it was raised two years ago. The question arose because when we see what's happening around us, it can arise, but I think we need to find the French model for doing it under good conditions. As for cannibalization in relation to lottery, I'd say these aren't the same games. The digital lottery we practice today is not online casino. It consists of giving access to our most iconic games like EuroMillions online—you don't need to go to a point of sale with a paper ticket—but these are lottery games, so they're extremely different from casino. We've also transposed our scratch card games online, but they remain games with different characteristics from casino in terms of frequency, return to player—I won't get into the technical details, but they're very, very different. And we've also created games called 'web exclusives.' But all of these are not casino games.

So these two activities—and that's part of the things that, if the day comes when this sector opens in France, will need to be quite clear: how do we distinguish lottery games from casino games? And these are games that coexist in other countries besides ours. So they're different games, even if at some point they were both online.

So first, the separation between monopoly and competition in our activities already existed before. It was reinforced by this. So we took additional commitments to make it even clearer, and the main commitment we made was that our customers' accounts would be totally separated between the monopoly activity accounts and the competition activity accounts. But these were already activities carried out in different frameworks. The second type of commitment we made, which will be implemented in 2026, is that we will also completely separate the brands. They were already different since for sports betting we have ParionsSport point of sale and ParionsSport online, but online we'll have a brand that will be much more differentiated. So it's rather a reinforcement of all this, a formalization that's being done today. It's rather the continuation of something that existed but which, as we become a more important player in competition—on competitive betting, which we are today because we're now effectively the third operator on the online market post-acquisition—it was important that it be perfectly clear that we don't use our monopoly rights to distort competition. So I'm very comfortable with this because for me it's the sense of history in a way. We have a monopoly activity that is in a particular framework, and a competitive activity in which we're in very intense competition with other players on the French market and the international market today.

And what's new is that this competitive activity is now completely European. In reality, France is just one piece—a nice piece—but it's only one piece of our competitive activity where we compete with very large online betting players. And to be competitive with those players, that's the transformation we're doing now. And what are we doing now? We're investing in what we call proprietary assets, notably a sports betting platform that will be the common platform for all our activities in Europe, called KSP, which we're progressively deploying. It's Kindred's platform—the one they had started working on to develop but hadn't yet begun deploying—and we're deploying it. This will be fully done by the end of 2026, and that's an enormous transformation because it's both the development of a platform, the migration of customers—and as we know, that's always a moment you have to be very careful with. That's why we're doing it country by country in an extremely careful and methodical way. And it's also because it will give us what competing players have on these markets—namely, the ability to fully manage our customer relationship, our customer marketing, and also to be more efficient in terms of costs. So it's really the deployment of this model that's happening today and it's a major transformation.

Well, the truth is the United States—what's amusing is that when you look at the history, it actually started later than us. On online lottery, they're behind, and online sports betting only opened relatively recently. That said, it's a market that by definition offers enormous potentialities and has seen very, very rapid development. To recall the history, Kindred, before we acquired them, had started to invest. They actually exited the United States because they weren't in a position to invest what was needed to be one of the major players on the American market. So for now, we're focusing on Europe to be well established on our European base, and then you never know.

There are already some, actually. We've been sending—we haven't been sending since last year. No, no, no. There have been some in shopping galleries for a long time, notably in press points in shopping centers. There have been press points in train stations for a very long time that also distribute la Française des Jeux games. So our vision is that we're a company that relies on contact—lots of contact with lots of customers. And that didn't happen automatically. We've managed to maintain 29,000 points of sale in France—the largest proximity network...

the entire territory. And it wasn't, it wasn't easy because every year when I arrived, I was told we lose between 500 and 1,000 points of sale. Not that we close them, but because they close automatically. I said, but we're not just going to watch the curve go down. So we're going to recreate them. So we recreated them in points of sale that are rather, indeed, local ones. So bars, newsstands, service stations, local shops in city centers. So once again, our goal is to maintain this network and this proximity with all the French people because we think it's really absolutely fundamental in our business. And there, we've reached a little bit the limit of what we can do with traditional points of sale that we've used for a long time. And so we started to see if we could be, well, not at all in self-service in supermarkets, but rather in areas that are actually before the checkout area where you enter and have access to the service department. So we are rather in an area that is often the area where you have ticket sales for shows, for travel. So it looks like local points of sale, except they are at the entrance of a hypermarket or a supermarket. And once again, the goal is always the same: to have proximity with the French people through the physical network and the online network, allowing those who are our customers to find us easily and in conditions that are obviously always controlled. That is very, very important for us. So we are in an approach where they are absolutely subject to the same control over all the risks we want to avoid.