Joc started Interblock way back in 1989, building PCs for customers and graduating to supplying POS systems for restaurants and bars by 1991; by 1997, Interblock had become the company we know today, making its international debut at ICE in London. Joc Pececnik spoke to Casino International about the company he has built.
Casino International: Can you give us some background on the company’s origins?
Joc Pececnik: Interblock has been around since 1989, and in gaming since 1996. Initially, we started with computers; we built computers in a small workshop. In 1991 we switched to a POS system for bars and restaurants. We served almost 1600 customers with that all around Slovenia, which was 80% of that market.
After a lot of success in that area, we started to develop the first gaming products in 1995 and in January 1997 we attended ICE in London for the first time with Princess, our first electromechanical roulette.
CI: Is the POS side still part of the business?
JP: No. I sold that to the employees for one Euro under strict conditions – that no customers can call me in coming years for any problems with product. We had good relations with those customers, they became friends, and the POS business is very specific. Nobody called me for a year, so they got the company for one Euro.
I then established a new gaming company; this was in 1995.
CI: Did you use the Euro they paid you with to finance Interblock…?
JP: I had been running the POS company for some years and had enough money to get started. I used some of the profits from the last six months with the POS business as the financial base to start the gaming division.
The money which I took from the old business was just enough to develop the first prototype, it didn’t buy a building or anything. We developed the first roulette game, manufactured the first prototype, and we were out of money but luckily we sold a lot of units at ICE that year – we sold 68 units that year I think, which was the trigger for other investment.
CI: Why go into gaming?
JP: That was an accident. I was well known with my computer business, and I got a call from a Slovenian government casino asking if I could fix a very old Sega bingo machine; I went and discovered a problem with the computer, so I changed it out and the machine was up and running again. Everybody was happy. I sent an invoice for maybe £1200; computer was perhaps £700, travel £100, three hours of labour… My phone rang shortly after sending the invoice, very early. The guy on the other end was asking if I was crazy sending him this invoice, did I want him to lose his job? He asked me to get down to the casino to discuss it.
I thought, perhaps I can give them a little discount, it must be far too high or something; when I got there, the manager told me I was crazy. He said, “I have had this product in my casino for 15 years and have had so many services – but I have never paid less than £20,000 for one. If my boss sees this invoice for £1,200, when all our past services were so expensive, he will sack me! Please help!” So I said, ok, I will invoice you for £12,000. He said great, thank you!
I thought to myself, I have to work six months to earn the same as I have earned in one day – this industry must be crazy! When I checked out the products they were using, I asked what they had paid for them if paying a service for £20,000 is ok and they said, we paid £350,000 for this. Are they joking I thought, is this impossible surely? It seemed so much for something relatively simple, and I thought we might be able to do it. My research suggested that on the casino floor, there were slots, roulette and bingo but roulette was the most important of those. So I started developing our first product, and that product is essentially the same now as it was back then.
CI: What was the key to that success at the ICE show? Was it that electro-mechincal roulette was just so new?
JP: It was one of the first electro-mechanical roulettes; at that time it was attractive because in some jurisdictions they were able to install these roulettes where live games were not allowed. There was interest for a variety of reasons though.
CI: Looking back to 1995 or 1996 in terms of operating systems, Windows 95 had just come out so that may have been a factor in the evolution of such machines… Was that the case? Did the machines use a Windows-based system?
JP: Those early machines used DOS and a network setup, so the first roulette had a server inside and a license for ten play stations to be connected with a network infrastructure.
All the products in gaming have a slight delay behind the latest technology in the consumer side of things. Up to 1997 we used DOS and Novell, and in 1997 we developed a parallel product with Windows 98. Later on we moved to an Windows embedded system.
CI: What’s your own background? How did you get started personally?
JP: I studied electro-technical engineering, and after I finished at school I opened a company immediately by myself. That was when I was building PCs.
Building a PC at that time was more about assembly than development, so if you had a customer that wanted a computer, they were really just looking for your help to put one together. So the business needed very little capital, and it just needed my hands and my brain. In three or four years, I assembled 6,000 computers. That’s a big number for an individual putting them together. That allowed me to raise some capital quite quickly.
CI: Slovenia is a very small country but there are several technology companies, all making waves in gaming. Is there a reason for this – is there a famous college or something in the country that is churning out electrical geniuses?
JP: It’s nothing to do with the Slovenian school system; it has had a good engineering division in the past, but times have changed and there is not such interest in engineering as a profession, especially in the technical side. Younger people now are interested in music, movies, different interests. The reason is though, I think, that as a nation we are competitive. People observe success and then try to follow it. A few years ago you might have found 16, 17 Slovenian gaming companies, and while there are not that number any more there are still quite a few. Some of the companies are smaller, but they are in the market and surviving, growing.
It’s a philosophy of different managers that they can do it, they can compete – if he can do it, I can too. But I don’t think there is a particular reason in our education, for example.
We are competitive in all levels of society; it might be partly because we are a small country.
CI: When did Slovenia become an independent nation? And has adopting the Euro helped you in international trade or not?
JP: 1991. And we became part of the European Union, adopting the Euro as our currency, in 2004. We were one of the first Eastern European countries to join and implement the Euro at the same time.
Being part of the Euro has definitely helped with trade I think. Business and exporting is easier, the currency is stable and we are very successful as a part of the Euro. It was very difficult for us before 2004; every European country needed its own certificate, import permissions, different currency… because we are working in many jurisdictions we had many more problems before joining the Euro.
It is also easier when trading outside of the EU. With Asia or the US, it’s not complicated but before we joined the EU we had difficulty in export, lots of bureaucracy to deal with. And it gives customers confidence, dealing with the Euro too. I can say that in general, it has helped the country and economy overall as well.
CI: Is there much of a domestic market in Slovenia?
JP: Not really, no – we tend to describe Europe as our domestic market.
CI: How is Interblock going to grow in future?
CI: We have a lot of ideas. Our main focus right now is on growing the US market, which we have been doing for the last two years. The business model we use there is quite successful, we have some products working well in the field. At the moment we are manufacturing product here in Europe and export to the US, where we lease the games or participate with recurring revenue.
The main products there are Roulette, Baccarat and Blackjack are our best games in the US.
The US market is a big market, with many facets and you have to assess which products will succeed in a property. If we are successful in our job, we can deliver a full cash box to our operators and that’s the only way to communicate with a customer. If your products prove themselves over a couple of months and the cash box is full, you have many more possibilities to work with those operators. If it doesn’t work, you can come back with another idea or solution. It’s a tough market though, and you don’t have a lot of time to succeed. If your machine is not earning money or you don’t get an engineer to it rapidly if it needs a service, you can be taken off the floor very quickly.
We have strong plans for Australia and Asia in the next few years; we have made an entirely new product for Australia, which will be very interesting. In general we will invest heavily in coming years into new products. If Interblock is now luxury gaming products, we want to become luxury gaming services; that’s my vision.
CI: What does that really mean?
JP: In the next five years we will need to step down and say goodbye to boxes, and make a different kind of box for our customers; change the concept of gaming. That’s our plan. We are developing systems.
In five years I am not saying that we will disappear from the market, I just want to say we will deliver a brand new technology which is very different from what we are delivering right now and over the next two years. I expect a lot of things in the casino field to change in the next five years, not just because of Interblock but because of general evolution and new technology, and because the big companies will have problems in coming years in terms of finding new growth. That means opportunities for a smaller company to run between elephants on ice!
I’m not saying we want to create some kind of technical engineering for our customers that will do everything; I’m just saying that the background of the technology will change in the company. We are developing new platforms and software that, if the regulator says yes and operators like it, has the potential for a customer to take their iPhone and choose roulette from a list of my customers and play a live wheel. It’s about interoperability.
CI: That’s the magic word, isn’t it? It leads to maximum customer retention in theory.
JP: Think of the customer as having an account – and think of a gaming device, the box that collects the money. We are talking about an ‘account’ on this gaming device; this is where your money will be recorded when it’s put into the machine. You put in £100 and the record goes to the CMS, which allows the player to play with £100. When you lose or cash out, the account disappears; the next player comes along, puts £20 in and a new ‘account’ is created. As long as that account is kept within the walls of the casino, the regulator is happy. When you move the account out of the casino, whether it is to play online, or just in your hotel room, they are not happy because they lose control and cannot collect their taxes and that’s the main regulatory issue everywhere.
If you allow an option that you will register your account in the hotel, go there and put £100 in, access online and play your own device, nobody has an issue from a regulatory perspective.
It’s a new approach with new technologies, which we will provide in the coming years. We have invested heavily in new products recently, and we have the products for the next five to ten years ready to go. We will not spend so much time researching and developing roulette, dice, blackjack, baccarat because we are the only company to have big hologram, small hologram, video, live, mechanical, and all families have at least 13 games and as many side bets… we have a very broad suite of products to work with now and in the future. We will invest in the new coming systems which we believe we will be ready to present at G2E 2015 or ICE 2016.