#20 Johann Graf Biography: How an Austrian Butcher Became a Casino Billionaire

  • Post category:Billionaires Series
  • Post last modified:June 25, 2022
Johann Graf
Johann Graf

Johann Graf is the founder, owner, and former CEO of Novomatic Group, one of the largest corporations in the betting and gambling industry.

The company manufactures, sells, rents out, and operates slot machines, casinos, online casinos, card games, betting games, betting software, casino management software, security software, and more.

It owns more than 60 casinos in more than 40 countries, has 23 000 employees, operates more than 210 000 slot machines, and exports materials to more than 70 other countries.

Novomatic belongs to Novo Invest, a holding company owned at 80% by Johann Graf (20% have been given to his son and two managers in December 2021) that includes 667 companies such as investment companies, casinos located around the globe, casino equipment manufacturing facilities, an IT company, and even a computer graphics company (ALS group).

Graf, which neither sits on the surveillance board nor the board of directors, has been really discreet these last 10 years, giving few interviews and avoiding public appearances.

He lives in Baden, nearby Vienna, and owns a house in Carinthia, one of Austria’s most beautiful regions.

Read on to find out how he built Novomatic.

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Beginnings

Graf was born in Vienna in 1946 or 1947. He was raised in a small flat without running water. The only bathroom was shared with other inhabitants of the building.

Graf was raised by his parents until they opened a butchery when he was 8 years old. As a result, he moved in with his grandparents.

He spent his childhood watching the wealthy Viennese kids playing tennis out of his apartment’s window.

Besides that, Graf was full of energy. He liked to test the limits. Once on holidays in Yougoslavia, he swam so far out at sea that his grandparents wanted to call the police to find him.

When he entered high school, his dad forced him to learn butchery hoping his son would continue the business. Reluctant, Graf still completed the apprenticeship in record time and at 23 years old, became Austria’s youngest master butcher in his parents’ butchery.

Since business interested him more than meat, he focused on increasing sales and managed to quintuple the quota of sausages his parents were selling.

“I didn’t make more money for doing it, and my parents never said thank you”, he declared. He knew he wouldn’t do this forever.


First Venture

When he was twenty, Johann bought a car on credit then found out he could sell it in the newspaper for a profit.

He repeated that so many times that he eventually met an electronic retailer named Gerhard Brodnik.

Graf and Brodnik became good friends and in 1974 at age 27, Graf quit his butchery to found Brodnik & Graf with 14 000 euros.

The company imported US pinball machines and put them in cafes, pubs, and inns in Vienna.

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The early days of their venture were tough – most venues turned them down. Johann had no idea what he was doing but with time and perseverance, it worked.

The British slot machine company JPM got in touch with them and offered them a commission on each machine they sold in Austria.

In 1975, Micro invented the very first electronic pinball machines. Since other companies had not prepared for innovation, Graf hired a bunch of electronic engineers and became a terminal manufacturer.

This episode was a turning point for Johann Graf. He understood the importance to be at the edge of innovation and always be the first one to enter new markets.

Shortly after, Johann decided to expand the business and ventured into vending machines. It was a complete disaster. He then tried billiard tables, which worked better.

In 1980, Brodnik left the company. Graf, which wanted to go beyond pinball machines, created a new company he called Intermatic, then changed it to Novomatic after he spotted a Novotel in Vienna.

It was time to go big.

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You have to admit that the resemblance is striking.

Novomatic

By putting pinball machines in cafes, Johann had realized that normal people longed for a place to play other than Casinos Austria.

Casinos Austria was the state-owned company that had a monopoly on gambling in the country. Their casinos however, were fancy and expensive. They only suited the higher class and left no space for those that wanted to gamble in everyday clothes.

Johann wanted to disrupt that. The only problem was that the law forbade him from building casinos.

So he hired a constitutional expert, went to court, and got half of a victory. He could not build casinos, but he could install slot machines in cafes.

So he got to work. He created the brand Admiral and started manufacturing slot machines and other amusement arcades.

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In 1981, he adventured himself outside of Austria and built his first casino in Switzerland. Then he went to France, the Netherlands, and Germany that same year; South Africa in 1988; and the Eastern bloc when the Berlin wall fell in 1989.

In 1984, Novomatic developed the MPU 01, a chip that would later be used in machines like American Poker II, one of the most successful betting games ever and nicknamed “The Legend”.

This highly innovative piece of hardware has since been the platform onto which slot machines are built today.

Graf wanted to manufacture, own, operate, and sell every type of gambling machine that existed, be it a real one, or a digital one.

He developed video poker games, slots games, video lottery, electronic table games, and multi-player games.

He was innovating everywhere, both in his business and in the technology of casino management.

For example, Novomatic developed a biometric system that verified credit transfers, controlled access to the venues, and managed betting terminals to avoid fraud.

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In 1989, Graf rushed into the Eastern block as if his life depended on it.

By 1993, Novomatic operated in 30 countries.

They entered North America in 1995 and opened a 4-star hotel and casino in 1996 in Switzerland.

They entered the Italian market, but a change in the Italian law left Novomatic unable to operate their machines. Left with hundreds of them, they almost went bankrupt.

In 2005, Novomatic bought NSM Löwen Entertainment, a German casino company, for 1 euro (and 14 million of debt).

They sold all of the machines from NSM and furnished their casinos with the brand new Novoline and Novostar.

In 2006, they bought ALS group, a Russian computer graphics company. That same year, they offered casinos to rent out slot machines instead of buying them.

The purpose was to shield Novomatic from more severe regulations and eventual economic crises.

It worked: during the first half of 2008, 75% of the company’s profit came from sales, and 25% from the casino business only. The company was profitable despite the crisis and Johann paid himself a dividend of $20 million with which he bought Romanian real estate.

That same year, Novomatic invested $400 million, financed by direct investments and debt. They also celebrated the purchase of its 40th company in five years.

They entered the Chilean market in 2009 with the construction of Latam’s biggest casino and Jennifer Lopez sang on the opening day.

In 2010, Novomatic entered the online world with the purchase of Greentube, an online game editing company.

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Graf personally took care of the company’s expansion, flying around with his private jet to inspect the machines and look for new markets.

He also started securing his company’s future.

The issue with casino companies is that they don’t necessarily have a good reputation. As a result, Novomatic sponsored a series of causes, from research about gambling addiction and cure (true story) to the Vienna State Opera.

In 2017, Novomatic announced they were going public but renounced less than 24 hours before their IPO for fear that the market would negatively react to the increasingly tightening laws in their industry. It was their second cancellation in 6 years.

The pandemic was a tough hit for Novomatic which saw their venues closing. Johann’s net worth dived from $9.3 to $5.3 billion in April 2020.

It has since come back up to $8 billion (according to Bloomberg, $6.8 according to Forbes).

As Novomatic has now reached maturity in Europe, it is counting on the African, Australian, and American markets to drive growth.


Style

While Graf gave up the CEO seat a long time ago, he is still involved in the executive decisions of the company.

Back to when he was actively running Novomatic, he never showed up before 10h, never went home before midnight, and always arrived in a black chauffeured limousine.

No employees would see him. He’d spend time smoking cigars in his office or in meeting with his inner circle.

Since Novomatic doesn’t have the best of reputations, Graf didn’t hesitate to go all-in to retain the best people.

Novomatic’s employees enjoy higher-than-average salaries, company cars, private pensions, and food courts at the headquarters.

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Senior executives earn enough to build luxurious vacation homes while former CEO Harald Neumann is often seen behind a Porsche Cayenne or a Lamborghini Urus in Vienna.

These advantages have made Novomatic one of Austria’s best employers because Graf needed the best people.

In the weekend, he read gambling magazines and unloaded a ton of ideas to implement every Monday. As a result, executives had to delay the general meeting from Monday to Wednesday.


Controversies

Neither Novomatic nor Johann are without controversies.

He made a scandal in 2020 when he paid himself a dividend worth $50 million while simultaneously laying off 120 people.

Furthermore, it has been reported that half of Novomatic’s customers in Vienna were pathological gamblers, unable to control their addiction.

While the older generation of politicians used to leave Graf alone due to the good relations they had, the new generation did not continue this way.

They have been tightening the taxes and imposed further regulations. The company had to go look for new markets in Latin America and Africa but dealing there isn’t like dealing in Europe.

Novomatic casinos have been accused to be money-laundering machines for local crime-lords in Colombia, Peru, South Africa, and other African countries.

Gambling is a dangerous industry.

When the FBI came knocking on Novomatic’s door after it was accused of trafficking its machines, Novomatic had but no choice to open the safe and give out the names of the people they were trading with.

The head of sales once explained in an interview that he had an unfortunate encounter with the Polish mafia in the 1990s.

“We don’t operate in markets where it’s dangerous”, said Graf.

Novomatic left Moldova shortly after arriving, and they never stepped foot in Ukraine.

When Graf entered the Russian market in 1993, Novomatic developed the casino in cooperation with the city of Saint-Petersburg, ruled at the time by none other than Vladimir Putin.

“Novomatic never got any problem in Saint-Petersburg”, said Graf.

He understood that if he hoped to win, he had to get the tacit agreement from all stakeholders involved in the city.

The law is the law, but gambling is no regular industry. Johann Graf learned it the hard way.

In May 2019, a video featuring two politicians from the FPO (a political party in power at the time) showed them discussing with a woman pretending to be a Russian agent. The discussion concerned the exchange of positive news coverage of Russia against lucrative government contracts.

One of the protagonists declared at some point that Novomatic influenced politics by securing well-paid positions for elected officials once they left the public service.

As a result, several search warrants were issued against Johann Graf and other executives. Graf declared for the occasion that while he makes 5% of his revenue and pays all of his taxes in Austria, he gets 80% of the sh*t from the country.

To avoid a PR crisis, Novomatic sold the shares it owned in Casinos Austria after one member of the FPO had been appointed CFO without any prior experience.


Conclusion

Johann Graf is a character.

He collects vintage cars (mostly Jaguars) and owns 120.

His employees whether call him Deus ex Automatica (the God of Slot Machines) or professor due to his reputation to be unbeatable at knowing all the figures in all of the markets.

Always surrounded by people, his personal assistant answers the name of “Commander”.

Johann once declared that gambling was as dangerous as smoking and drinking, and that he would never live nor die in Las Vegas.

When asked what had made his company succeed, Graf answered “an immense enthusiasm for the technological possibilities (…) an unhappiness with the games on offer in the late seventies (…) the will to create new games and to be technologically innovative (…) improving the security of gaming (…) the commitment to be a pioneer (…), the courage to do new things and accepting the limits of the technologically feasible as a challenge rather than an obstacle (…) (and) an unrestricted commitment to excellence.

For more billionaire stories, head to auresnotes.com.

Sources:

Wikipedia

Forbes

Bloomberg

Idolnetworth

Gambletroll

Successstory

Trend.at

Meinhauswirdbestehen

Der Standard

Novomatic

Agigamingcolombia

Isa-guide

Wikipedia

Casino.org

Graphicly

Casino.org

Trend

Novomatic

igamingbusiness

thelawreviews.co.uk

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