Ontario is the “most competitive market in NA” and the reasons for that competitiveness are specific to the province and not seen across other U.S. jurisdictions.
Ontario’s first year as a fully regulated online sports betting and casino jurisdiction has, broadly speaking, been successful, while in some key aspects the province differs from what has been occurring in regulated states in the U.S.
Jurisdictions that regulate their online gambling industries always have their own specificities, but in the case of Ontario they are such that they impact key metrics such as market share and the operators’ ability to use many standard advertising levers they use in other regulated markets.
When it comes to the numbers, the Alcohol and Gaming Commission of Ontario’s iGaming Ontario agency praised the jurisdiction as “the most competitive market in continental North America”, with 40 licensed operators and more than 60 brands active in the market.
Ontario players staked nearly CA$36bn in total wagers since regulation came into force in April 2022, and operators recorded approximately CA$1.4bn in global gaming revenues, “placing the province among the top 5 igaming jurisdictions in North America”, iGaming Ontario said.
Commenting on the province’s first set of annual accounts, Attorney General Doug Downey said Ontario had succeeded in displacing “the pre-existing unregulated market” and made the province “a recognized leader internationally in this industry since its launch in April 2022. We are truly proud of this strong, responsible, competitive online gaming model”.
Incumbents hold share
In terms of business impacts, the high competition levels have led to an industry that is more fragmented than has been the case in the U.S. when it comes to market share.
Commenting on Ontario’s first year of regulation, the analysts at JMP said executives had “highlighted a competitive operating environment”, with the top U.S. operators BetMGM, FanDuel and Flutter only recording “10% to 20% gross gaming revenue market share” in Ontario.
“Our checks through Sensor Tower indicate Bet365, theScore and Flutter (or related brands) have the highest downloaded market share in Canada to date,” JMP noted, and “existing operators have made the Ontario launch one of the most difficult market entrances for the US-listed companies”.
Gray to white-listed
The visual above shows bet365 and Penn Entertainment/theScore Bet as the top two operators and Super Group/Betway-Spin as a top five brand in Ontario.
It is noteworthy for the fact that it contrasts so starkly with the U.S., where the top spots are (invariably) occupied by FanDuel, DraftKings, BetMGM, Caesars Interactive and, in some jurisdictions, Rush Street Interactive or Penn’s Barstool Sportsbook.
The reason for this Ontario leaderboard is the province’s previous life as a gray market, where the pre-regulated market leaders were largely the same as they are currently (while theScore Bet is benefiting from the reach theScore Media and Gaming gives it). They operated openly and with no fears of regulatory backlash or legal clampdown, building up a customer database that for the most part has remained loyal in the regulated setting.
When Ontario launched as a regulated market a year ago, this meant that the likes of bet365’s and theScore Bet’s betting products were ready and their marketing campaigns were sent to their thousands of existing customers, who, bar for an AGCO logo here and there, carried on betting without noticing much of a difference.
In many ways this mirrors what FanDuel and DraftKings have been doing for the past five years with their fantasy betting databases in the U.S. Whenever a state regulates, the two leading U.S. brands email their DFS player lists with promotions and freebets, which enables them to build up their market shares. AGCO was also highly accommodating, giving operators around seven months to migrate to a regulated system and this surely played a part in the province achieving channelisation rates of around 80%.
Marketing restrictions and variety
As noted by JMP, incumbent operators “have made the Ontario launch one of the most difficult market entrances for the US-listed companies”, but the Ontario state of play has also provided some much-needed variety in the North American digital sports betting market.
JMP added in their commentary on the province that the situation can be “sustainable, but in a rational spending environment” but “the cost of capital, spending levels, and low-returns will make it increasingly difficult for brands with no scale to justify competing against well-capitalized operators like bet365 or Flutter” in Ontario.
And while it’s likely that FanDuel will continue to increase its market share in the province (the group has publicly pledged to do so and has the product quality to achieve that aim), the fragmentation of Ontario’s market share shows that it is possible for other betting brands to rival with FanDuel and DraftKings, even if market specifics have enabled them to do so.
Another key difference with Ontario has been the province’s restrictions on operators’ ability to market freebets and promotional inducements. According to JMP, this has led to lower wagering levels from Ontarians and resulted in lower gross gaming revenues for operators when compared to states with regulated online betting and iCasino such as Pennsylvania, New Jersey or Michigan.
Those marketing restrictions are also having an impact on affiliates. FansUnite CEO Scott Burton recently commented that the regulations were preventing its activation division Betting Hero from maximizing opportunities in Ontario.
The restrictions also provide an interesting counterpoint to all the debate around the ubiquity of betting brands in the U.S. It shows that regulators have a free hand in how they regulate the sector, but also the difficulty in asking operators to rein in their advertising, promotional or otherwise.
Indeed, while it is the most effective way for them to recruit players, the ability to advertise openly and at scale on mainstream platforms is the whole point of operators going through a regulatory process as well as an integral component of the sports betting ecosystem. It will be interesting to see if, as has been suggested, AGCO agrees to loosen the marketing framework for operators in Ontario.