New kids on the block: International operators and the Ontario market

July 25, 2023 1:10 PM

New kids on the block: International operators and the Ontario market

Photo: CDC Gaming Reports
  • Mark Keast, CDC Gaming Reports
July 25, 2023 1:10 PM
  • Mark Keast, CDC Gaming Reports

As last week’s iGaming Ontario first-quarter market report indicated, currently, 46 operators are licensed and operating in the province with 71 gaming sites.

In quarter four, those numbers were 44 and 75, respectively.

Where will the ceiling, or market maturity, end up?

Ontario’s handle was $14 billion in Q1 (April 1 to June 30), up from $13.9 billion in Q4. Total gaming revenue came in at $545 million, up from $526 million the previous quarter.
Ontario has fast evolved into a Top 5 North American igaming market.

This leads us to international players and where they fit. On the one hand, Ontario represented a huge opportunity to large international operators. But with the size and scope of the market and the speed in which it has become established in (close to 16 months), it makes one wonder how international players were able to establish themselves among Canadian players in such a tight window and competitive environment. How did they mobilize their compliance in the new regulatory regime and ramp up their marketing and commercial teams?

At the Canadian Gaming Summit last month, a panel discussion went over those questions. It consisted of Paris Smith, advisor to and former CEO of Pinnacle Sports; William Woodhams, CEO of Fitzdares; Roxana Zaharia, head of Canada for Rhino Entertainment Group; Peter Czegledy, partner in Aird & Berlis LLP; and Marina Bogard, managing director for North America of Betsson Group.

What were the top lessons learned that future international operators coming into the market can learn from?

Woodhams talked about the early “gold-rush” mentality and that some operators are feeling the pain of over-investing initially, but those who take their time will be rewarded.

“To be fair, the first-mover advantage happened ten years ago with all the gray-market operators,” he said. “Like Bet365. They have the advantage over us. It’s been a slower build than everyone thought it would be. That land grab was a bit messy in the beginning.”

All the presenters applauded the AGCO, the provincial regulator, and iGaming Ontario, in their efforts to help figure out the market.

“[Ontario] is now the benchmark in how you take a market legal,” he said. “If I spent $50 million launching, I wouldn’t be here now. I’d be hiding from my board.”

Bogard said they had an advantage with the Betsafe brand having already been in the market before regulation, so their move into the regulated environment was smooth.

Smith said that in some markets, they’ve never spoken with the regulator, unlike in Ontario. Zaharia said they’d also planned on going with the “big-bang investment” at launch, but knowing what they know now, that would have been a huge mistake.

“It would have hurt us and it would have hurt our players,” she said, adding they’ve adopted more of a test-and-learn approach (going live with just 35 games, for example), as they enter the market, adapting to issues like geolocation and how they impact players.

“That meant getting into details to make sure the player experience is the one we want as opposed to sitting on the sideline and hoping it’s all going to work out,” she added.

Pressure points in Ontario included reporting data on a regular basis, different than in other jurisdictions, understanding what was required and delivery timelines, and having the right team to execute the delivery of reports. A different level of expertise was required for Ontario, which created an internal challenge. Cyber insurance, enormously expensive for operators, and finding the right approach there, was another major challenge.

Banking was another big issue.

“No one wanted to bank our sector,” he said. “But like cyber insurance, the market settles. Any nervousness about the sector has calmed.”

Geolocation technology also needs to improve.

“The stickiest customers play on their laptop, their phone, but at the moment, I don’t think people here gamble on their laptop or desktop, because of geolocation issues around that,” he said.

How is the Canadian customer different?

As a casino operator, flexibility in serving content according to province is a big objective, Zaharia said.
U.S. and Canadian players are very similar, with more opportunity for casino games.

“Our existential problem in Ontario is sports. There aren’t enough sports to bet on,” Woodhams said, pointing to short seasons and with margins for the main sports.

“A European punter will be betting on 36 races during the day in the UK, Ireland, or France. Soccer is happening all the time. Tennis being a top-five sport, in-play there is insane. But it’s not happening here yet, because it’s a newly regulated market. The opportunity here is to lessen the reliance on casino and get day-to-day sports up, because that will help the margin of the business as a whole.”

Everyone agreed on the importance of a good project management team. Bogard said they have weekly calls with the AGCO, some lasting just five minutes, to make sure they’re compliant. “This isn’t a market that you can just throw money at.”

The shift in advertising standards is another storyline to keep an eye on.

“Sometimes [the advertising] is just too much. You can’t sustain that level of spend,” Bogard added. “What are the other things you can do to get those players to stick with you?”

Education is key. Most operators want you to become a better player, so you feel more confident in what you are doing.

Zaharia said she hopes the regulator takes a second look at incentives, but “with guardrails in place.”