How do two of Ontario’s homegrown online gambling operators plan to thrive in one of the most competitive markets in North America?
For theScore Bet, succeeding in the Ontario online sports betting and casino market is about leveraging its long-term popularity as a trusted Canadian sports betting media outlet.
“theScore as a media platform, and even back to its earliest days in the television business, was built serving sports and odds to a large number that liked to bet on sports,” Benjie Levy, theScore’s president and COO, told PlayCanada. “So, we knew the demand was here. We knew the market was here. We knew we had a platform and a brand that resonated with that target audience.”
For Rivalry, it’s about being a leader in the niche segment of esports betting.
“Esports betting is core to our overarching strategy at Rivalry, representing approximately 90% of our sportsbook handle in 2022,” Rivalry CEO and co-founder Steven Salz told PlayCanada. “Providing an extensive esports offering to customers is a significant point of differentiation, but more broadly helps us reach and engage the next generation of sports bettors.
Today (April 4) is the one-year anniversary of the launch of the legal, regulated Ontario online gambling market.
We’ve already had an overview of the market in terms of some revenue numbers and from a group of gambling operators, some of their bigger betting customers and a key demographic of 20-something Toronto sports bettors. We also reported on a rise in calls to one of Ontario’s biggest gambling helplines.
But beyond their approaches to competing in the market, theScore and Rivalry are also unique due to their deep Ontario roots and their ability to create jobs in the province.
Together, theScore and Rivalry have created some 350 Ontario jobs
Being based in Ontario has led to significant job creation in the province at both companies. Levy said theScore has hired over 300 people in Ontario in the last year and another 100 working remotely from the US and elsewhere.
“Product development and engineering is one of our core strengths,” Levy said. “Being able to create not just our media platform, but the betting platform over the last four years has been critical to our success. We have a tremendous team.”
Rivalry is a smaller company, but Salz said it has more than 40 employees in Ontario, most working out of its headquarters in downtown Toronto.
“And we hired about a dozen people last year in the general [Toronto] area,” Salz said. “We will continue to proudly build the company out of the province, and the city of Toronto, into the foreseeable future.”
The past year has seen the biggest growth for both companies, but their history in Ontario extends back further than that.
theScore Bet’s roots go back to the 1970s in Ontario
What is now theScore was started by Levy’s father, John, in the 1970s as a small Hamilton, ON cable television outfit. It was sold in 1999 to Cogeco — one of Canada’s largest providers — for $162.5 million. John and his family also had and retained Sportscope, a cable television channel that continually scrolled sports scores in the era before the Internet was readily available to the public.
Sportscope evolved into Headline Sports and then theScore. In 1997, theScore began offering sports programming in competition with Canada’s big media players — TSN and Sportsnet.
In 2007, theScore launched its first app. It sold its TV assets to Sportsnet and created an independent mobile sports media platform five years later.
Its app is now the third most popular multi-sports app in North America, with between 4 and 5 million active users — two-thirds of which are in the US.
In 2019, the year after the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act, theScore launched theScore Bet. It was the first media company to launch a mobile sportsbook in North America. It eventually had sportsbooks in New Jersey, Colorado, Indiana and Iowa.
In August 2021, theScore was acquired by Penn National for some $2 billion. Last year, theScore Bet exited the US online gambling space to cede it to its partner at Penn, Barstool Sports. Yet, theScore Bet remains as a prominent Ontario online gambling operator.
Rivalry started in a basement in Toronto’s Chinatown district
Salz said Rivalry was founded in 2016 in a basement in Toronto’s Chinatown district.
“We are as hometown Ontario startup story as it gets. We have been hiring out of local coding schools, universities, and the general startup ecosystem since day one,” Salz said.
He said leaning heavily on esports betting is both his company’s biggest opportunity as a unique selling position and its biggest challenge.
“Our brand position within esports and Internet culture allows us to execute against a generational opportunity that traditional operators aren’t tapping into,” Salz said. “We’ve built a marketing strategy, product, and brand that speaks to Millennial and Gen Z consumers. As a result, we avoid pitfalls in the macro sports betting industry where operators are often chasing the same customer cohort, resulting in exorbitant acquisition costs and in many cases transient users that are only there for the latest bonus offer.”
Salz said Rivalry has proven there’s “significant value” in esports in “both in terms of betting volume and as an entry point to a demographic of Millennial and Gen Z consumers.” However, esports betting is a much “less mature market” requiring greater awareness.
“This is a challenge, but also an opportunity to realize more of the market, and early movers like Rivalry will have a significant advantage as esports betting grows,” Salz said.
Ontario is home to US, European and former grey market players
There’s no doubt Ontario is a challenging market.
Benjie said, at the start, the market was difficult to read, especially with Ontario welcoming illegal “grey market” operators over to the regulated market.
“You have the grey market guys and you have some of our competitors from the US who stuck to their well-developed playbook of very significant marketing and sponsorship spending and endorsements and promotions,” Benjie said. “Even though Ontario came out with relatively tight rules about advertising, a promotion, they still are here and they’re as robust as anywhere.”
Then, there are the European players that are prominent in the Ontario market. Those companies are, essentially, non-existent in the US. Benjie said it’s created a more robust online casino market in Ontario.
“You have a much richer history of online gaming in Europe than you do in the United States, particularly on the online casino side. So, one of the things you see here that you see less than the states is a much broader breadth of gaming suppliers and casino content suppliers,” Benjie said.
theScore’s thesis about media and betting interaction proving correct
A year after launching into what he calls one of the most competitive online gambling markets in North America, Benjie said he’s happy with theScore Bet’s performance.
“I would say we came out and we did what we thought we would do. We are a leader in the market. We’re performing very well across both sports and casino. It has sustained as the market has become more competitive, as more of the grey market guys have come in as the market has grown. And we’ve continued to perform as we would have expected to perform. And we continue to see that month-over-month growth in users and in revenue, and just an engagement with our players and fans.
“For us to be able to hold our own against not just our American counterparts, but the European competitors is very, very validating for us.
“And probably most importantly for us, and most validating, we’re seeing that media and betting interaction and engagement. That was always our thesis all along, which is that betting is a part of the sports fans experience. It doesn’t exist in isolation. Users are crossing across from the media app to the betting app and back and forth. It’s a virtuous cycle. And those are our highest value players, the ones who engage with us on both platforms. And that’s a significant majority of our players. They’re engaging with us on both platforms. And so, for us, that has, I think, been the most fulfilling element is kind of the validation of that thesis.”
What does the future look like?
Ontario has already lost one online operator in Coolbet, which exited Ontario precisely because the cost of competing was too high. Salz said that’s an indication that the market will decrease in the next few years, at least in terms of the number of operators.
“We believe Ontario will have fewer operators than it does today [two years from now],” Salz said. “For the mature sports betting and casino cohort, most market share will likely be concentrated at the top between a limited set of operators. This is the same track the US appears to be on.
“Outside of that, we do expect you will also have a subset of operators, such as Rivalry, that are taking more targeted approaches to specific demographic cohorts, or specific product categories like esports betting, that will find success on that basis as well.”
Benjie said the speed of change makes predictions difficult to make.
“We have this conversation internally: What does the digital media landscape look like in one or two or five years? It’s very, very difficult to say,” Benjie said. “Our focus and our approach is that if you put the player and the sports fan front and centre and that’s your focus and you continue to think about how you lead that player and how you serve that player, and you lead with your product… However the environment develops, you’re going to be a part of that success and then that’s what we do. That’s our focus.”
Both operators believe wild spending is a “race to the bottom”
Salz said he expects operators spending wildly to acquire customers will decrease because it’s not sustainable.
“The go-to strategy for operators has revolved around deploying significant capital to acquire customers through excessive promotions, but it’s becoming increasingly evident that this is a race to the bottom,” Salz said. “Apart from the very top percentile of bookmakers who can stomach the costs in the near-term, the majority of operators won’t last under this model.
“We expect that the sports betting industry will undergo a market correction where operators will need to diversify their strategies to create real consumer touch-points that don’t rely on player subsidy or linear spend to achieve growth.”
Benjie said the Alcohol and Gaming Commission of Ontario and its subsidiary, iGaming Ontario, created a “bold framework” that attempts to limit harm.
“What we’re talking about is creating an ecosystem that’s fun and friendly,” Benjie said. “Whether it’s by industry initiative or whether it’s by regulation, initiatives that go to player protection, player safety, those are always good conversations for us to have. I think Ontario was, to a great extent, very thoughtful about how they put this together.
“They had the benefit of looking back over a lot of history over the past three or four years in the United States, over a much longer period of that in the UK and Europe and elsewhere to help arrive at that framework. We love to have those conversations and you will see us at the forefront of those initiatives in terms of creating a product and a platform that is safe and fun for players to engage in.”
Will Ontario’s success be contagious in the rest of Canada?
As for whether other provinces will follow Ontario’s lead and establish open, online markets, Benjie said, “success begets success.” He believes the other provinces will take notice.
“They could do worse than going to school on what Ontario has done and looking to that as a model for modernizing the online gaming framework in their own jurisdictions,” Benjie said.
“What we do know today is the same grey market operators who are operating as part of the Ontario license framework continue to operate as grey market operators in these other jurisdictions. The percent of share that these provinces are generating from their online lottery lead platform is miniscule compared to what’s happening in the grey market.
“We see the tremendous growth in the market in Ontario, the tax dollars that are being generated in Ontario. It’s just a lost opportunity for these other provinces to not look at it in the same way and Ontario has done a lot of the heavy lifting for them.
“They don’t have to reinvent the wheel. Ontario was put three years of very, very hard work into creating this framework. And provinces like Alberta and British Columbia and Quebec, I think, could do very well to use that as a starting point and then also take into account… what regional and market nuances are appropriate.”
