There’s been a lot of chatter in the news of late, particularly in Ontario, about the impact of online gaming on retail casinos.
Recent critiques of Ontario’s imminent shift to an open market warn of a catastrophic job and revenue loss — disastrous for provincial coffers and casino towns. As the April 4 launch inches closer, a cacophony of voices calls for a halt of the opening. Critics want the government to ensure jobs and revenues are safe before online casinos and sports betting goes live.
Much of the doom and gloom stemmed from a report commissioned by Great Canadian Gaming Corporation and leaked in January. The study, prepared by gambling consultancy HLT Advisory, paints a bleak picture of Ontario in the aftermath post-launch.
We hope to add depth to the picture with this piece.
Ontario expansion could add 1,295 jobs to the local economy
While researching this story, PlayCanada undertook an informal survey of currently available online gaming jobs. A scan of current openings in Canada reveals approximately 250 openings, close to 200 in Ontario.
Additionally, we reached out to casino and sportsbook operators, suppliers, businesses and organizations expected to play a role in Ontario to ask about related hiring.
While some enquiries went unanswered, many replied, on and off-the-record. The replies we did receive allowed us to make predictions for those who didn’t, based on available information.
When tallied, we found Ontario’s expansion could add 1,295 jobs to the local economy.
Our estimate could also be undercounting jobs from lesser-known entities and startups currently under the radar. In addition, we kept job count estimates conservative for operators known to have plans for Canada but were not responsive to enquiries. A few operators did not provide information because of the ongoing licensing process.
According to Benjie Levy in the Toronto Star, theScore already hired 200 people in Toronto. Levy is president and chief operating officer of the company (recently acquired by Penn National). The plan is to add another 200 to support their Ontario expansion, including a new 80,000 square-foot office on Toronto’s waterfront.
Levy also noted that online gambling had not cannibalized casino revenue in the four US states theScore Bet is live. Rather, it’s an “additive” to the commercial market. “We’re not seeing job losses, and we’re seeing the market in totality grow.”
That growth is an observation we dig into more later on.
Further, a company spokesperson had this to say about future growth:
“As a homegrown Toronto-based company, we are proud to be investing heavily right in our own backyard as we prepare for this exciting opportunity.”
Online gambling companies making big investment in Ontario
It’s true not all operators looking to serve Ontario are planning extensive in-market footprints. However, some like theScore, PointsBet Canada, BetRivers and Rivalry are.
Pat Eichner, PBC’s senior communications director, told PlayCanada PointsBet expects about 100 Canada-specific employees on deck a year from launch. PBC also has a new downtown Toronto office.
BetRivers, run by Rush Street Interactive, is also setting up shop in the heart of Toronto’s Financial District. According to RSI CEO Richard Schwartz, BetRivers currently has 40 employees in their local office. They also have nearly 20 open positions and intend to add 60 more in the following months.
And Rivalry, another homegrown operator, is ramping up hiring.
“Rivalry is founded and based in Toronto.,” said co-founder and CEO Steven Salz. “We have an office downtown with just over 25 staff in the city. With the upcoming Ontario launch, we will continue to hire consistently in the city to find the best talent to grow the market, add to our engineering, games, design, and sportsbook teams, across all roles, junior through senior.”
Others appear to be making more modest plays, building out small to mid-size teams ahead of launch. Examples of mid-size players include Bally’s and MaximBet, each with about nine current openings. On the micro side of things, we have Kindred/Unibet, now a team of three with boots on the ground in Ontario. It is safe to assume others may similarly test the water.
Sector playing to strengths in GTA
“We know that companies are hiring,” said Paul Burns of the Canadian Gaming Association. “And they’re locating here and setting up offices.”
Burns notes the moves by theScore and PointsBet and the arrival of BetRivers, FanDuel, and newest-kid-on-the-block, NorthStar Bets.
Burns credits the Greater Toronto Area’s depth of talent and competitive tax climate as reasons the region is appealing for companies looking to hire.
“Those are already policies that have been long in place,” Burns said. “So it’s just being able to take advantage of what’s already here. That’s sort of the last piece of the puzzle in terms of signalling to an industry; this is a good place to locate.”
And it’s not just the GTA with all the potential; the whole casino and sports betting industries are rich with possibility.
“It’s not only a very lucrative space but a lucrative space that stands to gain significantly within the next few months,” said Matt Thomson, co-founder and co-CEO of Placemaking 4G. P4G is a socially-conscious recruiting agency based in Halifax, Nova Scotia, that focuses on helping businesses hire for culture and the bottom line.
We’ve seen shades of that already, Thomson said, referencing evidence emerging from the US as states have legalized gambling.
Changing perceptions for the bettor
However, Thomson believes one thing that could further benefit hiring: “de-taboo-ifying” the gambling and sports betting industry.
“Not a lot of people understand it,” he said.” “There are preconceived associations… and people that don’t see themselves in the space.”
Thomson said that despite recruiting for companies with extremely high employee satisfaction, they sometimes get pushback from potential hires. Often when they reach out to individuals with a valued skillset, the only gambling association is negative. They say, ‘Oh, that’s gambling. I don’t want to work in gambling,” he added. And he doesn’t see that challenge going away until perceptions change.
Thinking outside the box: A way of thought and a hiring philosophy
Quarter4 is an artificial intelligence-driven sports analytics platform that delivers more than 2 million data points a day. This level of detailed data harnessed by clients can power anything — from unique individual betting content to real-time, data-driven storytelling.
According to Kelly Brooks, co-founder and CEO, the startup is experiencing recent, rapid growth, recently signing 10 new partners. As a result, the company, once four and now 16, expects to double in size over the next year.
“Our culture is progressive,” Brooks told PlayCanada. “So we need to hire people with a really entrepreneurial spirit, and not everybody has that. So if we post a job and get 300 resumes back, maybe three are suitable.”
Due to the nature of its business, Quarter4’s open positions often have deep technical needs. Filling them can be a challenge, said Brooks. And according to PointsBet’s Eichner, nearly 50% of forecasted hires will be technology-related. The rest will require skills like business intelligence, marketing and compliance. All are verticals that often benefit from a technical grasp of the industry.
Brooks expects the battle for talent to continue. In part, it’s why she insists one salve for future talent shortages is a commitment to hiring diversely, for individuals and experience.
“I think there’ll be a shortage of skills,” she said. “There’s already a shortage of technical talent.”
Brooks said the benefits of diverse hiring come from the different perspectives gained.
“This industry has been around for a long time,” Brooks added. “And I think in order for this industry to propel and gain momentum and respect, there needs to be commitment to diversified hiring.”
With all this talk of skill shortages, you might be wondering, ‘What about all the supposed job loss?’
What about it, indeed. Buckle up, folks; there’s drama incoming.
Great Canadian Gaming study drew media attention
OK, back to the market assessment that Great Canadian Gaming dropped in our laps like a hot potato this past January.
To recap: the study claimed that introducing an open online sports betting and casino market in Ontario would eat into land-based revenues. The cannibalization, it argued, would result in substantial job loss and lower gambling tax revenues for municipalities and the province.
Unsurprisingly, the findings drew headlines in mainstream and gaming media alike, particularly once local politicians and union reps got involved. But the doom-heavy proclamations and mainstream coverage have one thing in common with the study: they overlook or underestimate the size and stability of Ontario’s existing illegal (aka grey) market.
In Canada, we have accepted that we wager $4 billion annually on the offshore (grey) market, which means the operator is unlicensed in the local jurisdiction but regulated elsewhere. Further, the estimated black market (illicit and entirely unregulated) spend is more than twice that at $10 billion.
In contrast, the HLT study, based on data from H2 Gambling Capital, caps Canada’s entire grey market at $1.1 billion in 2019.
Although they adjusted for yearly increases ($1.2 billion in 2020 and $1.5b by the end of 2021), it is still far from CGA’s $4 billion. And it’s nowhere close to accounting for the estimated $10b that goes to black-market books.
Grey market operators, like bet365, opting for regulation
Importantly, land-based casinos in Ontario have long competed with more than the just existing regulated online market. In fact, most of their online competition already comes from illegal operators.
When Ontario’s newly regulated market opens in April, many grey market operators have indicated they will be making the switch. While there wasn’t much need to clean up their act before, the sheer size of the Ontario market offers a substantial incentive. Especially with the promise of government enforcement challenging illegal gaming sites. That’s certainly not something off-side operators have faced in Ontario before.
Underestimating the size of the illegal industry also means minimizing the market to be recaptured by newly regulated operators. In this, Bet365 is a perfect example. The global giant is one of the most recent operators to announce AGCO registration.
According to a 2021 report by PricewaterhouseCoopers, Bet365 is the top online sports betting and casino site in Canada based on web traffic. The data from SimilarWeb shows that Bet365 commanded 27.82% of sports betting traffic in Canada at the time of the study. It’s also Canada’s top online casino destination at 8.95%. That’s a substantial chunk of the market that would come into the fold with one license.
While the truth is likely more nuanced, that bodes well for the impact of Ontario’s wildly open market on the regulated industry.
GCGC cannibalization challenged by another study
Another issue with the GCGC report is whether online casinos cannibalize retail revenues is a question most consider closed. There’s no measurable proof that online casinos dilute land-based profits. The report, however, claims otherwise.
According to one industry insider, igaming does not cannibalize the land-based market, despite what GCGC and Apollo (their owner) claim. Market data, they said, has clearly set a precedent indicating the opposite: “their whole proposal was an attempt to stall a new market they weren’t ready for.”
Further, another report leaked to media last week seems to close the door on the cannibalization myth. PlayCanada tips its cap to The Parleh’s Steve McAllister for the share.
The study, prepared by GP Consulting for MGM Resorts International, found no clear evidence that online casinos divert revenue from their land-based counterparts. MGM and Entain share ownership of online giant BetMGM, expected in Ontario on day one.
GP Consulting study: The nays have it
According to the study, which also used data from H2, empirical studies of the relationship provide no clear conclusions.
“Most of our available evidence suggests there is a positive or insignificant relationship,” the study said. “To the extent that we have seen evidence to the contrary, it appears during periods of conflated pandemic-related data points that imply many alternative explanations.”
“Across all of our analyses,” reaffirmed the study, “we cannot support the notion that online gaming has a material impact on the retail casino market in the United States.”
Work published by PlayCanada earlier this year came to a similar conclusion. In the piece, writer Katarina Vojvodic compared brick-and-mortar casino revenue before and after the introduction of online in three states; New Jersey, Pennsylvania, and Michigan.
“While it’s true there were initial drops in retail casino revenue when internet gaming launched,” Vojvodic wrote, “the US examples had other factors at play. After those factors stabilized, the true nature of growth emerged.”
“Whether a tethering system is better for the overall economy is an open question, though it’s obviously better for the land-based halls,” she added. “But to say online casinos will keep substantial amounts of gamblers home is a theory unproven in the states.”
It seems safe to assume a similar truth on this side of the border.
Great Canadian statement: We support fair, competitive rules
While working on this piece, PlayCanada reached out to representatives for Great Canadian, Gateway and Fallsview casinos for their land-based viewpoint. As of publication, only Great Canadian had responded with a statement.
“Great Canadian supports fair, competitive gaming rules, whether for land-based facilities or online,” said Tony Rodio, CEO. The pandemic, he said, forced facilities to close for much of the last two years, putting thousands out of work. Now, he said, GCG is seeing guests return due to its best-in-class gaming experience, delivered responsibly and safely by hard-working Ontarians.
“While Great Canadian supports iGaming in principle and has every intention of participating in the market, we continue to engage with the provincial government and its various agencies regarding our concerns with the province’s iGaming model,” Rodio added. “We are committed to investing hundreds of millions in our facilities, generating billions in revenue for the provincial government, and employing thousands of Ontarians, and we will continue to advocate for policies that support that commitment.”
Regulators have expanded workforce
PlayCanada also attempted input from the government and regulators, but that proved a challenge. Those that did reply did not offer the level of detail requested.
The Alcohol and Gaming Commission of Ontario, in an email, reiterated the usual talking points: Ontario’s new igaming market is the first of its kind in the country. Implementation will allow players in Ontario to access top gaming sites with an assurance of integrity and protection.
“The AGCO’s regulatory framework will ensure, among other things, that player protections, game integrity, responsible gambling safeguards and anti-money laundering protections are in place for the benefit of Ontarians.”
Although AGCO declined to provide an internal hiring forecast or specifics around igaming related hires, the agency has expanded to support igaming.
“The AGCO has created some additional units within the agency to support the successful development and implementation of the new igaming regulatory framework,” the statement said.
“For example, the Technology Regulation and Compliance Branch was created to conduct regulatory assurance activities for this new sector; the iGaming Compliance Assurance Unit, which will exclusively focus on ensuring the ongoing compliance of igaming operators and suppliers, was also created. We also added staff in key areas, such as financial investigations, anti-money laundering and online gaming technology.”
Ministry of Finance argues against grey market, supports land-based online efforts
When it came to the impact of the new market on jobs in the province, however, they redirected us to the Ontario Ministry of Finance.
The MOF, in its reply, focused on the province’s existing grey market.
“As you might be aware,” said MOF spokesperson Scott Blodgett, “there has been unregulated online gaming activity in Ontario for many years.”
The new igaming market added Blodgett “is designed to reduce risks for participants and provide safeguards that are unavailable on unregulated, grey market websites, which may lack proper consumer protections or responsible gaming measures.”
Additionally, said Blodgett, “The Ontario government remains committed to working for workers – preserving jobs, supporting workers, and strengthening Ontario’s competitive position. Ontario’s new igaming framework will complement land-based gaming activity, not detract from it, by providing new opportunities for land-based gaming operators to diversify their offerings and cross-promote between online and land-based sites.”
Ontario, Blodgett added, is “continuing to assess the implications of igaming on land-based gaming and is committed to working with sectors on cross-promoting land-based and online gambling in a safe and socially responsible manner.”
Compass Rose commissioned economic impact analysis
It’s strange that no one, not the government, the regulator, or industry, thought to quantify the potential economic impacts of Ontario’s proposed igaming expansion.
It’s possible that the $4-to-$14 billion carrot provided enough temptation to bring the market to life. The lack of data is a missed opportunity to show the market’s full potential. And in light of the damage attributed to the leaked GCGC study, the oversight is particularly glaring.
As previously noted, mainstream media covered the study, for the most part reporting with little mention of its limitations. The ignorance of the existing grey market and blind acceptance of the cannibalization myth did little to stoke fear within the gambling industry. However, the doom and gloom prediction found an audience with local politicians and union reps, who further doubled down on the report’s contested claims.
In the end, we found one study that attempted to quantify the economic benefit. The previously mentioned 2021 PwC report examined the economics of the outcome of the legalization of single-event sports betting in Canada. The report, commissioned by public affairs consultancy, Compass Rose, was part of a response to the federal government during consideration of Bill C-218. The bill allowed the provinces to regulate single-event sports betting upon its passing.
Setting the stage
Before we get into its projections, it’s important to note two assumptions at the foundation of the report.
First, the study presumes each province moves to implement an open market, unbound by provincial monopolies and with competitive revenue sharing formula of 15% to 25% of gross gaming revenue.
While we know now the first assumption, at this time, is incorrect from a Canadian perspective, Ontario is introducing a fully open market. But, it’s the first province to open that door. So, although Canada-wide projections are potentially overblown, the Ontario-specific data reflects the potential realities of the expanded market. Especially considering the expected revenue share gives operators 20%, smack in the middle of PwC’s assumptions.
According to Michael Dobner, a partner at PwC and the national leader of its economics & policy practice, the report’s projections also assume advertising is permitted and restrictions around gaming offerings are minimal.
So far, other than restrictions disallowing the promotion of bonuses and inducements, these later assumptions ring true. “We have not gone into the issue of potential cannibalization,” said Dobner, commenting on the report’s rejection of the cannibalization argument.
“Our report is not analyzing that, so implicitly it assumes no cannibalization.” However, PwC notes that based on “what we have seen in European countries,” he added. “It does not appear that this was a big issue there.”
Breaking it down
As noted, due to the assumption of a country-wide open market, we decided to put aside the Canada-wide predictions (for now).
Fortunately, the report also breaks things down provincially. Given that Ontario opened the door to a wildly competitive market with limited restrictions and its (reportedly) attractive revenue share rate, we feel the Ontario jobs predictions accurately represent what’s possible.
According to the report, PwC expects the introduction of single-event sports betting and implementation of an open market in Ontario to lead to 1,433 jobs (full-time equivalent). The number is a combination of expected direct, indirect and induced employment impacts.
While not definitive, PwC’s result certainly casts ours as reasonable.
And, should other provinces follow Ontario’s lead and open additional markets, PwC’s other regional predictions would come into play. If all provinces open things up, PwC’s forecast climbs to 2,678 jobs, which surpasses the GCGC report’s loss projection (2,588). That’s something other provinces should pay attention to, particularly Quebec (374 jobs), British Columbia (415) and Alberta (340).
In any case, it’s important to note, too, that these are overwhelmingly well-paid, desirable positions. The boon could also prompt talent from elsewhere to move here (and contribute to the local economy). Not to mention, cascading impacts could lead to additional jobs in supporting or adjacent industries.
“I’ll tell anybody, there are a wide variety of career choices in the gaming industry,” said Burns. “Great jobs, frankly…from technology developments to customer support specialists to marketing and compliance work, there’s a wide variety of options. It’s an exciting time.”
Burning down the house
Undeniably, it is an exciting time for online gaming in Ontario.
It’s also true that land-based casinos have legitimate concerns, even if cannibalization by online casinos isn’t one of them.
“Ontario casino operators want access to online offerings,” Burns told PlayCanada. “They want to extend their brands beyond the four walls of their properties.”
One problem, said Burns, is an additional red tape burden. Currently, when land-based casinos introduce an online presence, they’ll report to two different masters, OLG (land-based) and iGO (online).
“We need a more streamlined, single reporting mechanism, added Burns. “And that can be done in time; there’s no question. And I think the Ontario government recognizes it. But I think that’s imperative to make sure that the casino sector can compete effectively.”
Other improvements like working towards single wallets and integrating casino rewards programs into online products will help ensure casinos thrive, Burns said.
Pandemic put added stress on brick-and-mortar gaming
The province, said Blodgett, recognizes COVID-19 had a significant impact on land-based gaming in Ontario, including casinos such as Caesars Windsor (pictured).
OLG entered into alternate financial agreements with casino providers to minimize the economic impact of closures. And, Ontario will continue to support jobs and businesses for a post-COVID world.
“The Province is working closely with the OLG on how single-event sports wagering will be rolled out at casinos,” added Blodgett.
Ontario Lottery and Gaming, for its part, said much the same via its director of external communications, Tony Bitoni:
“OLG has conduct and manage function over lottery and casinos in Ontario – not the iGaming market. As you know, casino service providers run the day-to-day operations of the facilities, so any decisions that are made that impact the gaming facilities have to be discussed with OLG.”
OLG and its providers are currently focused on reopening casinos without capacity restrictions, said Bitoni. That includes launching an ad campaign, “Where Fun has Fun,” to lure customers back to the floor.
Additionally, OLG is “actively engaged in planning for retail sportsbooks in Ontario and looks forward to bringing this exciting experience to sports fans.”
Connecting the dots
It’s plain to see Ontario’s potential employment impact is more complex than GCGC’s land-based report could show.
“If you look at the demographic question, first, you find that these are actually two very different groups of users,” said Kahlil Philander. Philander is an academic and lead author of the PG/MGM cannibalization study.
“From a sociological level, people who are regular casino goers often find some sort of sense of community within those environments,” he added. “So the idea that [online] is a direct or even a partial substitute for the online experience that’s typically at home, it’s not obvious that that’s the case…It just didn’t seem like there was any material impact from online gaming legalization on retail gaming, in all the markets that we studied.”
Just because claims of cannibalization are unrealistic doesn’t mean casino operators are without legitimate worry. But, perhaps land-based operators should focus on re-engaging customers at full capacity, introducing retail sports betting and casino-branded online gaming, and less on unproven cannibalization.
Self-preservation is what corporations do
It’s no surprise Great Canadian would attempt to shield its business from a perceived threat, especially after nearly two years of being flattened by the pandemic. In fact, they do run more brick-and-mortar casinos in Ontario than anyone. And, Apollo Global Management’s Apollo Funds subsidiary only bought Great Canadian Gaming Corp in September 2021.
Anyone who’s been through a significant acquisition knows it’s very involved and takes time. It’s not lost on us that this happened during the same period AGCO sought industry input. However, being late to the party is not a good reason to attempt to torpedo a whole industry.
As analyst (and colleague) Dustin Gouker initially told the Toronto Star, the report was late and “seems like crying over spilled milk.”
Onward and upward
The good news? Nature is healing.
According to US data, in 2021, in-person gambling lifted brick-and-mortar revenue to reach its best second quarter ever. And by the end of the year, commercial casinos made over $44 billion, surpassing the last record set in 2019.
The Canadian recoup is surely trailing behand due to longer-lasting restrictions. But, the record-setting also bodes well for our land-based casinos in the long run.
As for Ontario, the market opens on April 4.
“I think it will be a good day,” said Burns. “We’ll see the beginning of a regulated marketplace; I think it’s positive…For many that have been waiting, it’s a great day to get going. They made a commitment to the Ontario market early on; they’ve worked hard to get ready. And they want to get access.”
Competition, added Burns, will only ensure market success.
“That’s going to be the success of the market in Ontario,” he said. “A healthy competitive market that’s left to the expertise of the companies participating to decide who’s successful and who isn’t. Not policy A, policy B, government agency A or government agency B, deciding who wins and who loses…We want everybody to succeed.”