Ask six Ontario online casino, poker and sports betting operators their take on the province’s legal online gambling market and there’s one thing on which they agree: Ontario has one of the most competitive gaming markets on the continent.
April 4 marks the first anniversary of the province’s open market. One year in, there are 46 live operators in the province, offering more than 70 total gambling sites.
Full fiscal year numbers have not, yet, been released by iGaming Ontario. Expect those later in April. But, the numbers through the first three fiscal quarters, ending Dec. 31, 2022, show the industry surpassed $21.6 billion in total wagers in its first nine months. And, total gaming revenue was $886 million. Handle and revenue both grew 182% from the first quarter to the third.
While we wait on the financial picture from the full fiscal year, the operators PlayCanada interviewed gave their assessments about this truly unique gambling market.
Ontario’s ultra-competitive market features major US and European brands
Ontario has a relatively-low cost of entry and wide-open approach to attracting as many operators as possible. Given that, the regulated market has attracted an interesting mix running from major US and European brands to a number of smaller players.
“It’s a highly, highly competitive market. I would say the most competitive market for online gaming in North America with the number of operators,” said Benjie Levy, president and chief operating officer of theScore, which operates theScore Bet in Ontario.
Dale Hooper, general manager of FanDuel Canada added: “Ontario is a great market opportunity, and there are still new brands being licensed even now. We expect this market to remain very competitive for a long time.”
That level of competition has led to one of PointsBet’s biggest conundrums, said PB’s Canada CEO Scott Vanderwel.
“How you break through without blanketing consumers with gambling promotion has been a challenge,” Vanderwel said.
Amanda Brewer is the Canada country manager for the Kindred Group that operates Unibet in Ontario. She said, “Ontario is a highly unique market and regulatory environment, as the Alcohol and Gaming Commission of Ontario structured the standards to be outcomes based, which essentially means getting out of the way of how operators do business.
“The other thing to appreciate about Ontario is that there are brands here that you don’t see anywhere in the US, and they are largely coming with more European experience vs American.”
Part of the regulator’s unique framework is the AGCO’s decision to ban the advertisement of bonuses, inducements and credits.
“I think we’ve all calmed down from the initial reaction to the ban on public offerings of bonuses or inducements – the success of the market has demonstrated those aren’t necessary to attract customers,” Brewer said.
Biggest takeaways one year after launch
Steven Salz, the co-founder and CEO of Toronto-based esports betting company Rivalry said Ontario’s launch was similar to a typical launch in a US jurisdiction, “in terms of the way operators went extremely heavy upfront with bonus offers in order to grab market share. We were vocal leading into market launch that this was a likely outcome, and it certainly played out that way throughout the year.
“Our intention, as noted on some of our public earnings conference calls, was to exercise caution as a result of this, spend as little as we could to start testing product market fit, specifically in our niche of esports betting. And, as promotional efforts cooled off and we find deeper product market fit, ramp up [the] spend. This is where we find ourselves now, one year post launch.”
Brewer said she expected the online launch to be challenging. A year in, she said her two biggest takeaways about the market, from Unibet’s perspective, are:
- “It was smart to sit out the initial partnership rush as too much was over-valued.”
- “There was never a ‘tsunami’ of sports betting advertising as many mainstream media claimed. However, as an industry, we do have an opportunity going forward to work collaboratively with broadcasters and leagues to make sure responsible gambling stays front and centre.”
Operators find a lot to like about Ontario’s framework
Over at PointsBet, Vanderwel said his biggest takeaway from the first year operating in the province is, “The overall structural attractiveness of the Ontario model. While there are clear areas to refine and improve the approach, the regulatory framework produces an attractive structural market.”
Despite going up against large US companies spending liberally to try to acquire customers, Levy said Ontario-born theScore Bet is happy with its measured approach.
“We know that we can live in this market,” Levy said. “And I think we’re demonstrating that over the course of the first 12 months. We built and sustained a business both in online sports betting and also in online casino. We’re proving that owning your own tech stack and creating a product where you’re winning on product — you’re not winning on promotions and marketing — and you’re serving that user every day is a recipe for success. So, we couldn’t be more pleased with where we sit as we approach the first anniversary.”
For the legacy online brand at the Ontario Lottery and Gaming Corporation, the challenge was suddenly having to deal with more than 40 new competitors.
“When the provincial government opened the iGaming market in 2022, there was a lot of excitement, both from the players and from the companies wanting to enter this new regulated market,” said an OLG spokesperson. “We were pleased to see our customers stayed with OLG and, in fact, our digital gaming customer base has continued to grow. OLG is a trusted brand, delivering a variety of world-class entertainment options and is the only online sportsbook and online gaming site that delivers 100% of profits back to Ontario.”
Grey market blues
All of that competition also came with a host of uniquely Canadian challenges. Namely, being forced to go head-to-head with a number of operators that had long taken bets from Ontarians in the non-legal “grey market.”
“[FanDuel’s] biggest challenge was the established grey market, which made entering Ontario different from many other North American jurisdictions,” Hooper said. “The transition from an existing grey market meant there was already a very established customer base in Ontario, which is different from most other jurisdictions. Despite this, we have seen the popularity of our sportsbook and casino app grow consistently.”
Levy said unlike a lot of US jurisdictions, the grey market had been “thriving” in Ontario for “the better part of 20 years.” Further, he said Ontario has been, “the most challenging market to launch into because you’re not launching from a standing start, you’re launching against incumbent competitors who have had five, 10, 15 years head start, like the bet365s of the world… There was lots of talk about a penalty box and what do you do about the grey market? Our view was, ‘Open the market and let us compete…’ Even if we’re starting a little bit behind, we know that we can compete, we know that we can be successful.”
Still, Levy said it has been “very frustrating” competing with former grey market operators that had a head start in Ontario and are also still taking illegal grey market bets in the rest of Canada.
Other challenges Ontario operators have faced
How the AGCO chose to transition the grey market operators into the regulated market is just one of a number of early growing pains in Ontario.
Brewer said the April 4 2022 launch was somewhat chaotic for other reasons, as well.
“In the early months,” Brewer said, “it felt like the first wave of operators who launched on April 4 were tasked with dealing with all the issues: interpreting the inducement language for advertising — several of us got that wrong — managing affiliates who were still advertising unlicensed operators — Whac-A-Mole comes to mind — and combatting loopholes that customers found in the regulations.
“Lately, things have been much smoother. I’m looking forward to the latter part of this year when iGaming Ontario should hopefully launch the province-wide self-exclusion tool and the AML [anti-money laundering] cloud-based software, which will make a few pain points go away.”
Despite the new competition in the online gambling space, the OLG said competition, in general, isn’t new.
“Even before the open iGaming market, OLG was always competing for a share of discretionary entertainment spending,” said the OLG spokesperson. “OLG needs to ensure we are always offering a competitive product that meets our customers’ needs, in a socially responsible way.”
Legalizing Ontario online casinos has been key
There’s little doubt Ontario’s decision to legalize online casinos at the same time as sports betting and poker has allowed so many operators to continue to operate. After all, sports betting is a small-margin business. The real money is in online casinos.
“Unibet has been casino-first since April 4 and that has always been our strategy,” Brewer said. “Given how multi-cultural Ontario is, product differentiation – even in sports – is crucial. We’ve seen interest in cricket, esports, and FIFA matches which is different than in Pennsylvania, for example, and our live dealer and table games have done very well. Thanks to the acquisition of Relax Gaming, which Kindred completed in 2021, we will have the ability to offer unique casino products to our customers later this year, and I look forward to launching more casino content soon.”
Vanderwel said being able to offer a full portfolio of casino and sports betting, when coupled with the maturity of Ontario’s market, has been an important part of PointsBets success in the province to date.
Over at FanDuel, Hooper said, “We’ve also seen strong interest and growth for our casino offerings, which we expect to continue as people look for safe, exciting ways to play.
“Online casino is very important to FanDuel — it’s a great opportunity to provide safe and fun play to customers that aren’t sports bettors.”
What does Coolbet’s departure mean?
Not everyone has been successful, of course, in Ontario’s market. Coolbet recently announced it was exiting the market before April 4.
Asked what that move says about Ontario’s online gaming sector, the reaction was mixed.
“As with any new market, there’s an initial rush to enter. However, given the heavy compliance requirements, the marketing restrictions, and the competition, Ontario may be more than some operators can handle,” Brewer said. “We’re probably 12-18 months away from seeing the market settle down to the operators who will be here for years to come.
“Unfortunately, I don’t think Coolbet will be the last operator to bow out gracefully. This isn’t something I’m celebrating, as the hope is that Ontario can attract operators of different shapes and sizes, and not just be a replica of a US state.”
Levy said he, too, can’t speculate on another company’s business plans, “but it’s a very, very competitive market. Operating an online gaming platform, an online sports betting platform, an online casino is not an inexpensive proposition. You need to have some scale to be able to do it profitably. And you have more operators. You have 38 licensees here, whereas in a lot of US jurisdictions, it’s eight, 10, 12, 15 and maybe in the biggest ones you’re getting to 20 and in markets that are kind of comparable size to Ontario.
“So, it wasn’t surprising to me that you’re going to see some operators realize that perhaps the market is challenging, the market is tough, and they’re not seeing the return that they would need to see to be able to continue operations. But you’re starting to see that in the US to where operators are making decisions not to launch in certain new jurisdictions. Big operators and well-known brands are making those decisions.”
What the Ontario online gambling market will look like two years from now
Finally, we asked what operators thought the Ontario market will look like two years from now.
Vanderwel said he expects continued growth and expansion of the market. “We are hopeful that other provinces will be able to establish their own competitive, regulated, and safe framework,” he said. “This is a market that needs regulation across Canada to address the ‘grey’ activity that continues to exist outside Ontario’s provincial borders.”
Brewer said she doesn’t expect a noticeable difference in advertising/marketing or partnerships.
“With the province-wide self-exclusion system in place — which will add another safety net — we may see less churn, as currently customers can self-exclude and hop over to another operator,” she said. “We’ll get better at including betting content in sports programming, and the advertising will not seem so startling.
“From an operator perspective, I think we’ll be around 30. So, there will be more consolidation over the next few years. Lastly, as an industry, I hope we continue to invest in this market and attract people to work with us, and that more women will hold leadership roles, instead of reporting into them.”
Market size correction likely
Salz said he believes Ontario will have fewer operators in two years than it has today. “For the mature sports betting and casino cohort, most market share will likely be concentrated at the top between a limited set of operators,” he said. “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.”
Hooper said he believes the provincial market will still be competitive in two years. “We will see responsible gaming take a front seat in the market. And we will see innovation in sportsbook, casino, and novelty markets,” he said.
Levy said making a profit will be key. “I don’t know how quickly it happens, but we’re certainly moving into a new phase. People are starting to focus on the need to be able to operate profitably, at scale profitably. And that’s going to, I think, influence how people look at launching into new markets. And continuing to operate in certain markets.”
Finally, the OLG believes it will, “continue to be a leader in our offerings, player support, responsible gambling programs,” the spokesperson said. “And [it] will continue to deliver on our mandate to contribute 100% of our profits to the province to support people and communities across Ontario.”