Ontario Lottery Steps Up Online Casino Efforts Amid Competition

Ontario’s government-owned lottery and gaming agency has answered the bell after an army of private-sector competitors were invited to do business in Canada’s most populous province.

The Auditor General of Ontario’s 2024 annual report was tabled on Tuesday at Queen’s Park, and a section of the report was a follow-up to a 2022 review of Ontario Lottery and Gaming Corp.’s operations.

That 2022 report dug into OLG’s casino, lottery, and Ontario sports betting and iGaming businesses. It noted the government-owned entity now faces “significant competition” from private operators after the launch of a competitive online gambling market in the province in April 2022.

The audit said the growth of OLG’s iGaming revenues had slowed with the arrival of the private-sector operators, and the watchdog office made several recommendations to the agency in the face of that competition. 

We hear you

According to the latest review, OLG took those recommendations and ran with them, including the development in 2023 of a “comprehensive strategy” for new iGaming products.

“As part of this strategy since our 2022 audit, OLG began introducing games every week with new features to drive engagement,” Tuesday’s follow-up report said. “Between February 1, 2024 and April 30, 2024, OLG introduced 80 new games or about six new games per week.”

The AG’s office also recommended that OLG keep looking for ways to offer more “real-time games,” such as poker and blackjack, alongside other provinces. The follow-up report said OLG set up a new team in June 2023 to look at potential new products and that live table games are offered using a studio shared with other provincial lotteries.

“As of June 2024, OLG is exploring options for new product offerings and whether to join a national network or keep the product within a specific region,” the follow-up added. “A potential implementation of the new option is expected by April 2025.”

Duly noted

The findings suggest OLG is making efforts to improve its iGaming business to compete with the 51 operators and 83 websites that have been authorized by Ontario to offer legal sports betting and online casino gambling in the province. Before April 2022, OLG was the only authorized source of iGaming in Ontario.

A competitive OLG is important for Ontario because the agency provides a greater percentage of its revenue to the province than private-sector operators. According to the auditor general, the province keeps around 45% of OLG’s iGaming revenue as profit, compared to 5.7% from private operators. 

The follow-up did not comment on revenue growth, but OLG reported record proceeds from its digital business for the year ended March 31, as those net winnings and lottery sales rose to $750 million from $669 million for the 2022-23 fiscal year. OLG’s iGaming business also dates back to 2015, so there are plenty of older customers still using the platform that may appreciate the upgrades. 

The hearing for Ontario’s court reference regarding DFS/poker/iGaming/pooled liquidity — which asked if it’s legal for provincial bettors to play with users outside Canada — has wrapped up. The five-judge panel for the Court of Appeal reserved their decision for a later date.

— Geoff Zochodne (@GeoffZochodne) November 28, 2024

A spokesperson for OLG told Covers on Tuesday that the company’s “live” games on OLG.ca are powered by Evolution AB and include blackjack, roulette, baccarat, and game shows. Evolution has a studio near Vancouver, and the games broadcast from there are shared with the British Columbia Lottery Corp. and Loto-Québec.

The mention of “a national network” that OLG may join presents another interesting possibility. The company’s spokesperson told Covers that the network being considered is the “Canadian Poker Network” operated by IGT that is likewise shared with B.C. and Quebec.

“We hope to have an announcement in the spring,” OLG’s Tony Bitonti said in an email. “OLG is always exploring new and engaging products and games for our customers to ensure OLG.ca remains popular and highly competitive in Ontario’s crowded open gaming market.”

Ontario’s private-sector operators can only serve users physically present in the province for their games, a rule that has limited the pool of poker players and crushed paid daily fantasy contests. 

However, OLG, if it can tap into liquidity from other provinces, could have larger poker games and tournaments. 

While Ontario is asking the provincial Court of Appeal if it can expand its player pool for private iGaming operators outside of Canada, OLG would appear to have the inside track for inside Canada, at least for now.

Needs improvement

Still, the auditor general’s report noted several iGaming-related recommendations from 2022 that were no longer applicable, such as integrating lottery players into OLG’s other iGaming offerings and cross-selling lottery players on iGaming and sports betting.

“As always, OLG thanks the Auditor General for the observations contained in the 2024 Annual Report,” Bitonti said. “OLG values third-party reviews of our business and has provided information as requested for the AG’s follow up review. We would refer you to the AG’s office for comment on recommendations the AG has determined are no longer applicable.”

Bitonti added that OLG products are only offered to adults, who must be 18 or older to buy lottery tickets and 19 or older to play in-person or online casino games and sports betting. 

The auditor general also reviewed slot payouts at brick-and-mortar casinos from January 2017 to August 2022 and found they paid out, on average, around 91%. Meanwhile, OLG’s iGaming slots paid an average of around 95% from January 2021 to August 2022. 

While the AG’s office recommended OLG publicly disclose game payout data by casino and for its iGaming site – arguing it would provide more accountability and transparency – casino operators were reluctant. 

“The casino operators were not in favour of publicly disclosing game payout data claiming that it would put them at a competitive disadvantage with online gaming and each other,” Tuesday’s follow-up said.

Brick-and-mortar breakthroughs

The audits of OLG dig into the company’s bigger businesses as well, namely, its lottery retail and land-based gaming arms. Those two segments provided more than $8.5 billion in proceeds to OLG in its 2023-24 fiscal year, far more than online sports betting and internet slots.

In 2022, the auditor general’s office found OLG accepted “significantly reduced revenue commitments” from some casino operators even though contracts were already signed. 

The AG recommended that OLG avoid any further reductions to revenue or capital spending promises and potentially even look for new operators if the current ones can’t deliver on their commitments.

Progress has been made there, Tuesday’s follow-up noted, including an updated “Business Case Template” that OLG will use to weigh proposals from private-sector casino operators.

“OLG informed us that in the future, if casino operators fail to meet the revenue and capital investment commitments outlined in their existing contracts, it will evaluate whether any of them qualify for re-procurement,” the report stated. “According to a written statement from OLG, since updating the Business Case Template in 2023, there have been no instances of casino operators requesting reductions in their minimum gaming revenue commitments.”

However, the AG said there were other recommendations on which little or no progress has been made, such as commitments on capital spending that could be tacked on to existing agreements with casino operators.

OLG said it lacks the “unilateral rights” to change existing contracts without the approval of casino operators as well.

“In August 2022, OLG did include a capital investment plan as an amendment to its existing agreements with one casino operator,” Tuesday’s report said. “Going forward, OLG told us that it plans to incorporate capital commitments in any new agreements with casino operators.”

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