14 minute read

US Market

CANADA: HOW ONTARIO IS BRINGING THE SPORTS BETTING INDUSTRY ‘INTO THE LIGHT’

AFTER 11 LONG YEARS OF WAITING, the passage of Bill C-218 in the Canadian Senate will pave the way for sportsbook operators to work with provincial partners across the Great White North - but what can we expect from the market in years to come?

In a roundtable discussion for SBC Leaders, Jordan Gnat, CEO of PlayMaker, Terry Debono, Partner at the Debono Group, and John Levy, CEO and Founder of theScore, assess the ways in which market entrants can persuade bettors to choose licensed operators over the offshore companies that they've grown accustomed to using.

Kicking off discussions, Gnat believes that operators must be given a competitive advantage over any unlicensed companies - with favourable regulations ensuring that players opt for the legal option.

He began: “Bettors have been betting online in Canada for decades. Bill C-218’s passage now moves this activity into the regulated market. To channel existing bettors into the regulated market, the regulations have to be such that the product offering and customer experience and marketing tools of the regulated operators is competitive with what they have had previously.

“Players are accustomed to an offering - if the regulated market means their experience is inferior, they will simply continue with the unregulated operator. However, in general, people will choose a legal versus an illegal option, everything being equal.

“For me, this is the single most important thing to get right in the roll out of the newly regulated market. This means allowing all bet types, marketing tools, liquidity for poker and exchanges, novelty bets, casino and bingo games. A full suite of products and services.”

For Levy, theScore will persuade

bettors to choose licensed operators by deploying the same strategy it already uses in the US market. He said: “Our basic underlying philosophy of how to approach sports betting is really to treat it as one aspect of why people love sports.

“It’s all about an integrated approach between the media - which we have with theScore app - and introducing sports betting in an infused fashion. It should be a combined experience, and to be able to effectively do that is at our core. People tend to label us as a digital sports media company, but first and foremost, we’re a technology company.

“Quite frankly, the success we’ve had with the app and with ScoreBet is because of our focus on the end user and creating this bespoke technology. Ultimately, our end goal has always been to own and control that platform.”

IF THE REGULATED MARKET MEANS THEIR EXPERIENCE IS INFERIOR, THEY WILL SIMPLY CONTINUE WITH THE UNREGULATED OPERATOR

Jordan Gnat, CEO of PlayMaker

John Levy, CEO and Founder of theScore

Ontario, a state which accounts for almost 40% of the Canadian population, has quickly taken the lead in the race to permit sports betting - having initially launched its igaming consultation last April.

Levy explained that while Ontario has been “out in front”, theScore team has been helping to move the legislative process along. “By the nature of what the Ontario government is promoting, it’s an open environment so to speak - they’re encouraging competition,” he continued.

“So even if grey market operators get their act together, they can apply for a licence and it’ll be a level playing field. We’re really looking forward to it. Ontario is our home turf, we were born and raised here. We had our TV network here. The brand is recognised in the US, but we’re Canadian at heart.”

For Debono, one of the key challenges for operators looking to enter the Ontario market comes in the form of the taxation system - something which is yet to be formalised by the regulatory authorities.

He noted: “Looking at Canada, there is a quest for knowledge which doesn’t seem to end. There’s a lot of conflicting agendas and circumstances, but one thing for certain is that there is a significant pent up demand for online gaming and sportsbooks.

“Ontario is taking the leadership in moving from a monopoly-focused regime to a licensed and “revenue share regime” (yes it’s a tax – but for legal reasons in Ontario we have to call it a revenue share). Until the actual revenue share model is finalised (one tax rate or two tiers of tax rates, or a tax rate based on the amount invested by the operator in the market), it will be challenging for operators to finalise their commitment to entering the Ontario Market.

“The next thing for operators to consider is the competition from the Ontario Lottery monopoly, which will have certain advantages because of

LOOKING AT CANADA, THERE IS A QUEST FOR KNOWLEDGE WHICH DOESN’T SEEM TO END THE FIRST BATTLEGROUND WILL BE THE JURISDICTION. ONTARIO WILL DETERMINE THE LEADER IN THE MARKET

their point of sale and established presence in the online gaming marketplace (and their ability to have shared liquidity with some of the other Canadian Provincial Lotteries).

“The chances are, however, that the OLG will be relatively slow to innovate in the online gaming industry in comparison to the private sector. The issue then becomes the high cost of customer acquisition and retention.”

As more provinces begin to embrace sports betting regulations, Gnat views jurisdiction, user experience and promotions as key battlegrounds.

He said: “The first battleground will be the jurisdiction. Ontario will determine the leader in the market. There will always be regional players, but Ontario will be key to building the foundation of a full Canadian market.

“The second will be the user experience (UX). International

operators have been in Canada for years and the existing bettors are used to it. The mass market, the casual bettors, those currently making parlay bets, are not used to it.

“We have seen in the US that a UX focused on the casual consumer can have a very meaningful impact. That will be a key differentiator. Lastly, promotions. That sounds simple - everyone has them - but those who bother to understand how Canadians are different from Americans will have an edge.” THIS INDUSTRY, WHICH HAS EXISTED FOR DECADES IN THE SHADOWS, WILL NOW COME INTO THE LIGHT IN A REGULATED AND SAFE WAY FOR PLAYERS TO ENJOY

ONLINE GAMING IN ONTARIO WILL SOON BE OPEN FOR BUSINESS. ON YOUR MARKS. GET SET. GO

Gnat pointed towards a number of lessons that Canada can learn from the US market, the first of which should be the introduction of a common regulatory framework.

“If the tax rate is too high, like Pennsylvania, the market will not be optimal and the grey market will thrive,” he continued. “Fourth, an open market with unlimited licences is the best solution for consumers. The US has created artificial markets with limited licences and market access agreements. An open market allows operators to offer better, more competitive pricing and higher value to players.”

The need for a common regulatory framework was a point echoed by Debono who warned of potentially

onerous restrictions being imposed at a later date. He said: “As it stands, we’re starting in Ontario with no hard rules, just recommendations. The issue with this is, if there are no restrictions from the beginning, when these measures are eventually introduced (and they will be), they’ll be draconian.”

Rounding off discussions, the trio was quizzed on what lies ahead for the Canadian market, with each stakeholder highlighting that the country has huge potential. Gnat said: “Canada has historically punched above its weight in internet activities, and online gambling is no exception. This will be a material market for operators globally. We need to remember that this market exists today, it is just not regulated, much the same as marijuana before legalisation. How big will it get? It will be measured in the billions.

“The impact and general economic activity will be measured in the tens of billions. Most importantly, this industry, that has existed for decades in the shadows, will now come into the light in a regulated and safe way for players to enjoy.”

For Levy, there is going to be considerable levels of competition in the Canadian market as more operators eye up the growing opportunities.

He added: “Everybody's going to come in and it's going to be very competitive. Obviously, I think we have a huge advantage up here, because of who we are, what we are and the relationship we have. But we're not resting on our laurels.

“At theScore, we’re focusing on building an amazing product and making sure that the consumer is at the centre of everything.”

Debono concluded: “The story of the Canadian gaming market is going to evolve for years to come, and there will be winners and losers. The winners are going to be those who can provide a better product to their customers, who can genuinely deal with responsible gaming issues, who can contribute to the local economy and who can also survive the exuberance of the first few years of high costs of customer acquisition.

“Online Gambling’s success in Canada will be dependent on how we evolve from a nascent to a mature market. Online Gaming in Ontario will soon be open for business. On your marks. Get set. Go!” •

He added: “Having a common regulatory framework across the country (or very close) allows for a better fan experience. Secondly, launch all products at the same time. Players are used to an offering today and it must be the same if the government wants to channel as much of the grey market as possible into the regulated market.”

Echoing Debono’s reference to the Canadian tax system, Gnat warned Canadian regulators to consider a fair taxation system - something which, if too high, can reduce channelisation rates.

IS THE US PRIMED AND READY FOR AN IGAMING GOLD RUSH?

US STATE POLICY MAKERS are increasingly cognisant of the potential to drive significant new revenue streams from igaming. But is it going to be the gold rush they hope for? And where will the product innovation come from?

The market potential for igaming in the US was the subject of debate at SBC’s recent CasinoBeats Summit. A panel of industry experts, gathered to speak as part of a packed agenda sponsored by Scientific Games, was tasked with answering the burning question: is the US primed for a new gold rush?

James Myles, Analyst at Eta Delta and moderator for the Microgamesponsored session, put the question to Adam Noble, Co-Founder and Chief Business Development Officer at Playstar Casino. “I’m not sure whether it’s primed for the next gold rush or whether we’re right in the middle of it,” he responded.

“You mentioned New Jersey, Pennsylvania, Michigan - the two latter markets have been live for a relatively short time in the online casino world and are two of the largest, or soon to be largest markets, globally. So it’s just a couple of states that we are talking about. By the time you add another 10, 15, 20 states to that equation, absolutely that will be a gold rush.”

On the potential for new incumbents, he added: “From budding operators, suppliers and affiliates and so forth that are looking to get across and take advantage of that gold rush there’s opportunity under every stone that you lift. From our perspective as an operator we see huge potential to come into that market.

“There are several big brands that are establishing positions in that market at the moment, but we believe that there’s opportunity to come in

I’M NOT SURE WHETHER IT’S PRIMED FOR THE NEXT GOLD RUSH OR WHETHER WE’RE RIGHT IN THE MIDDLE OF IT

James Myles Adam Noble

Fintan Costello Benjamin Truman

WHEREVER IT’S ‘LAND FIRST’, IT WILL FOLLOW ONLINE

and still find plenty of gold between those cracks. The answer to the question is a resounding yes.”

Fintan Costello, Managing Director of BonusFinder.com, was equally bullish about the prospects for a burgeoning US igaming sector. He noted: “The short answer is yes - it’s automatic growth as more and more states pass igaming laws. A tiny fraction of the US population has access to legal online casino. It’s just natural organic growth.”

He added: “I think where the stumbling blocks could be is things around how many licences are going to be issued in a particular state, what kind of restrictions are going to be put in place, what tax rates. It’s not a given.

“If you take the difference between West Virginia versus New Jersey in terms of how many licences are being issued for example, or Pennsylvania tax rates. But even with the tax rates - that had a lot of negative press - when you start looking at the numbers that are coming out of Pennsylvania it’s probably not as bad as people think. But I think ultimately over the long run, if we look at the next decade, absolutely.”

Benjamin Truman, Co-founder and CEO of Media Troopers, adopted a more cautionary tone, suggesting that the US is at a very early stage in the development of igaming.

“It’s going to take a while,” he said. “The states are looking at it. Every single state sees what’s going on in New Jersey and Pennsylvania, even a state like West Virginia with about only one million people has pretty strong numbers. It’s going to take a while though. Wherever it’s ‘land first’ it will follow online, and the US is very much ‘2000 UK’, it’s very young - it’s still long term to grow.

“It will take a while for this market

WE BELIEVE THAT THERE’S OPPORTUNITY TO COME IN AND STILL FIND PLENTY OF GOLD BETWEEN THOSE CRACKS

to mature and people like Adam have a great chance. Anybody who is small coming in with a good product will succeed in the US and that’s what we see now.”

When pushed on who will make money from igaming, Truman answered: “The people making money right now are the people that aren’t necessarily throwing money at the TV. You have your FanDuels and DraftKings which obviously led the way in New Jersey with market access very quickly. It’s the guys that are doing this very slow, very methodically - your Golden Nuggets. It’ll take a while. The US, remember, is a seven trillion (dollar) black market. It’s just slowly going white.”

As the unfolding sports betting market has clearly shown, operators and suppliers have been faced with a piecemeal approach to the US with legislation being passed on a stateby-state basis. Moderator Myles posed the question: will it be 50 completely different markets for the igaming sector?

Noble responded: “A lot of the conversation in Europe talks about the

I THINK AS EUROPEANS WE ARE UNDERESTIMATING THE US TECH AND VC ECOSYSTEM
I ACTUALLY SEE A LOT OF INNOVATION COMING FROM THE GRASSROOTS UP

US being the next gold rush, or is it the next gold rush primed and waiting to happen. Well yes it is collectively but then you’ve got to look at it as a bunch of different minds. They’re (states) all opening up at different times with different regulations, with different sizes, with different people.

“So yes, you view it as the whole, but really it’s Europe 20 years ago with a bunch of differences between each state that you’re going into - a bunch of differences in the regulation. And, you know, when you launch in those states, arguably a product that works for you in one state isn’t necessarily going to work for you in another. So you need to be cognisant of the differences right across every state. Just to say it’s the US is probably the wrong way to approach it.

The panel session also addressed

product innovation, with Costello telling delegates that he sees a more homegrown approach. “I think as Europeans we are underestimating the US tech and VC ecosystem which is completely different to what we’re used to over here (Europe).”

Referring to US startups - the “classic really smart guys working in a garage” - he noted: “I’ve spoken to eight of those companies so far this year. And each of them have got some really, really cool stuff. And they’re very quickly - through their funding - being put in touch with some of the big land-based operators.

“I actually see a lot of it (innovation) coming from the grassroots up, and my feeling for a lot of the more traditional brands - the suppliers that we’re familiar with - they’ll be too slow to innovate in an American way and provide a product that Americans actually want. My money is on a few guys we’ve never heard of doing amazing stuff.” •