In those days, it must have seemed like OLG would always be about Wintario; but things change. Times and tastes change.
Like lottery and gaming jurisdictions across the country, OLG has evolved since those early days. As it has grown and changed, OLG has continued to make an important contribution to the revenues of the Ontario government – just under $2 billion a year for the past seven years. Today, OLG is still the Ontario government’s largest non-tax revenue source.
In order to maintain and protect that contribution in an increasingly competitive marketplace, OLG must look at ways to stay at the forefront of the industry and bring continued improvement to its product offering.
There is opportunity for growth. On average, Canada’s lottery and gaming corporations generate an average of $595 in revenue per adult in the province. In Ontario, however, that number is $459 per capita. There is potential to be more innovative, more efficient and more effective.
In order to achieve growth in this sector, in this province, OLG and the industry need to address some key challenges including:
1. Competition from new gaming options
The advent of the Internet and new digital gaming options has been a boon for unregulated off-shore operators. In Ontario alone, it is estimated some $400 million is spent annually with off-shore gaming sites. There are now over 2,000 such sites where Ontarians play every week.
The Internet is rapidly changing the marketplace by changing personal behaviour.
2.Competition from traditional gaming options
Casinos along the Canada-US border have been challenged by the higher Canadian dollar, issues related to crossing the border and a number of new gaming facilities in the United States. This has led to a sharp decline in the number of Americans entering Ontario.
The combined impact is difficult to overstate. A decade ago, OLG’s border casinos were returning a net profit of $800 million a year. Now, that profit is less than $100 million and falling.
3. Changing tastes in gaming preferences
In 2000, one in three adults in Ontario under the age of 45 regularly played the lottery. By 2015, it is estimated that number will be one in 14. It is a popular form of entertainment, but the customer base is shifting. One of the key challenges is that Ontario has a paper-based lottery system in an e-based world.
And that’s not all. Today, almost 90% of OLG’s casino and slot facility revenue is from slot machines. But slots have limited appeal to people under 45.
THE NEW OLG
OLG and its shareholder, the Ontario Government, have recognized the challenge and are moving forward. Working under the direction of a highly engaged Board of Directors, a streamlined management team has developed a plan for a “new OLG”. The particulars of the plan, approved by government, were announced publicly on March 12 at a news conference at Queens Park.
OLG will become more customer-focused. In any business, it’s the customer who tells you what he or she wants. OLG needs to be where customers want it to be, providing games they want to play. Sites need to be where customers are, and need to consider the current preferences and realities of the market.
OLG is also expanding the regulated private sector delivery of lottery and gaming. The lottery network has 10,000 points of sale. There are 23,000 slot machines and over 500 games tables in the 24 facilities in the province. In varying stages, all of these things will require updating. In an era where hospitals are built with public-private-partnerships, it makes sense to move capital investment away from government.
Currently, regulated private sector operators employ a majority (60%) of the people delivering gaming in Ontario. These employees work at places like Fallsview Casino Resort and Casino Niagara, Casino Rama and Caesars Windsor. In the future, their ranks will swell to include the 6,000 employees that, today, work directly for government through the OLG
Overall, the benefits of OLG modernization will be substantial: an additional $1.3 billion annually to the province, new private capital investment of some $3 billion, and over 6,000 new private sector jobs, either in gaming or in related spin-off industries (like hotels, restaurants and entertainment among others).
As a first step in the process, OLG recently released Requests for Information, or RFIs—a standard way of collecting information about the capabilities and interest of potential private- sector suppliers. It will help OLG understand the level of ability that exists out there as it relates to lottery and gaming operations.
OLG has proposed 29 potential Gaming Zones across the province. 24 of them have existing OLG gaming facilities, so the proposal includes the potential for five new facilities.
Gaming Zones are geographic areas where regulated private-sector providers will be allowed to operate a single gaming facility, subject to approvals. The zones are based on a business model that is designed to maximize revenue for the province. Factors such as proximity of a gaming location to other gaming facilities and residential areas were measured to determine the zones.
The five new zones, where no current facility exists, are in Bellville, Collingwood, Kenora, North Bay, and the Greater Toronto Area. New facilities could be groundbreaking in their approach to design and customer interface.
Inside gaming zones, each operator will be allowed to establish a new facility (for new zones), operate the current facility, or relocate existing facilities within the boundaries of the zone, subject to relevant approvals.
The RFI will be followed in due course by a Requests for Proposal (RFP). OLG will look for the best private sector partners, outline the specific terms of what their role would be and invite them to bid on a specific product or service. It is through this transparent and competitive process that the future of gaming and lotteries in Ontario will begin taking shape.
OPERATING MIND AND REGULATION
In the future, OLG will continue to conduct and manage all gaming and lotteries in the province, meeting and exceeding its statutory obligations under the Criminal Code. A leaner, more focused OLG will be responsible for market management, oversight, and important priorities like Responsible Gambling.
OLG will continue to lead the continent in its Responsible Gambling standards and programming, expanding its support for prevention, treatment and research and treatment. Ontario dedicates more than $50 million annually to the prevention, treatment, and research into problem gambling. That’s the highest funding level in North America.
OLG will continue to work positively and actively with its regulator, the Alcohol and Gaming Commission of Ontario (AGCO). The role of the AGCO is central to the modernization of lottery and gaming. Effective regulation is a key to upholding public confidence in gaming activities. The AGCO is also going through a transformation of its own, evolving from a traditional “one size fits all” approach to regulation to a risk- based model that targets outcomes against legislated standards.
The vision is clear: Regulated private sector enterprises provide services for existing and new gaming sites and certain aspects of the lottery business. OLG will continue to oversee and, in legal terms, conduct, and manage all gaming and lotteries in this province. It will bring greater attention to customer and market management. It will work in concert with a regulator, the AGCO, that’s guided by the principles of honesty, integrity, and social responsibility.
OLG needs to be where people want to go. OLG needs to provide the games they want to play. The opportunities for a renewed and well-regulated industry are substantial. OLG is taking steps to seize upon those opportunities for the good of the agency, the industry and, above all, the people of the Province of Ontario.