In a highly saturated, highly competitive online gaming market like Ontario’s, how can second movers and second-tier operators make a mark and find a foothold?
NorthStar Bets is no second mover, as the made-in-Ontario brand entered the province’s regulated market shortly after it launched in 2022. Still, the prospect of having to compete with internationally renowned operators and existing grey-market brands was certainly a challenge for CEO Michael Moskowitz and Co.
At the upcoming SBC Summit in Lisbon next month, Moskowitz will speak on a panel discussion addressing the question of whether there is room for new market entrants in Canada and the U.S.
Canadian Gaming Business sat down with Moskowitz to discuss Ontario, market saturation, appealing to Canadians, Alberta’s allure and more.
What is the most important thing for smaller brands or new entrants to consider before entering a saturated marketplace?
Moskowitz: NorthStar Bets was one of the original entrants into the regulated Ontario market in 2022. It is our home jurisdiction, and we have been committed since day one. We have not had to enter a well-established market, but we did experience being a relative start-up having to compete against major international operators.
Clearly, a smaller company needs a differentiated strategy to establish a foothold among the larger competitors. Something about your brand or product offering or marketing strategy needs to grab the attention and loyalty of local consumers. For example, NorthStar Bets has carved out a successful niche as a premium offering. A company providing a premium experience can earn the loyalty of its customers so that growth is sustained and the economics are more favourable. In our case, this is created through a premium brand position and a unique proprietary approach coupled with best-of-breed global technology partnerships and strong local knowledge.
A new entrant considering entering an established online betting market would need to consider whether there is still growth available, either from customers who are willing to switch away from their current provider, or new customers who have not yet signed on with anyone.
The market in Ontario is expected to be over $3 billion and in Canada over $6.5 billion and continues to grow at double-digit rates. There is significant upside in the Ontario and Canadian markets. There are many operators; however, we are focused on the 20% of the market that is focused on local interests. We expect to grow at a faster rate and take a disproportionate amount of the local segment based on our unique product and local approach.
Some North American open markets have as few as 7 operators while Ontario’s is in the 70s. Why so much variance?
Moskowitz: Ontario is a very attractive market, as both the largest province in Canada and the first to license online betting. It is not surprising to see all of the major players entering the province. By some measures, the Ontario online betting market ranks among the top five or six jurisdictions in North America. Anyone with hopes of becoming a serious competitor in Canada would need to establish a foothold here.
The AGCO, the regulator in Ontario, has taken the position that licenses should be granted to anyone who can meet the standards, so we’ve seen a large number of licenses granted. Over time, I would expect to see some rationalization of the number of operators in Ontario. Many have not yet demonstrated a viable path to profitability.
With Alberta planning to open up, do you think it will be able to sustain as many operators as Ontario has?
Moskowitz: NorthStar is watching Alberta very closely. As a Canadian-based operator, we consider the entire country to be our home market and we certainly want to grow as additional provinces are opened up. While we are still waiting to see the details of Alberta’s regulatory framework, we have every reason to believe it will be an attractive market for operators. The population is not as large as Ontario, but it is growing quickly, disposable incomes are higher, and people tend to spend more on games of chance.
If you’re already operating in Ontario, you can likely leverage some existing resources and infrastructure to expand into a second province. On the other hand, any operators whose experience in Ontario has not met their expectations will have to decide if it makes sense for them to continue to invest. My hunch is that there may be fewer operators in Alberta than we have in Ontario.
Ontario’s limitations on advertising make brand an important piece of the puzzle for an operator. How can operators stand out, and is it sustainable to aim for a smaller, niche market?
Moskowitz: Every company needs to develop its own brand strategy. Those who initially had big budgets for advertising and spokespeople may need to pivot to a different approach. That was never our approach. For NorthStar Bets, our strategy has not really changed. As a start-up, we knew we would not succeed as a mass brand, competing head-to-head on promotional dollars. We attracted many of our initial customers through media partnerships and unique content, and we have retained them through top-tier customer service. Our brand has become synonymous with a premium experience.
You could describe our strategy as a niche approach. Our customers tend to be higher-value players who enjoy personalized service and an effortless experience. As the market matures, that “niche” could become bigger and bigger.
NorthStar prides itself on being a homegrown Ontario operation. Why do you think local operators resonate with customers in the online gambling space?
Moskowitz: Many people feel good about supporting local companies, but that only takes you so far. We need to prove ourselves by delivering a positive experience every time customers use our platform. We do believe we have a deeper knowledge of the Canadian marketplace than the multi-nationals who operate here. One way we take advantage of that is through content. Our Sports Insights section includes original articles, analyses, betting strategies and statistics that help people make more informed betting decisions. And we naturally focus on the sports and the teams Canadians follow most passionately. It’s an important point of differentiation for NorthStar that has helped drive strong engagement among readers.
We are constantly reinventing ourselves to deliver super local and engaging offerings is just part of our innovative culture. How to do things incrementally better and fundamentally different while always raising the bar. As a strong local brand, you will see some very compelling ideas coming out of the diversified thinking that takes us away from the traditional approach.
