Canada is the talk of the sports betting industry right now. Two separate bits of news in recent months have paved the way for a regulated market in the North.
First, the province of Ontario revealed plans to end its lottery-run monopoly on online gambling and allow private operators into the market. Then just days later, the Canadian government announced plans to end the federal ban on single-game sports betting.
The two moves combined could have a huge impact in Ontario. It means the forthcoming market can now include sports betting as well as iGaming.
What is the Ontario opportunity?
By population, Ontario would be the fifth-largest state in the US with 15 million citizens.
That puts it about 2.5 million people ahead of Illinois. Illinois took $305 million in bets in September alone, less than six months after the market launched.
“The potential numbers are staggering,” said Yaniv Spielberg, chief strategy officer of Toronto-based provider Bragg Gaming. “Even compared to mature markets like Pennsylvania and New Jersey, Ontario could be much greater.”
Lottery already a major factor
Spielberg points to the estimates of the province’s lottery operator OLG, which budgeted for $3.5 billion in revenues from lottery and digital gaming in FY20/21.
Of course incoming operators won’t have the lottery revenues but the sports and iGaming market could benefit from increased marketing and competition to make up that shortfall.
Toronto-based TheScore estimated a market potential in Ontario of $1.5 – 2.1 billion in annual gross gaming revenue. The company based its estimate on historical data from legal online gaming markets in the US and globally.
National opportunity for Canada sports betting?
Of course, the nationwide market potential is only if other provinces follow Ontario and do away with their own lottery monopolies – which is no slam dunk.
One source with experience in the Canadian market noted that Quebec was more likely to do the opposite of anything Ontario did rather than copy it. However, tax dollars can help overcome even regional rivalries.
“Once Ontario goes, others are going to go,” said John Levy, CEO of TheScore. “Every province is suffering. They’re all spending enormous amounts of money. And there’s just not much resistance to sports betting anymore. I’d be very surprised if we talk in a year or two and Ontario is an isolated case. Our PASPA moment is just around the corner.”
Ontario has been light with details of the market structure so far but the Doug Ford administration has a reputation for free market economics. To that end, stakeholders predict no tethering and no need to partner with local casinos for licenses.
It’s also expected that operators currently active in the Canadian gray market will be eligible for licensing. The market could be live by the second half of 2021, Levy said.
Winners and losers in Canada sports betting
So, who are the big winners from this market liberalization?
TheScore is an obvious candidate. Its share price more than doubled following the recent movements, although it has given back some of the gains this week.
Canaccord Genuity noted TheScore has 1.4 million users in Ontario alone, and could take a 10% market share in the province.
“We estimate that Ontario could add as much as $100 million in annual betting revenue to Score Media,” Canaccord wrote.
TheScore does indeed have a massive engaged user base, but it needs to show it can convert those users better than it has in the US. Many of those customers will already be betting with gray-market operators and need incentivizing to switch. But Levy is bullish.
“We’ve got the inside track,” he said. “This is something we’ve been working towards for all these years. Everyone knows there’s going to be competition up here just like in the States.
“But up here, it is them chasing us, not vice-versa.”
What about the DFS giants?
That brings us to FanDuel and DraftKings. They may not have the same marketing head-start they had in US sports betting. Comscore app usage data for Canada shows the two DFS firms with a fraction of the usage of media companies like TheScore, TSN and Sportsnet.
FanDuel and DraftKings of course have the marketing firepower to bridge that gap quickly. But it will be interesting to see how they fare on more-level footing.
Indeed, those Canadian sports media companies might be the other big winners from liberalization. Spielberg says he expects a similar rush of media/operator partnerships as the US saw.
“TSN, Rogers Sports, even the Toronto Star. These are all really interesting opportunities for providers like us,” Spielberg said. “They will need a technology partner to help them convert eyeballs into sports bettors.”
That’s good news for for the likes of GAN, Kambi, SBTech and SG Digital.
Finally, it’s worth mentioning operators who have historically had a presence in the Canadian grey market like PokerStars, GVC and bet365. These firms will likely apply for licensing under the new regime and stand to take good market share.