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Ontario Sports Betting: Will new online bookies kill casinos?

·5 min read
theScore’s future headquarters at the Waterfront Innovation Centre, a complex on Toronto’s Sugar Beach, will house the company's Ontario sports betting operations.
theScore’s future headquarters at the Waterfront Innovation Centre, a complex on Toronto’s Sugar Beach, will house the company's Ontario sports betting operations.

With floor-to-ceiling windows overlooking Toronto's waterfront and ultra-high-speed internet powered by solar energy, Score Media and Gaming's (PENN) new 80,000-square-foot office lease is a shining example of the lofty expectations for a competitive online sports betting market in Ontario.

As of Monday, the Toronto-based media company, and its sportsbook peers, can compete with the government-owned Ontario Lottery and Gaming Corporation (OLG) for betting action in a market of nearly 15 million people.

It's a first in Canada that's surely being watched by other provinces and territories eager to wrestle millions of dollars in bets away from the black market operators that dominate the industry. Moreover, politicians have framed Monday's launch as an opportunity to boost key industries, including brick-and-mortar casinos looking to recover from a pandemic-led slump.

Not everyone is buying it. Great Canadian Gaming, the company with the largest share of Ontario's casino market, commissioned a report predicting land-based casinos will cut a quarter of their payrolls due to weaker revenue, resulting in some 2,500 lost jobs. (CBC News first reported on the document prepared by industry consulting firm HLT Advisory in January. Yahoo Finance Canada has since obtained a copy.)

Casinos that suffered during COVID are now going to blame this.Harley Redlick, gambling industry consultant

At the same time, data from the job search website Indeed shows a 94 per cent year-over-year uptick in job postings in Ontario related to sports betting and sports gambling in 2021.

Harley Redlick, an industry consultant who also teaches gambling law at York University's Osgoode Hall Law School, says measuring the employment impact of Ontario's decision to launch a competitive sports betting market is challenging.

"Will the service sector suffer in some of the casinos? Maybe. It's going to be hard to tell because you're not coming off a normal environment. I don't know many people who've set foot in an Ontario casino in the past two years," he said in an interview. "There's a lot going on that makes the analysis very, very difficult."

Ontario's online gambling market is expected to generate $989 million in gross revenue in its first year, hitting $1.86 billion by 2026, according to research firm Vixio GamblingCompliance.

Anticipation for Monday's launch has drawn interest from some of the biggest names in the global gambling industry, and spurred companies like Australia's PointsBet (PBH.AX) and FanDuel, owned by Ireland-based Flutter Entertainment (FLTR.L), to open offices in Toronto led by local corporate talent.

According to iGaming Ontario's (iGO) website on Monday, 13 operators are registered with the Alcohol and Gaming Commission of Ontario and executed an operating agreement with iGO. At least 30 have applied for their iGaming registration. FanDuel, PointsBet, theScore, and Coolbet were among the brands that took to Twitter early Monday to announce their official launch in the province.

Despite the online promotion, and recruitment of celebrity spokespeople, only 19 per cent of Canadians were aware that new forms of sports betting (wagering on individual events) had recently become legal, according to Deloitte Canada. Jeff Harris, leader of the firm's sport business advisory, says Canadian companies have already benefited from providing services like data analytics and risk management analysis to sportsbooks in U.S. states where they can legally operate.

"The way these organizations are positioning themselves would still very much offer the opportunities for very high-value jobs for people here in Ontario," he said in an interview. "I believe that momentum is sustainable."

Harris predicts job growth beyond betting companies, with opportunities spanning the IT, telecom, media and secure payment sectors. However, he also expects M&A activity among sportsbook operators, which can result in fewer jobs at the newly combined company. For brick-and-mortar casinos, Harris says Deloitte's data show there's an opportunity to create in-person sports betting experiences that benefit other types of games.

"A majority (of potential sports bettors) across the board have all indicated that they'd probably play other casino games," he said.

Redlick is less convinced that the proliferation of online sportsbooks in Ontario will meaningfully benefit casinos. But he says it is possible if operators are creative, for example, by offering a discount on food to those who place online bets.

He also notes that many casino operators have recently shut down or reduced the size of their poker rooms, which are popular with a younger smartphone-savvy demographic, in favour of more profitable slot machines that attract older gamblers.

"Casinos that suffered during COVID are now going to blame this," Redlick said. "I don't believe that if you bet on a DraftKings (DKNG) mobile site, all of a sudden you're going to want to go to a casino."

He says the launch of private sportsbooks clearly favours growth in white-collar jobs in swanky Toronto waterfront offices, over food and service gigs in casinos. However, he worries the global nature of the online gambling industry could eventually push many of those plush positions to places where it's cheaper to operate.

"Who wants to pay employees where they have to buy a million dollar knock-down house?" he asked, referring to Toronto's notoriously expensive real estate market.

"Some of the IT stuff, I guess a little bit of it has to be done in-jurisdiction. But everything else, I can't see lasting forever in any one place," he added. "If PointsBet or theScore or anybody else announces how many people they have in their Toronto office right now, I'm betting they will have less than that in two years, not more."

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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