Growth of Ontario Lottery’s Online Sports Betting Revenue Slowed After Competitors Arrived, AG Says

For a time, OLG’s site was the only legal source of online sports betting in Ontario. Now, though, it is facing increasing competition due to a regulated iGaming market in the province.

Last Updated: Nov 30, 2022 4:29 PM ET Read Time: 3 min
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The growth of internet-gambling revenue has slowed at Ontario Lottery and Gaming Corp., and the arrival of more than 20 other online sports betting sites in the province may be the reason why. 

Ontario’s auditor general released her latest annual report on Wednesday, which included a chapter on government-owned Ontario Lottery and Gaming (OLG) and its various operations, such as its internet-gambling website. 

For a time, OLG’s site was the only legal source of online sports betting in Ontario. But, in April, Canada’s most populous province launched a regulated iGaming market that allows private-sector operators to take bets as well — and more than 30 have done so.  

One of the findings of Auditor General Bonnie Lysyk's latest report is that OLG's iGaming-related revenue growth has slowed with the arrival of private-sector operators. While OLG's iGaming revenue grew to $511 million in its 2021-2022 fiscal year (which ended March 31) from $139 million in 2019-2020, it looks like keeping up that pace will be a challenge. 

Crunching the numbers

The AG's report said OLG iGaming revenues, excluding those from internet-based lottery games, rose by 7% from $101 million from April to June 2022 to $108 million from July to September. 

Meanwhile, revenue from Ontario’s new iGaming market (which doesn’t include OLG, as the company conducts and manages its gambling activities on its own) shot up from $162 million in its first quarter to $267 million in its second, or an increase of 65%.

In other words, OLG's quarterly growth in iGaming revenue is far weaker than the growth that has happened in the private iGaming market. OLG's year-over-year growth was weaker too, as non-lottery iGaming revenue rose to $108 million for the government's second fiscal quarter of 2022 from $77 million for the same three months of 2021, or an increase of around 40%. 

“There would be a significant revenue advantage for the Province if OLG’s Internet gaming revenues could be maximized,” the AG’s report said, adding “the Province receives approximately 45% of OLG’s Internet gaming revenue, compared to only 5.7% of gaming revenue from play on private Internet platforms registered with iGaming Ontario.” 

The report goes on to say OLG is expecting to hold on to around 25% to 30% of the market for iGaming in Ontario and is forecasting its revenue will hit $530 million (not including lottery sales) by 2025-2026, or 56% more than non-lottery iGaming revenues for 2021-2022.

“Strategic initiatives on which OLG bases its forecasts include quicker releases of new products; table wagering with a live dealer dealing cards or spinning the roulette wheel; direct pay for iLottery; and other customer acquisition and retention activities,” the document states. “OLG is also currently working with British Columbia, Quebec and Alberta to offer live table games on its Internet platform.”

A few recommendations

The auditor general's office recommended that OLG develop a "comprehensive strategy" for introducing new products, keep exploring options for more real-time games such as poker in partnership with other provinces, and use its position as the provider of lottery products to sell players on iGaming. According to the report, 56% of OLG's iGaming players are only buying lottery tickets.

“This is an advantage that OLG could leverage to bring more Internet players to its Internet casinos and sports offerings,” the AG study said. “The increased provincially authorized online competition from private operators has made it important for OLG to ensure that its strategies are sound to achieve the growth that it has projected.”

OLG agreed in the report that it is important to keep competitive in the iGaming world, and said it has used this fiscal year to improve its online sportsbook, PROLINE+, among other things. 

It has done so, the government-owned company said, by adding more betting markets and options for players.

"OLG plans to expand its live dealer category and is currently exploring the implementation of new products such as peer to peer poker," the Crown agency added. “OLG will also seek to further expand by introducing its core lottery players to other online gaming products that are offered by OLG, and will include this ‘cross play’ metric as a key performance indicator for performance management purposes next fiscal year." 

Interesting timing

The release of Lysyk's report (which has much more to say about OLG and iGaming) comes the same week as a lawsuit that was filed against the provincial government in connection with its new internet-gambling market. While the legal application's claims have yet to be proven in court, it aims to dismantle the regulated market as currently constructed. 

Arguing it is the operators and not a government agency conducting and managing the iGaming in Ontario's new market, the Mohawk Council of Kahnawà:ke is challenging the legality of the regulatory framework with its lawsuit, which is something the auditor general herself warned could happen.

If successful, the council says that "Ontario will be forced to return to the drawing board and adopt an online lottery scheme that is consistent with the Criminal Code." 

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