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PlayOLG and the future of Provincial Online Casinos
It has been almost two years since the Ontario Lottery and Gaming Commission launched their online casino platform, PlayOLG.ca. The promises at the time were lofty. PlayOLG.ca would offer Ontario residents a safe and exciting platform to gamble online that would also return significant money to the taxpayers to the tune of $375 million over the first 5 years of operation. OLG was trying to tap into a grey online casino market that generates an estimated $400 to $500 million in revenue from some 500,000 Ontario players alone. The premise is a good one, keep gambling dollars in Ontario and keep gambling safe for all. As with all well laid, government plans, this one is also wrought with problems.
PlayOLG.ca has a few competitive barriers to becoming profitable. According to their most recent annual report, international online casinos “offer a broader portfolio of products and promotional offers”. PlayOLG.ca is currently restricted to IGT as their software provider but other online casinos are unrestricted in the amount of providers that they can use. Most online casinos use more than one provider, including larger names like Microgaming and Playtech, and thus can offer a wide range of gaming options, from online slots to table games like baccarat and roulette. The second part of the competitive landscape is promotional offers and welcome bonuses that these online casinos give to new players. They are unable to compete with either the financial clout of larger international brands or the smaller startups that operate with very little overhead.
The bigger problem with PlayOLG’s business model is something they do not mention. Experienced gamblers know that to have a good chance of winning you have to play at an online casino that offers good promotional terms and excellent Return to Player (RTP) percentages. The RTP is the amount of winnings returned to the player for how much they gamble. For online slots, the RTP for good slots is around 97%, meaning for $100 gambled, $97 is returned to the player as winnings giving the house a 3% house advantage. Alan Jones at CasinoCanuck.ca explains that no matter how safe a casino appears to be, if the RTP is low then you will never win any money and it is fairly well known in the industry that provincially run online casinos offer very low RTP’s. He further explains that PlayOLG is definitely considered safe, but no more so than many of the online casinos available to Canadians that are licensed in very reputable jurisdictions like the UK, Malta or even the Kahnawake Gaming Commission located in Quebec.
There have been numerous cases in the past demonstrating the massive cut that provincial gaming commissions try to take from their offerings. Pro-Line has seen its fair share of scandals in this regard but also the BCLC, Atlantic Lottery Corporation, and EspaceJeux in Quebec. EspaceJeux admitted to offering very low RTPs and changed their business model when players realized that they couldn’t win at the casino. To learn more about some of the health concerns related to gambling, check out CPOE.org.
EspaceJeux and Loto-Quebec have also realized that they face tough competition. This has led to the introduction of the anti-competitive, and possibly unconstitutional, Bill 74 which has passed legislation and prevents Quebecers from playing at international online casinos. This Bill is being challenged both from Internet Service Providers as well as the CRTC, as provinces do not have jurisdiction over Telecom related legislation. If the bill withstands the courts then it may be an option for Ontario as well, since it may be the only way to make the provincially run casinos profitable.
PlayOLG was supposed to bring in $375 million in profit over the first five years. Instead, PlayOLG.ca lost $3.9 million last year against a projected $22.6M profit in addition to the $36.6M they lost ramping up. Things are not looking good for PlayOLG.ca. Not only are they not competitive compared to international online casinos, they are also not making any money. As more players realize that they cannot win from provincially run online casinos this is only going to get harder. Anti-competitive legislation may be the only way for them to succeed in the future unless they start to offer more than just trustworthy brand recognition.
