The Innovation Group was thrilled to be back in Toronto this week for the Canadian Gaming Summit. From our perspective, the headline topic was how modernization efforts are resulting in stakeholder realignments in the diverse provincial gaming markets. The expanding regulated online gaming market and land-based M&A are deconstructing historical barriers between operators, Crown Corporations, First Nations, charitable gaming, and regulators. This is most evident in the structural shifts in Ontario, but as other provinces evolve, we are seeing similar conversations and envision analogous outcomes.

The open market model in Ontario has led to strong iGaming topline revenue for both OLG and private operators. And it has become clear that the modernization of Alberta’s iGaming market is no longer a question of if, but when. iGaming proponents cite the success of regulated operators channelizing players from the gray market (or, as one of our colleagues described it, ‘legal-adjacent’ market) into the regulated market and the tremendous topline growth experienced in Ontario.

Nonetheless, debate continues, and there are several advocates for the status quo, tightly-controlled Provincial gaming model. Arguments include the underwhelming bottom line of Ontario iGaming, though in our view, the outsized marketing reinvestment is a startup cost and unsustainable (as are 40+ operators). Ultimately, we expect to see consolidation and improved margins. But there is material concern as Canadian land-based gaming begins to see declines from the post-COVID peak, much like several U.S. jurisdictions, and iGaming is oft-cited as a contributing factor.

We’ve studied cannibalization extensively stateside, but Canada has a far more robust gray market making it difficult to view regulated iGaming as an entirely new form of gaming. In contrast to the substantial online operator spend on customer acquisition and loyalty, there is limited reinvestment happening in land-based gaming properties across Canada, other than by covenant, and even new properties are often being developed in less attractive and lower ROI destinations. Lacking significant new investment in amenities, this will lead over time to the perception of a stale land-based gaming market.

Finally, we would be remiss not to mention the priority stakeholders across the Canadian market continue to place on responsible gaming and their ongoing work, as discussed throughout the event, to find the appropriate balance between RG, revenue growth, and player development.

As our longtime Canadian practice continues to grow anew, with significant engagements around casino development, M&A, iGaming, sports, and strategic marketing, we were excited to kick off the show and welcome colleagues to Toronto with a successful reception alongside our partners at Fogler Rubinoff and Hall Hospitality Advisors. Bookending the week on a positive note, we departed the event as newly minted members of the Canadian Gaming Association.

As always, we’d love to continue the conversation with you about your operation or our outlook on the market. Contact Kevin Dennis to set up a meeting.