Last year, a total of 8 million Ontario adults played the lottery at least once, and 2.7 million visited Ontario gaming sites. Despite the popularity of lottery and gaming in Ontario, a number of factors are creating the need for change. Advances in technology, changes to shopping patterns, shifting demographics, and declining U.S. visits have all begun to threaten OLG’s long term sustainability. The current business model is not serving customers, or the province, as well as it could and without reform, OLG’s contribution of up to $2 billion, toward important public priorities, could be at risk.
Advances in Technology
- The internet has opened a significant market, for online gaming
- Ontarians currently spend at least $400 million a year on gambling websites unauthorized in Ontario, resulting in lost revenue for the province
- The lottery system is largely paper-based in an increasingly paper-free economy
- Lottery terminals are under-used; in addition to tickets, terminals could be used to sell phone cards, gift cards and iTunes cards
- The blue box terminals are becoming outdated and will soon need to be replaced
Changes to Shopping Patterns
- OLG’s current terminal technology limits where lottery tickets can be sold and does not fully reflect current customer shopping patterns
- The majority of Ontario adults under 45 frequent supermarkets, big box stores and large retail locations, but most lottery terminals are located in convenience stores
Changing Demographics
- OLG’s slot machine business is tied to racetrack sites, limiting options for new gaming locations, although racetracks are not necessarily near where customers live
- About 88 percent of land-based gaming revenue is from slot machines, which have limited appeal to adults under 45
- Demand for slot machine gaming in current locations is not expected to grow and will plateau in the coming years
Core lottery players buy a ticket at least once a week. Since 2000, there has been a significant decline in lottery participation by players under 45.
Declining U.S. Visits
- Over the past 10 years, the profits from gaming facilities close to the U.S. border have dropped from $800 million in 2001, to $100 million in 2011
- Gaming revenues are also flattening, due to competition from casinos in NY State, Detroit, Buffalo, Cleveland, North Michigan, and Chicago.
Contribution to the Province
- Overall lottery and gaming revenues have flatlined and revenues paid by OLG to the province are declining ($2.0 billion in 2010-2011, and an estimated $1.9 billion in 2011-2012)
- If no action is taken, OLG will need to spend $1 billion in public capital just to update its current offering
- Other provinces reduce their operational costs and improve efficiencies by allowing the private sector to operate sites (British Columbia, Atlantic Canada)
- Based on per capita gaming profit in other Canadian provinces, the people of Ontario do not receive a comparable benefit from lottery and gaming
- On average, the lottery and gaming industry returns about $220 to every resident of Canada, but in Ontario it is about $149 per capita