Exclusive: $450m Ontario egaming contract open for bids

North America’s biggest egaming contract outside the US is open to bids and is estimated to be worth up to CA$75m in profit to the eventual supplier, a source close to the matter has told eGaming Review.

The Ontario Lottery and Gaming Corporation (OLG), that offers lottery products and operates casinos, slot parlours and bingo halls in the most populous province in Canada, today released a Request for Proposal (RFP) to find a supplier for its online gaming operation.The OLG last year announced its intention to offer an online option, noting Ontarians were spending an estimated CA$400m on offshore gaming sites.

OLG is initially seeking a gaming platform provider with casino games to allow it to launch with an online casino and lottery product. The successful bidder will supply a player account management system, casino games, financial processing and customer service as well as integrate into the OLG’s lottery system to allow players to buy lottery tickets online.

The RFP states that OLG’s best estimate of the current Ontario egaming market is that total annual revenues are between $425m and $450m. It expects this to grow substantially over the next five years, “driven by greater internet penetration, growing consumer trust in transacting online, increased acceptance of gaming by the Ontario population and improved acceptance of financial transactions relating to gaming by Canadian banks”.

The proposal adds that the lottery plans to launch online bingo, poker and sports betting in a second development phase as well as enhance its lottery product. A third development phase will see an expansion of casino products, launch of mobile gaming products and an integration of the online and offline CRM systems.

Under Canadian law, OLG must still retain the “control and manage” function of the online gambling operation but can work with a partner (or a consortium of partners) to deliver the online gambling platform.

The Canadian province of British Columbia launched North America’s first government-run online casino in July last year.
UK gaming software provider Openbet provides the platform for PlayNow.com operated by the British Columbia Lottery Corporation (BCLC) on the government’s behalf, allowing residents of the province to play games including blackjack, roulette and craps. Just weeks after launching, however, the site had to be taken down after a security breach led to 134 user accounts being compromised. The site re-opened in late August, but the shutdown cost BCLC CA$150,000 a day, or CA$5m in total lost revenues. The launch has been seen as successful with casino revenue understood to be nearly twice as high as predicted, however poker and online lottery sales are said to be poor.

In February last year PlayNow joined Loto-Québec on the GTECH G2-powered Canadian Poker Network, allowing residents of British Columbia and Québec to play poker against each other online.

Among those expected to respond to the RFP are OpenBet, GTech, Dragonfish, bwin.party, Intralot, Camelot and SciPlay (the joint venture between Scientific Games and Playtech). It is expected that existing suppliers to OLG’s land based business such as IGT and Bally would join consortiums to leverage their expertise of OLG’s existing business.

It is expected there will be fierce competition to win the OLG contract because of its status as the largest province in Canada. Any company who successfully wins and launches OLG’s online operation is likely to be in pole position to supply to state lotteries and other government controlled entities when the US online market regulates in the coming years. It is estimated that the successful vendor could make as much as $75m profit from the contract over the course of its lifetime.

All player data has to be stored in Ontario, which means that the successful supplier will have to have a physical presence in the province.

One of the biggest hurdles facing any vendor is the need to pass the vetting process of the Alcohol and Gaming Commission of Ontario (AGCO), the province’s gambling regulator. The RFP asks respondents to start the process of AGCO certification as quickly as possible to avoid any potential delays before launch.

The initial contract period for the successful vendor is thought to be five years. OLG will not confirm the term until entering into final contract negotiations with suppliers. The launch date for the online venture is also not mentioned in the RFP, although it is thought that it is likely to start at the end of 2012 with a full launch in the second or third quarter of 2013, based on previous statements by the OLG and delays in the publication of the RFP due to the Ontario election in October.

Potential respondents to the RFP need to log on to Merx (www.merx.com), the Canadian government procurement site, and download the RFP relating to OLG’s Internet Gaming Solution Service Provider.

Responses to the RFP must be returned to OLG by 3 February next year.