Canadian Gaming Business Magazine

Canada's Premier Gaming Industry Magazine

Vol. 11 No. 3

www.CanadianGamingBusiness.com

Fall 2016

THE NEW CANADIAN

CASINO PM 40063056

The Challenge of Change CanadianGamingSummit.com June 19-21, 2017 Vancouver, B.C.

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Fall 2016 Publisher

Volume 11 Number 3 Chuck Nervick chuckn@mediaedge.ca 416.512.8186 ext. 227

Editor Sean Moon seanm@mediaedge.ca

contents 18

www.CanadianGamingBusiness.com

42

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5

EDITOR’S NOTE

6

MESSAGE FROM THE CGA

8

COVER STORY

Not Your Grandpa’s Casino – Appealing to different audiences and overcoming barriers

18 INDUSTRY SPOTLIGHT

President Kevin Brown

President & CEO Bill Rutsey

kevinb@mediaedge.ca wrutsey@canadiangaming.ca

Senior Vice President Chuck Nervick

Vice President, Public Affairs Paul Burns

chuckn@mediaedge.ca pburns@canadiangaming.ca

Canadian Gaming Business is published four times a year as a joint venture between MediaEdge Communications and The Canadian Gaming Association To advertise: For information on CGB’s print or digital advertising opportunities: Chuck Nervick 416-512-8186 ext. 227 chuckn@mediaedge.ca

Growing Through Change — Horse Racing in Canada: Innovating for the future

25 GAMING REGULATION

A Modest Proposal – Gaming and the Canadian Criminal Code

30 INDUSTRY Q&A

Engaging the Community – The importance of connecting with the local community

34 EXECUTIVE Q&A

Tom Mungham, Chief Operating Officer, AGCO

36 CORPORATE PROFILE

Innova Gaming Group — Growing world class companies

38 MARKETING

Digital Stress Test — Is your website meeting customer expectations?

Copyright 2016 Canada Post Canadian Publications Mail Publications Mail Agreement No. 40063056 ISSN 1911-2378

41 REGULATORY COMPLIANCE

Guest editorials or columns do not necessarily reflect the opinion of Canadian Gaming Business magazine's advisory board or staff. No part of this issue may be reproduced by any mechanical, photographic or electronic process without written permission by the publisher. Subscription rates: Canada $40* 1 yr, $70* 2 yrs. USA $65 yr, $120* 2 yrs. International $90* 1 yr, $160* 2 yrs. *Plus applicable taxes.

Postmaster send address changes to: Canadian Gaming Business Magazine 5255 Yonge Street Suite 1000, Toronto, Ontario M2N 6P4

Official Publication of the Canadian Gaming Summit

Good Governance – Good business or just a catch-phrase?

42 GAMING INNOVATION

Gaming with Skill – The great gamble for next generation gaming

44 2016 CANADIAN GAMING SUMMIT HIGHLIGHTS 46 FINANCE

The Compliance Challenge – AML compliance in an era of privatized gaming

Canadian Gaming Business | 3

editor'snote

Modernizing for the times AS THE GAMING INDUSTRY continues to evolve in the face of shifting demographics, technological advancements, regulatory conundrums and an ever-increasing battle for the consumer entertainment dollar, casinos, lotteries, race tracks and industry suppliers (among other gaming organizations) are challenged more than ever to stay on top of changing trends. As witnessed at the Canadian Gaming Summit earlier this summer, there is plenty to talk about when it comes to ensuring gaming facilities, products and services continue to innovate and modernize in light of such important changes.

In this issue of Canadian Gaming Business, our team of editorial contributors has gone to great lengths to shed light on several of these topics. It all starts with our cover story from the team at Ipsos, who examine how Canada’s casinos need to modernize and evolve in order to accommodate the Millennial demographic as well as attract new players and guests who may never have previously set foot in a casino. Relying on its trademark in-depth analysis and data gathered earlier this year, the Ipsos authors take a deep dive into many of the issues facing casinos in this country, including answering questions such as what barriers are keeping non-players from visiting casinos, the different approaches that can be taken to attract more Millennials and innovations to gaming amenities and equipment that could attract new players.

Elsewhere in the following pages you will find insights and analysis on many of the other issues affecting the industry today — from a cross-country look at the state of horse racing and its ability to adapt to changing times to a modest proposal of how the Criminal Code of Canada should be amended to more accurately reflect the current behaviour and attitudes of Canadians when it comes to gaming. We also have our regular superb lineup of columns to discuss the myriad subjects on the mind of gaming industry professionals, whether it is the importance of good governance in regulatory compliance, how to ensure your company website is meeting the expectations of your customers or the many ways that gaming organizations are connecting with their local communities.

Of course, be sure to check out the latest edition of Canadian Gaming Lawyer from Editor Michael Lipton and his team of gaming law experts, also in this issue. As always, we’d love to hear from you if you have any story ideas, suggestions or comments. Feel free to contact myself at seanm@mediaedge.ca or CGB’s Publisher Chuck Nervick at chuckn@ mediaedge.ca for information about advertising and event sponsorship.

Until next time, cheers and enjoy the issue.

Sean Moon Managing Editor, Canadian Gaming Business

Canadian Gaming Business | 5

messagefromtheCGA

The Summit Continues to Evolve

BY BILL RUTSEY, PRESIDENT AND CEO OF THE CANADIAN GAMING ASSOCIATION

THE CANADIAN GAMING SUMMIT is a conference and exhibition developed by the industry for the industry.

Summit development has been driven from the beginning by dialogue with delegates, sponsors and exhibitors, many of which are CGA members, about what we can do better to deliver the highest quality event for the best value.

Our intention has always been to improve the depth and quality of the information and education experience offered while allowing delegates as many opportunities as possible to exchange ideas and information with their peers attending from other jurisdictions.

Coming from this perspective, the 2016 Summit in Gatineau/Ottawa was a transition event, ref lecting the changing nature of industry conferences and tradeshows worldw ide as well as circumst ances unique to the Canadian gaming model, including: • Technology and customer awareness of and familiarity with products and services is changing how exhibitors engage and interact with their customers; • F r e q u e n t t o u c h p o i n t s e x i s t b e t w e e n l a r g e r manufacturer/suppliers of electronic gaming devices and systems and their crown agency customers to demonstrate products and services; • Crow n agencies want conferences w ith a g reater emphasis on educational programs, including ways to innovate and unique research.

Our plan for 2016 was to provide significantly enhanced information and education content, more time and f lexibility for the delegates to attend educational sessions and various net work ing events and pavilions on the trade f loor, and increased opportunities for exhibitors to interact with their customers.

I must confess that our 2016 results were mi xed.

A lt hou g h t he i n for m at ion a nd educ at ion cont ent quality was very high and well received, our trade f loor

6 | Fall 2016

communications and execution were not up to our usual standards, which caused confusion and misperceptions for both delegates and exhibitors.

And our moving the Industry Awards to the Opening Reception didn’t work and will not be repeated. The very worthy award winners were not shown the respect they deserved, and for this I personally apologize to each one of them.

Congratulations to First Nation Canadian Gaming Award winners Steve Chase (Leadership), Lindsay Sault (Community Service), Judith Hubner (Employee of the Year), and Arnold Block (Lifetime Achievement), and to Jon Kelly for Industry Leadership and Outstanding Contribution. You are all very deserving of the honours your colleagues voted you.

Planning has already started for 2017 to improve on what we learned this year. Content committees have been struck with the goal of determining a unifying theme and identifying the topics and presenters such that the education and information is second to none. Dialogue has begun with exhibitors and manufacturers to ensure the integrity and relevance of the Summit trade show component.

Our pledge is that the 2017 Canadian Gaming Summit in Vancouver ( June 19-21) will set a new standard for large industry conferences – with enhanced information, education and networking events, including a new trade f loor model that will provide more interaction, allowing exhibitors to be a greater part of the event fabric and education program.

Lastly, I’d like to express my sincere thanks to the Summit Advisor y Committee for providing us with invaluable feedback for 2017. We are looking forward to sharing these ideas and our revised Summit schedule with you very soon.

coverstory

NOT YOUR GRANDPA’S CASINO Appealing to different audiences and overcoming barriers

BY PAUL LAUZON, JASON ALLSOPP, PAIGE SCHOENFELD AND ROSE WONG

8 | Fall 2016 8 | Fall

coverstory

Canadian Gaming Business | 9

coverstory

Canada is a lottery and gaming nation. More than 80 per cent of Canadians play the lottery in any given year and among casino visitors that number exceeds 90 per cent. Nationally, more than 70 per cent of Canadians have frequented a casino at some point in their lives, with around 40 per cent having visited a casino in the past year. Once the cards are counted, it adds up to a country with strong gaming market penetration and impressively high rates of play.

POPULATION VS. PAST YEAR CASINO/ CGC VISITATION SHARE BY PROVINCE

But does all of this mean that casinos should continue with a business-as-usual approach? As national demographics shift over time, there is some concern that profits and rates of play may be affected as Millennials replace today’s middleaged players and slots are leapfrogged by sk ills-based games. There are also problems of perception to be overcome that, if done effectively, could open the door to visitors who may otherwise have never ventured inside a casino.

With all of this in mind, what can casinos do to stay on top of their game in this rapidly changing landscape?

%

POPULATION SHARE

%

VISITATION SHARE

OUR RESEARCH

This article presents a synopsis of research conducted by the Lottery and Gaming Practice at IPSOS in the spring of 2016, which had the goal of providing insight into how casinos can improve their service offering to not only keep players coming through their doors, but also appeal to those people who do not currently visit casinos.

Between April and May 2016, we conducted a two-phased study that sought solutions for the following questions:

10 | Fall 2016

14% 11% 22% 11%

3%

4%

24% 14%

2%

4%

39%

2%

45%

Figure 1.

2%

3% 1%

coverstory

• What barriers are keeping non-players from visiting casinos?

• Are there different approaches that can be taken to attract more Millennials?

• A re there innovations to slot games that could attract new players?

The f irst phase of the research involved four focus groups: 1) slot players, 2) non-casino visitors, 3) Millennial non-casino visitors, and 4) sport bettors.

The information gathered from these four groups informed an online sur vey that was developed for phase two of the research. This 20-minute device agnostic sur vey, which allowed people to respond from any device, was administered to 2,001 Canadians not morally opposed to gambling between April 29 and May 5 of this year. The data in this article is derived from the results of that survey.

TYPICAL GAME PARTICIPATION

BY WEEKLY CASINO/CGC VISITORS SLOTS Casino Visitors: Core 9% Moderate 19%

18-34 years: Core 9% Moderate 17%

TABLE GAMES Casino Visitors: Core 4% Moderate 11%

ALL PROVINCES DO NOT GAMBLE EQUALLY

As mentioned at the top, overall Canada is a country that is open to gaming. When we break the numbers down on a province-by-province scale, however, we see that certain regions seem to be doing a better job at attracting players than others (see Figure 1). In British Columbia, for example, our research indicates that while the province only makes up 14 per cent of the Canadian population, 22 per cent of total casino visitors in the past year hailed from Canada’s westernmost province. Ontario, which comprises 39 per cent of the Canadian population, saw an impressive 45 per cent of all casino visitors over the same time period. Clearly, casinos in these provinces are doing something right to bring people through their doors. We can assume that not everyone is coming to casinos in these provinces strictly to gamble, and the facilities are likely promoting the social side of casinos and casino users’ penchant for enjoying the finer things in life (we’ll dig into this a little later). Casinos in other provinces have an opportunity to look to B.C. and Ontario as models for how to reach out to and attract more people into their facilities.

35+ years: Core 9% Moderate 20%

18-34 years: Core 7% Moderate 16%

35+ years: Core 2% Moderate 9%

POKER Casino Visitors: Core 4% Moderate 8%

18-34 years: Core 5% Moderate 13%

35+ years: Core 3% Moderate 6%

ELECTRONIC TABLE GAMES Casino Visitors: Core 5% Moderate 9%

18-34 years: Core 8% Moderate 13%

35+ years: Core 3% Moderate 7%

Figure 2.

Canadian Gaming Business | 11 Business | 11

coverstory THE RETURN(S) OF THE SLOT

Slots have always been the greatest revenue and profitability source for casinos. Our examination of player demographics indicates that of overall casino visitors, slots play comprises nine per cent of core visitor gambling and 19 per cent of moderate visitor play. In the 35+ age group, the percentage stays the same for core players and jumps to 20 per cent for those in the moderate range.

When it comes to Millennials — those in the 18-34 age range — the numbers for slots play are cause for some concern. While core Millennial players still comprise nine per cent of overall slots play, the number drops to 17 per cent for moderate players. Compared against other casino offerings, such as poker and both traditional and electronic table games, we see that Millennials are out-participating the older demographic by a fairly wide margin with these products. Table games, for example, are played by just two per cent of core players and nine per cent of moderate players in the 35+ group, while seven per cent of core and 16 per cent of moderate Millennials play the tables. The trend continues for both poker and electronic table games, with Millennials out-participating older players in every category (see Figure 2 for a complete breakdown of game participation by demographics).

Casinos would be wise to take the long view when analyzing these numbers as older players age-out and Millennials move up the age scale. Marketing and product initiatives aimed at more interactive play could seek to drive more Millennials towards the slots, or casinos could risk losing revenue through falling use of their most profitable products. Later, we’ll also discuss ways that changing the concept of what a casino is, and what it offers, can have positive results when reaching out to Millennials and potential new visitors.

LURING THE SOCIAL CREATURE

Casinos are hubs of activity. On any given night, they buzz with the excitement of possible jackpots and the energy created when people come together to have a good time. It should not come as a surprise, then, that by nature casino visitors gravitate towards social interaction and seek out places where they know others will congregate. According to our research, on a weekly basis casino visitors “out-activity” non-casino visitors by a scale of 2:1 across a large number of recreational and leisure activities. For instance, casino visitors dine out at a 2:1 ratio over non-casino visitors; the numbers jump to 3:1 and 8:1 respectively for live entertainment (lives shows, sporting events, museums, amusement parks) and going to a movie.

When it comes to overall spending at the casino, the same characteristics that draw casino-users into social environments also entice them towards the non-gambling amenities on offer.

As Figure 3 indicates, during their last visit to a casino, nearly half (44 per cent) of our survey respondents’ total spend was on amenities, such as dining out at the restaurant, staying at the hotel and enjoying some drinks at the bar, with 56 per cent of their total spend still going to gaming products. Clearly, casino-users are frequenting these facilities to do a lot more than just gamble.

Could greater awareness of these same amenities attract noncasino users and Millennials to spend on food, entertainment, drinks and other non-gaming offerings?

BETTING ON AMENITIES

It ’s a s a fe b et t h at g a m i n g w i l l a l w ay s rem a i n a foundational piece to any casino’s business model. But as our spending data indicates, a range of non-gaming amenities represent a signif icant revenue source that casinos should be taking advantage of. When we look

SHARE OF SPEND SUMMARY

ANY GAMING OR AMENITIES MEAN SPEND LAST VISIT:

Misc. gaming activities

Playingtable games

10%

$205.60

14%

Staying at the hotel

17% 13%

Gaming (Net)

Dining at the restaurant

56%

44% Playingslots

Figure 3.

12 | Fall 2016

Amenities (Net)

30%

7% 10%

Having drinks at casino bar or lounge

Misc. amenitiesactivities

coverstory at the barriers of attracting non-casino visitors and Millennials alike, our research indicates a high degree of similar concerns, most of which can be addressed with the right messages and targeted marketing campaigns that highlight the diversity of what today’s casino offers.

Fig ure 4 present s a brea kdow n of t he concer ns articulated by non-casino users and Millennials. While not a lot can be done to address the view that “playing casino games is not a good use of money,” the remaining top barriers all present opportunities to change people’s perceptions w ith the right messages, products and promotions. After all, casinos are so much more than places to gamble: they offer a range of entertainment options that don’t require you to spend on gaming products. They are exciting, vibrant and diverse places with great food, top-tier entertainment and hundreds of people out for a good time — in short, a fun night out.

Of course, not to be forgotten is the key casino message that you if you play, you might win — a tactic that could apply to players of ever y demographic and preferred gaming type. It comes down to executing marketing strategies that appeal both to the anticipation of winning big and the larger entertainment package that makes up a modern casino.

For a variety of reasons, there will always be people who will not visit a casino. That fact aside, there are also opportunities to change the perception that some people have about casinos by increasing awareness around the amenities that they offer. The results of our sur vey indicate that casinos are not currently doing a good

enough job of marketing their amenities to the public. In one example, a casino offering 12 amenities saw 66 per cent of respondents indicating that they were not aware of any of them; another casino with 19 amenities had 51 per cent of respondents indicating zero awareness. While the numbers do improve when we look at other casinos, clearly there is an awareness gap that is acting as a barrier for potential customers.

We have already discussed Millennials’ penchant for interactive and skills-based games. Setting aside the affect of these games on casino revenue, we see a signif icant jump in the likelihood of non-casino visitors frequenting casinos if skills-based slots are made available. While our research noted that just nine per cent of this group said that they would be likely to visit a casino in the next year, the percentage jumps to an impressive 37 per cent with the addition of these games. Clearly, there is a growing appetite for skills-based gaming across demographics that casinos can choose to leverage.

Similarly, if we can change people’s concept of what a casino is, our data indicates that current non-visitors will be enticed inside casino doors. Consider the following description: “Gaming as you’ve never played before. A multigame space w ith live hosts, approx imately 50 interactive terminals to play alone or in a group, and décor that changes according to the lights and sounds. A festive atmosphere by night, calmer by day, but always exciting.

Look for this area in the Casino to enjoy a gaming experience that’s unique in North America.”

BARRIERS AMONG NON-CASINO VISITORS AND MILLENNIALS

Non-Casino Visitors

Millennials

Playing casino games is not a good use of money

Playing casino games is not a good use of money

I would rather take part in other types of entertainment

I cannot afford to go to the casinos as a regular form of entertainment

I cannot afford to go to the casinos as a regular form of entertainment

I would rather take part in other types of entertainment

I do not find playing casino games entertaining

I am afraid of overspending at casinos

I am afraid of overspending at casinos

Figure 4.

14 | Fall 2016

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coverstory A fter reading this description, the likelihood of non-visitors changing their minds and patronizing a casino grew to about 20 per cent across our research demographics.

CONCLUDING REMARKS

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While there is no silver bullet to attracting new visitors and keeping people interested in casinos, it is clear that Canadians like to gamble and opportunities do exist for casinos to leverage the diversit y of their ser vice offerings to attract and retain customers. Gaming habits are evolving and casinos w ill need to adapt in an environment with a greater emphasis on skillbased games and casino-as-entertainment-venue. By marketing their range of amenities, in addition to their core gaming products, casinos across the country can become go-to destinations — places to see and be seen, to be entertained, and of course, places where the chances of winning big are always on the table.

Methodology These are findings from an Ipsos Lottery & Gaming study conducted from April 29 to May 5, 2016. For the survey, a sample of 2,100 Canadians was interviewed online using a 20-minute device agnostic questionnaire. The precision of online polls is measured using a credibility interval. In this case, the poll has a credibility interval of plus or minus 3.5 percentage points.

For more information about credibility intervals, please visit the Ipsos Public Affairs section of our website [http://www.ipsos-na. com/dl/pdf/research/public-affairs/IpsosPA_CredibilityIntervals. pdf] at www.ipsos-na.com. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error and measurement error. Where figures do not sum to 100, this is due to the effects of rounding.

About the Authors Paul Lauzon is Senior Vice President and Managing Director with Ipsos Reid and head of the firm’s Lottery & Gaming practice that employs more than 10 full time lottery researchers. Based in Calgary, Paul leads the team of research experts dedicated to serving the market research needs of lottery and gaming organizations across Canada and the United States. Paul can be contacted at paul.lauzon@ipsos.com or 403.294.7386.

Jason Allsopp is a Vice President with Ipsos’ Lottery & Gaming practice. Based in Vancouver, Jason is part of a team of research experts dedicated to serving the market research needs of lottery and gaming organizations across Canada and the United States. Jason can be contacted at jason.allsopp@ipsos.com or 778.373.5035.

Paige Schoenfeld is a Senior Research Analyst with Ipsos’ Lottery & Gaming practice. Based in Calgary, Paige manages key Lottery & Gaming accounts across Canada and the United States. She can be contacted at paige.schoenfeld@ipsos.com or 587-952-4869.

Rose Wong is a Research Manager with Ipsos’ Lottery & Gaming practice. Based in Calgary, Rose aids in supporting the team of research experts dedicated to serving the market research needs of lottery and gaming organizations across Canada and the United States. She can be contacted at rose.s.wong@ipsos.com or 587.952.4873.

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industryspotlight

GROWING

THROUGH CHANGE Horse Racing: Unfreezing the Old Model and Innovating for the Future

BY DOUG REED

Given the current state of the industry, many will admit that horse racing in North America must make significant changes for the future. The extent to which it is able to let go of the past and embrace innovation is sure to play a key role in determining the industry’s success and longevity down the road.

18 | Fall 2016

industryspotlight

SINCE A PEAK in 20 03, pari-mutuel handle in Nor th A merica has trended down 29 per cent through 2015. During the past 10 years there h a s been a steady decline in t he thoroughbred foal crop (down 42.7 per cent in the U.S. and 49.8 per cent in Canada) with a similar trend for standardbreds. The number of races r un ha s a lso t rended dow nwa rd; in North America as a whole, there has been a decline of 26 per cent in thoroughbred races.

SOME GOOD NEWS

That sa id, there a re some recent positive signs. Thoroughbred handle i n Nor t h A mer ic a for 2 015 w a s up 1.5 per cent, while in Canada, s t a n d a r dbr e d h a n d le w a s up 10 p er cent i n 2 015 a nd h a nd le on t ho r ou g h br e d s w a s up 1 3. 5 p er cent. Through the f irst six months this year, handle on U.S. races is up slightly. The number of races continues to decline but that might not necessarily be a bad thing.

So what are some of the challenges?

One is t he supply of horses a nd owners which has been declining, m a k i n g t he bet t i n g pro duc t less attractive with fewer betting interests per race and opportunities to wager.

Another challenge has been that the popularity of the product itself has declined due to a vast number of options, competition and due to the product’s lack of change.

The industr y is fragmented and it is difficult to make changes. Still, Ontario racing has made efforts to

break down the fragmentation with the for mation of Ont ar io R acing and the alliance of standardbred race tracks. Also, Alberta has a 10 -year e x t en sion on t he a g re ement for revenue splits of slots at racetracks.

MORE TO BE DONE

But perhaps the most challenging issue, since it is due to a cultural change in society, is the animal safety and welfare concerns. Horse racing has been making signif icant efforts but there is much more to be done and the industry must be more proactive.

S o w h at a re s om e t h i n g s t h at are work ing? R acing in Nor th A mer ic a m ay h ave b e en slow t o embrace inter nat iona l ex pa nsion via simulcasting, but in recent years this and account wagering have been growth areas.

“Big” events and “niche meets” h a v e a l s o b e en s u c c e s s f u l . T h e popularity of some race meets that a re shor t a nd sea sonal continues to g row. For ex ample, this spring Keeneland attendance was up 4.7 per cent, on-track handle up 11.35 per cent and total daily handle up 4.4 per cent. Key race days such as the Queen’s Plate, Triple Crown, etc., continue to be very popular and most have experienced growth.

Horse ow nership clubs a nd fractional ow nership has been ver y successful as well. Track s in Washington, Illinois and Minnesota were some of the first tracks to offer t he hor se ow ner sh ip ex p er ience

at a ver y low cost. In Canada and the States, tracks have copied this success.

TRYING NEW IDEAS

W hile perhaps controversial, some jurisdictions have approved wagering on historical races on machines at racetrack s. Other countr ies of fer team-g roup wagers, fractional ownership of multi-leg wagers, with social aspects and prizes.

L a s t l y, r e d u c t i o n i n t a k e o u t ex periments have been conducted and copied. It st ar ted w ith a signif icant reduction in takeout of one wager like a pick-four to attract interest to the track ’s product. This was done in many jurisdictions.

What other business experiments are in the works? Canterbur y Park this season has greatly reduced their takeout on wagers across the board.

The results are yet to be measured a nd g iven the complex simulca st environment today it will be difficult to accurately assess.

E x c h a n g e w a g e r i n g o r P- 2 - P wagering made popular in Europe

by Betfair, was introduced in New Jersey this summer. A gain, it is a new product in North America and now has limited liquidity since it is only available in New Jersey. Results will be interesting to follow.

OPPORTUNITIES ABOUND

So what else might horse racing look at to further experiment and change?

North American thoroughbreds only run 6.18 times a year. If you left the Canadian Gaming Business | 19

industryspotlight Holding Steady Hastings Racecourse shows signs of optimism

By Greg Douglas At a time when the horse racing industry is struggling in a state of uncertainty throughout North America, Hastings Racecourse in Vancouver continues to holds its own.

Historians have recorded the first thoroughbred race staged in Vancouver was held in 1889 in the downtown area of what would become stock market row on Howe Street. Steeped in such history, the racing industry continues to be an important part of the entertainment and tourism landscapes of the province of British Columbia.

Thoroughbred racing at the Hastings facility in the east end of the City of Vancouver has been at that location since 1961. In the fall of 2004, Great Canadian Gaming Corporation purchased the Wall Financial Corporation’s interest in Hastings Entertainment Inc, and became the sole owners of the operation.

Approves Deal A joint team from the gaming and racing factions representing Great Canadian went before city council to present plans for upgrading the Hastings Racecourse facility and the need for an electronic gaming component to facilitate their plans. By a narrow 6-5 margin, Vancouver city council granted approval.

Great Canadian also owns and operates the standardbred facility at Fraser Downs, located at Elements Casino in Surrey, B.C. The B.C. Horse Racing Industry Management Committee, appointed by the province of British Columbia, oversees horse racing at both Hastings Racecourse and Fraser Downs.

In a mid-year summary on horse racing finances, the B.C. Horse Racing Industry Management Committee reported the industry has generated an increase of 8.6 per cent over 2015. Director of Racing Sustainability Brian Butters included the following information in his report: • Hastings Racecourse (Track and Racebook) has contributed a seven-per-cent increase compared to 2015.

• Fraser Downs/Elements (Track and Racebook) has contributed a 2.2-per-cent increase over last year.

• Teletheatre B.C. (Racebooks and Online Wagering) is up 2.4 per cent compared to 2015.

The biggest improved contribution is from the slot machines at Elements (Fraser Downs) and Hastings casinos. The industry’s 25-per-cent share of net income from those machines has increased by a combined

20 | Fall 2016

total of 23.6 per cent in the first six months of 2016 compared to 2015. Elements Casino slots, benefiting from a successful re-branding late last year, are ahead by 32.4 per cent and Hastings slots have improved by 2.1 per cent.

Positive Outlook Butters reported the industry’s financial performance versus the 2016 budget is looking positive with income generated ahead of budget by five per cent. Butters noted that slots have contributed most of the gain, but racing operations are also ahead of budget. He said handle numbers are also strong this year compared to last.

Darren MacDonald, general manager at Hastings Racecourse and director, BC Racing, says he is pleased with the continued encouraging signs that provide reason for optimism going forward.

Live racing at Hastings Racecourse has been attracting a younger demographic that has made the facility an entertainment destination in Vancouver. He noted that the Friday Night Live racing cards were increased in 2016 due to the popularity of the concept from younger patrons.

“We have had an increase in all-sources wagering (on-track and simulcast) that continues to maintain a solid pace,” MacDonald said. “It has resulted in attracting casino and casual customers with corporate sponsors increasing their participation in onsite events at the Hastings skybox, guest patios and marquee tent locations.”

There are 50 outlets on the Hastings Racecourse simulcast system, including 20 in B.C. and the balance across Canada and throughout the United States. On a year-round basis, MacDonald says the simulcast telecasts provide a wagering service with racing signals that are both exported and imported by Hastings Racecourse. The live thoroughbred racing feeds provide the City of Vancouver with satellite tourism exposure in every participating racing establishment in North America.

Hastings Racecourse winds down its 53-day thoroughbred season on October 16. For further information contact Darren MacDonald, General Manager, Hastings Racecourse, Director, BC Racing, dmacdonald@hastingsracecourse.com.

Greg Douglas, widely known in British Columbia as Dr. Sport, has been a columnist with The Vancouver Sun for the past 19 years.

He also contributes a Canadian sports column to The Desert Sun in Palm Springs, CA. He was inducted into the media category of the B.C. Sports Hall of Fame in 2010.

number of races fixed and horses run 7.18 times a year, based on a number of academic studies, handle increases anywhere from 10-19 per cent. How many in the industry would not be delighted with that change?

What if change were easier? What i f you cou ld conduc t a bu si ness ex per iment w it h fewer ba r r iers?

Some time ago, I advocated for an experimental rule. Since many resist change due to fear, I suggested as long as an experiment did not present an integrity or safety issue it would be permitted on a trial basis (60 or 90 days) regardless of fears of other stakeholders. This would make it possible to experiment and if it failed no one would want to go for ward.

However, if it proved successful, it would be much easier to seek a more permanent approval.

W hat if you do ever y thing you can to make the local players cash more t icket s? Th is w ill help the lo c a l m a rk et chu r n of w a g er i n g dollars and be especially effective for jurisdictions that have large negative settlements sending losing dollars out of the local market and out of circulation that can’t be re-wagered.

STIMULATING INNOVATION

Handicapping contests have been a no t her g r o w t h a r e a . Ho w e ver, how do beg inners compete in such cont e st s? W h at i f you h a d segmented handicapping contests?

The Meadowlands recently had a handicapping contest for 30 -yearolds a nd young er. W hy not have beginners contests so new players have a chance? Like conditions for the horse races, as the beginners win they are no longer eligible for some contests and must play against more advanced players.

If you really wa nt to stimulate innovation and technolog ical advancement in horse racing, what a b out ho st i n g a “ h a ck at hon” or get ting involved in innovation contests? Last year, several partners and I founded Innovators’ Circle, a Shark Tank-like contest. It was very successful, attracting over 80 entries from f ive cont inent s. The f ina ls were held in December at the Global Symposium on Racing and Gaming.

A number of the finalists are having success and their ideas are being implemented.

industryspotlight High Stakes Getting a handle on Ontario’s horse racing industry

By Cal Bricker

On a warm and sunny July afternoon, 13 restless thoroughbreds are loaded into the starting gate at Woodbine Racetrack.

Sir Dudley Digges, a spritely, Ontario-bred colt, has a mischievous glint in his eye. In one moment, more than 37,000 thousand people fall silent, waiting for the doors to crack open.

The 157th running of the Queen’s Plate broke a record by bringing in almost $12 million in wagers, $3 million of which was bet on the title run alone. More than half a million viewers tuned in to watch Canada’s biggest horse race on television.

As the horses thundered past the grandstand packed full of cheering patrons, it would be hard for anyone to believe Ontario’s horse racing industry is in decline.

But behind the one-day celebration, the stark reality is there: horse racing in Canada isn’t what it used to be. In 1968, 100 per cent of gaming revenue in Canada came from betting on horses. By 2010, that number was barely over two per cent.

Diverse Influences Growth in other areas of the province’s lottery and gaming industry has had the largest impact on the sport of kings. The development of community-based lotteries, advent of Ontario’s casinos and, more recently, the immense popularity of sportsbased betting has meant more competition for customers.

More and more, the ability to bet on virtually any kind of sport is a click away.

Why bother going to a racetrack?

For years, in Ontario at least, competition crept up on the racing industry while it relied on a steady stream of revenue taken from the slots facilities attached to

most tracks. In 2013, the end of that funding program introduced a new level of economic uncertainty to the industry, including the province’s breeding program. As a result, the number of horses born in Ontario decreased significantly. With fewer horses available to fill race cards, many were left feeling unsure about the industry’s future.

Integrated Strategy In 2014, the government of Ontario announced a five-year transitional funding program to help stabilize purse values and give confidence to breeders. The government also asked the Ontario Lottery and Gaming Corporation to integrate horse racing into the existing provincial gaming strategy to create a more sustainable future for the industry.

OLG quickly got to work; I joined the provincial agency to lead a new line of business that is focused on administering government funding, providing responsible gambling advice and creating a robust marketing plan for the industry. All of this work has deepened our relationship with horse racing leaders, track owners and the broader industry.

Together, we agree it’s time for a fresh approach; one that puts more power over the future of the industry back into the hands of the people working in it. We’re collaborating on a customer-focused plan that will help bring people back to tracks by creating and building a more intimate connection between racing and its fans.

Keys to Growth Beyond everything else, the quality of races is what will drive demand from customers and increase wagering in the industry. Growth in the handle will improve purses and encourage new investment, helping to create more jobs.

It’s likely some level of public funding will always support horse racing in Ontario which, in turn, sustains tens of thousands of jobs across the province and contributes about $1.1 billion to the provincial economy every year. But our shared goal is to have the industry, over time, rely on its own growth to fund operations, reducing the need for public money to keep tracks alive and horses running.

The government has extended funding to tracks that run live races until 2021 and OLG is working with the industry to provide advice on a long-term funding model that will kick in once the current program ends.

Ontario Racing, the new industry association in the province, has taken on the responsibility of leading the industry and bringing stakeholders together under a common direction and vision for its future. Gathering opinions from all levels of racing and providing advice to OLG and the government in areas like breed improvement programs, setting the annual race program and attracting investment will contribute to a more sustainable industry in Ontario.

Getting the industry back on track won’t happen overnight, but the pace has quickened thanks to the new structure we’re putting in place. Over time, success will be measured by stability or improvement in key areas like employment, wagering, track revenues and support from both the public and the industry.

So no, horse racing in Ontario, and in Canada, isn’t what it used to be. But with strong partnerships and a little industry-led ingenuity, many of the people who watched Sir Dudley Digges take the Queen’s Plate that sunny Sunday in Toronto will make it out to the races once again.

Cal Bricker is Senior Vice President, Horse Racing, Ontario Lottery and Gaming Corporation

Canadian Gaming Business | 21

industryspotlight

ATTRACTING NEW DEMOGRAPHICS

A final idea, certainly not unique to racing, relates to the fact that many industries are tr ying to f igure out how to bring in Millennials. It is an attractive demographic. I recently partnered with a former professional eSports (competitive video gaming) player and others. We are currently in t alk s w ith a few racet rack s in Canada and the States. eSports is ex ploding w ith rapid g row th and those that play enjoy games of skill and competition. We believe this will be a great f it for racing if they act quickly and correctly. Racing has the space and the type of games that may attract a new demographic, benef it from ancillar y revenues and also achieve crossover for the track’s game of skill, pari-mutuel wagering and handicapping contests where players also compete against each other.

It is said that necessity is the mother of invention. W hat is happening in Ontario long term will be positive,

a s t he i ndust r y h a s b ecome less frag mented and many are w illing to try new things. Look at the 2015 resu lt s prev iou sly ment ione d — not bad when compared to other jurisdictions.

There is not a “silver bullet” solution for r a c i n g but t h rou g h bu si ness experimentation and innovation the industr y will reverse the tide and be a competitive entertainment and gaming product.

Doug Reed is Principal at Racing, Gaming & Entertainment LLC(RGE), a consulting f irm with an emphasis on operations, strategy and innovation. Doug has 40 years’ experience in racing, gaming and education.

He is also director emeritus and former director of the University of Arizona Race Track Industry Program. His current focus includes eSports/iGaming, operations and innovation for change. For further information email: dougreed27@gmail.com.

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industryspotlight Culture of Innovation WEG moves forward with creative thinking

By John Siscos How does a sports and entertainment brand with roots dating back to the 19th century remain relevant in a crowded marketplace that emphasizes being fresh and new? For Woodbine Entertainment Group (WEG), operators of the iconic Woodbine and Mohawk racetracks, it commits to a culture of innovation.

No forward-thinking company is immune to the demands of today’s ultra-savvy consumer and the leadership team at WEG, along with their engaged workforce, have responded by examining every aspect of their business.

A recent example of the success stemming from its creative thinking was demonstrated at the 157th Queen’s Plate. Occurring this year on July 3, the Queen's Plate is Canada's oldest thoroughbred horse race and longest continuously run race in North America.

With fresh ideas and offerings at the Queen’s Plate contributing to the event’s success, WEG is cognizant of the need to continually reinvigorate all of their brands.

Historical First Held annually in June, the $1 million Pepsi North America Cup is the richest pacing Queen’s Plate Success event in the world. The event showcases WEG brought in new vendors, standardbred’s top pacers also set activated spaces targeted to specific records this year with a total of $5,241,459 demographics such as the popular wagered, setting not only a Pepsi North Hats & Horseshoes Party, the countryAmerica card record but also the highest themed Paddock Party and the highsingle-card handle in the 53-year history end White Party. Additionally, music of Mohawk Racetrack. was prominently featured throughout Outside of these prominent events, the day and included headlining bands WEG supports the growth of horse racing The Strumbellas, Matthew Good and Canadian pop-punk superstars, Hedley. in numerous ways including an investment in a new Tapeta track surface which was The results were astounding and installed earlier this year and the launch of served as evidence that there is an the EuroTurf series where horses run in a appetite not only for the food and clockwise direction, allowing WEG to hold fashion featured at the Queen’s Plate more of their popular turf races on the but also for the big race itself. world-famous E.P Taylor course.

More than 37,000 fans attended Off the track, WEG is taking an the big day, the most for a non-royal innovative approach to some of its Queen’s Plate and nearly matched challenges. the 1973 race, graced by Her Majesty A steady supply of qualified people Queen Elizabeth II. is needed to work with the world-class Exit surveys showed that WEG was equine athletes featured at Woodbine able to reach new audiences as 24% and Mohawk. With no defined path of those who sat in the grandstand at or point of entry previously available, the Queen’s Plate had never visited WEG co-created with the Horsemen’s Woodbine before and 37% have never Benevolent and Protective Association previously attended a Queen’s Plate.

(HBPA), the Groom Elite Program this year All of those new and returning guests which encouraged people from diverse contributed to a record wagering backgrounds to be trained, free of charge, handle of $11,839,883 for the day for jobs associated with the maintenance including $3,354,822 for the Queen’s and care the horses.

Plate race itself.

Innovative Wagering Coming up with new ways for consumers to wager on their product is a priority for WEG. Starting this fall, a partnership with Ryerson University will challenge Canadian start-ups, entrepreneurs, developers and students to use technology to help bring the traditional sport of horse racing to the next level.

The program, called HorseRacing 3.0: Changing the Game, will seek new product solutions, to help drive sustainable growth and revenue within the horse racing industry.

“At Woodbine, we are continuously looking for ways to modernize our industry to ensure a sustainable future for horse racing in Ontario and gaming is a key piece of the equation,” said Jim Lawson, CEO of WEG. “Our plan in leading the industry is to develop ways to reach and engage a younger demographic.”

Even though competition amongst sports and entertainment groups is at an all-time high, WEG has shown that through fostering a culture of innovation even an established brand is able to remain relevant and in many ways, become new again.

John Siscos is Director, Communications, Woodbine Entertainment Group, showcasing world-renowned horse racing at Woodbine Racetrack, home of the iconic Queen’s Plate, and Mohawk Racetrack, host of the storied Pepsi North America Cup. WEG is the leading member of the Standardbred Alliance and the single operator of Teletheatres and Account Wagering, available through www.HPIbet.com, in Ontario. For more information visit www.woodbineentertainment.com.

Canadian Gaming Business | 23

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gamingregulation

A MODEST PROPOSAL Gaming and the Canadian Criminal Code

BY DANIELLE BUSH

The playing of games, the holding of competitions, the placing of bets — in fact any endeavour in which Canadians engage that involves both chance and a prize — is illegal unless structured to remain within the narrow confines of Part VII of the federal Criminal Code. The title of Part VII is “Disorderly Houses, Gaming and Betting.” The combining of provisions prohibiting brothels and gaming speaks volumes about the antique nature of the approach to gaming in this country.

THE PRESENT CONSTRUCT:

The differentiation between betting on horse races and all other forms of gaming adds to the confusion and underscores the fact that Part VII is the end product of public policy that was, even in its day, a combination of paranoia and condescension. The provisions in the Code that govern g aming have no room in today’s societ y. They are, to begin w ith, incomprehensible on their face without an intimate knowledge of games such as three-card monte that have not been played in any serious fashion within the last 50 years. It is now time to lay to rest the numerous references to three-card monte as well as all of the other archaic gaming provisions found in Canada’s Criminal Code.

THE SOCIAL CONTEXT:

If one were to remove all of the gaming provisions from Part VII and start again in 2016, how should the governments of Canada approach gaming? Games and gaming have been a source of entertainment and amusement in every culture for millennia. The Royal Game of Ur, a race game played with a set of pawns and dice on an intricate board, dates from about 3000 BCE. It is, practically speaking, impossible to stop people from gambling. Canada is now sufficiently mature as a society to view gaming within its proper social context — not as a criminal activity but rather a form of entertainment that should be acknowledged as a positive and predominantly, although not necessarily, social activity. Like many other enjoyable activities, it can become

addictive for that stable percentage of the population who are susceptible to addictive behaviour.

A s well, in many cases, gaming involves large amounts of money changing hands quickly with a potential for individuals to suffer large monetary losses. We can all therefore agree that the activity should be regulated. At a minimum, regulations are required in order to prevent theft, fraud, and money laundering. While all of those risks are already addressed in other parts of the Code, it is arguable that the sophistication of gaming products and services necessitates the regulation of the equipment used, the facilities in which the gaming takes place, and the persons who are providing the services, whether in the cage, on the f loor or operating an online casino or sports Canadian Gaming Business | 25

gamingregulation

betting site. As well, it is understandable that gaming service providers should d i s c ou r a g e t ho s e w it h pro blem gambling issues from continuing to engage in the activity. Given the nature of the activities and things that require oversight, it is clear that what is needed is a regulatory structure rather than a penal structured based on the principal that the gaming is fundamentally criminal in nature.

Gaming no longer has a place in the Criminal Code. Any remaining concerns about criminal elements in the industry can be properly addressed by the provisions of the Code dealing with crimes such as money laundering and fraud.

OPTIONS:

There are a number of plausible opt ions ava ilable to add ress t he present disconnect between the laws governing gaming in Canada and the real / virtual world in which we live.

The federal government withdrew

from the fray in 1985, leaving the field to the provincial governments. The legacy was a federal statute governing an industry monopolized by provincial governments. Practically speaking, no change to Canada’s gaming laws is likely to occur without the agreement of most of the provinces. While the federal government ceded the field to the provinces, it did not agree to forego its share of the income generated by gaming. Ottawa and the provinces will therefore be required to share the financial benefits accruing from a restructured gaming industry.

Ca n a d a wou ld b e wel l- ser ve d by look ing to other members of the Commonwealth for alternative models. Australia is the most obvious candidate as, like Canada, it has a federal government as well as state governments which are akin to those of the Canadian provinces. Over 80 per cent of Australian adults engage in gambling of some kind. While this is apparently the highest rate of gambling

in the world, Australia takes the position that gambling is a social activity that, with some exceptions, requires active management as opposed to prohibition and criminalization. Gaming is in almost all instances regulated on a state level while online gaming, given its “borderless” nature, is regulated by the federal government.

THE PROPOSAL:

It is proposed that all of the provisions regarding gaming be removed from the Criminal Code and that federal and provincial governments agree on a two-pronged regulatory regime based on the fundamental tenet that gaming is a socially acceptable and legal activity.

Each of the provinces would enact a statute, identical in all material respects, pursuant to which each province would license private sector operators to provide any and all forms of gaming to the residents of that province. The provision of gaming products and services would be taxed and regulated

HLT ADVISORY HLT Advisory is pleased to announce that Jim McGrogan has joined the firm as a Managing Director, based in Vancouver, British Columbia. Jim joins the HLT team after 11 years of executive experience in the gaming industry with Great Canadian Gaming Corporation. Most recently, Jim served as Vice-President, Business Development.

Previously, Jim worked in senior business development and professional services roles in the software industry serving financial institutions.

Jim has a successful track record in both the acquisition of new businesses as well as the expansion of existing businesses. He brings experience with detailed financial analysis and the negotiation of a wide array of complex contractual agreements including gaming operating/service agreements, real estate acquisitions and leases, corporate partnerships and other major capital initiatives.

Jim has also led multi-disciplinary teams in developing comprehensive responses to formal government procurement processes for new gaming development opportunities in both Canada and the U.S. Jim strengthens HLT’s position as Canada’s leading gaming, hospitality and tourism advisory firm. HLT has been assisting owners, senior

For additional information please contact Lyle Hall at lylehall@hlta.ca, Robert Scarpelli at robertscarpelli@hlta.ca or Jim McGrogan at jimmcgrogan@hlta.ca

1 26 | FallHLT_Gaming_Fall_2016.indd 2016

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gamingregulation

like any other industry. The regulations that would be applied to the industry in each province are likely to look very much like those in place today.

While no province would be permitted to prohibit gaming in general, the province could choose to forego tax revenue and limit the types of gaming that it would license.

Having said that, it is the author’s v iew that Ca nada is too small a country to permit one province to take a dramatically different position on the criminality or morality of an activity than the rest of the provinces.

It would be manifestly unjust for the residents of one province to be subject to penal proceedings while Canadians in other provinces were legally engaged in the same activity. For that reason, the proposal contemplates the use of a common template for the provincial statutes which could then be amended to a cer tain ex tent by prov incial regulation. The approach could be similar to that taken when the various provincial personal property security statutes were passed. The harmonizing of provincial regulation would also attract sophisticated multinational gaming companies to the Canadian market. Given the size of Canada’s population, we are far more likely to attract reputable multinational gaming companies who will provide sophisticated ser v ices a nd pay a percentage of their profit in tax dollars if the regulatory regime in Canada is, while rigorous, also harmonized.

Concurrently, the federal government would enact a statute whereby the online gaming industr y would be licensed, regulated and taxed. Online operators, whether Canadian or based offshore, would be licensed to allow players from anywhere in Canada. In return, the operators would pay a tax to each province based on the amount of revenue generated in that province, and a tax to the federal government which would be a percentage of the national revenue generated.

encompassing all gaming, betting, and lottery activities that would otherwise be illegal under Part VII of today’s Code. Section 207(1)(a) of the Code would then be revised to read: “[It is lawful] for the government of a province, either alone or in conjunction with the government of another province, to conduct and manage, and license others to conduct, manage and operate Gaming Activities in that province, or in that and the other province, in accordance with any law enacted by the legislature of that province.”

Each provincial government could then decide whether to maintain its monopoly as a gaming provider, move instead to a license and tax model, or to adopt a hybrid model. As an example of a hybrid model, a provincial government would maintain its monopoly over lottery offerings, grant licences to provide bingo only to charities, and license private companies to provide all other forms of gaming including

online gaming. Many of the provinces would choose to jointly license, tax and regulate online operators in order to create the liquidity desired by the global online operators. Finally, the federal government would continue to receive its share of any revenue generated by gaming in a province, whether directly through operations or indirectly through taxation of the private sector.

It is hoped that those involved in the Canadian gaming industry, including regulators and lottery corporations, will see the merit in putting forward a proposal to modernize Canada’s gaming laws and lobby their Members of Parliament to move forward with this initiative.

Danielle Bush is a partner in Miller Thomson's Toronto office where she practises in the areas of regulatory, technology and commercial law.

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THE POSSIBLE:

Given the complexity of the above Proposal, it is suggested that, as a first step, the Code be amended to provide a def inition of “Gaming Activities” in the broadest sense of the word,

© 2016 SAS Institute Inc. All rights reserved. 152739US.0516

Canadian Gaming Business | 27

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ENGAGING

THE COMMUNITY The importance of connecting with the local community and developing social licence From charitable contributions and corporate funding programs to social media outreach, gaming leaders across Canada understand the growing significance of improving relationships with their local communities. Canadian Gaming Business recently asked several leading gaming organizations for their insights on this increasingly important topic. Read on to hear what they had to say. . .

Participants:

Patricia Cook Vice President, Corporate Affairs Saskatchewan Indian Gaming Authority

Tanya Gabara Director, Public Relations Gateway Casinos

WHAT ARE SOME OF THE BIGGEST CHALLENGES FACING GAMING ORGANIZATIONS WHEN IT COMES TO CONNECTING WITH THE LOCAL COMMUNITY? Patricia Cook: Some of the challenges that face gaming

organizations today include: building trust and relationships with the local community, not enough knowledge or information of how gaming impacts local community positively, stigma around gaming dollars and the social issues associated, and the notion that casinos have an endless supply of money for programs. SIGA has a comprehensive Corporate Social Responsibility (CSR) platform that contains a sponsorship program, scholarship program, employee volunteer program, and a nationally accredited responsible gaming program. We are a non-profit company in the truest sense of the word, all of our revenues are returned to our beneficiaries, through a revenue sharing model. Our profits

30 | Fall 2016

Greg Medulun Director of Communications Fallsview

Alison Stultz Vice President, People Atlantic Lottery Corporation

are distributed to our First Nations owners, community development corporations and the provincial government’s General Revenue Fund.

Tanya Gabara: At Gateway, we strive to be good neighbours in the communities where we operate. That means working collaboratively with community leaders and residents alike.

In particular, it means placing a premium on listening.

Listening and learning to what local communities tell us is the cornerstone to building and operating successful properties that allows us and our community partners to achieve our mutual objectives. We always try to find ways to support projects and initiatives that matter most to our communities, whether it's an economic development project or a local charity. But none of this can been accomplished without listening to learn what matters to those that live and work there.

industryq&a

Greg Medulun: For the gaming industry, social license is

dynamic; it needs to be continually earned and maintained.

Consistently delivering on good corporate citizenship in its many forms is key to fostering and reinforcing community relations. Corporate philanthropy, as one example, provides much-needed support to local causes. This, however, presents its own set of sensitive circumstances as organizations try to balance finite resources and strategic funding priorities with an ever-increasing number of worthy charities/non-profits.

At Niagara Casinos, we have a proud legacy of giving through our corporate funding program, which closely aligns with our company’s core values. Further to financial contributions, we deepen our impact in the community through a volunteer grant program, in-kind donations, workplace campaigns, employee volunteering and corporate advocacy.

Alison Stultz: One of the challenges we have is communicating

the message that as a regulated lottery corporation, 100 per cent of our profits go back to the governments of the four Atlantic provinces. The more people know about us, the more they can appreciate the role we play in their communities.

Besides the profits we return, we also provide sponsorships through our festivals and events program. This year alone we are supporting more than 150 communities. That said, there is a stigma associated with gambling. Some people have strong views on gambling and are reluctant to partner with a lottery organization. Our community engagement includes funding for responsible gambling initiatives through the Responsible Gambling Community Partnership Fund.

WHERE DO YOU SEE THE GREATEST OPPORTUNITIES FOR GAMING ORGANIZATIONS TO GROW POSITIVE AWARENESS OF THEIR PRODUCT OFFERINGS IN TERMS OF THE BENEFITS OF THEIR PUBLIC AND COMMUNITY ENGAGEMENT PROGRAMS? PC: We believe there are plenty of opportunities to grow

awareness by sharing our story through advertising campaigns where our partners speak on our behalf, and getting employees involved in community investment, specifically volunteerism. For the past two years our central office employees partnered with a local community school and purchased Christmas gifts/stockings out of their own pockets for over 180 students. They also raised over $4,500 which was then matched by a sponsorship from SIGA, for a total of $10,000 going towards the school’s cultural programing.

We believe creating opportunities for our employees to make connections with people and organizations will ultimately build a positive reputation for our organization and its product offerings.

TG: The gaming industry in Canada has made tremendous

progress over the last 20 years in helping Canadians understand the role the industry plays in supporting local economies and local priorities. It was a real challenge for a relatively new industry. But as the industry matures, we still need to be diligent in continuing the work to communicate the benef its to our customers, our community leaders

and the public. Making it a priority for all levels of the organization, from front line staff to CEO, is important. And now in 2016, we have more tools and channels to accomplish that work. For example, 70 per cent of Canadians get their news from Facebook so when we think about opportunities to grow awareness, digital channels must be part of the communications mix.

GM: Heightening visibilit y around one’s communit y engagement initiatives with deliberate and consistent communications offers considerable opportunities to influence public perception and build awareness. Blending traditional and new media lends the advantage of connecting to a larger audience while optimizing exposure. Our history of hosting a selection of prominent community events onsite has proved valuable in our continual efforts to create goodwill, demonstrate our commitment to local priorities, garner positive awareness for our brand and corporate giving program, and enhance our reputation as a communityminded, socially responsible business leader.

AS: We maximize any opportunity to tell our story. Research tells us many people don’t know enough about us. We use real examples in social media, traditional media, speaking opportunities and community/business partnerships. We introduce our winners, we show where lottery dollars go, we list the individual events we support. We know that when our players trust us and understand where lottery dollars go, they are more likely to purchase our products. Our Askaway.ca campaign encourages people to ask us any question and we answer. Askaway.ca resonates with our players, stakeholders and employees, who are proud to work here and act as ambassadors.

HOW WILL CHANGING DEMOGRAPHICS IMPACT YOUR COMMUNITY SUPPORT AND DEVELOPMENT PROGRAMS? PC: Staying on top of changing trends in CSR so our programs stay relevant is important to SIGA. For example, if we look at the Millennial demographic specifically, we know they are looking for organizations to work for that are socially responsible in the way they operate. I feel that we do a great job now with our CSR initiatives, but we’ll have to find ways continue to satisfy the changing values of our employees and those we serve in the community. Listening and proactively responding will be key in order to remaining strategic in our growth and meeting our mission and vision.

TG: There's no doubt that changing demographics, coupled with the rapid pace of digitization, will impact how we support community priorities. At the core though, we still need to be connected to our customers and community leaders to ensure we are supporting projects and programs that matter to them in their local community. So in a sense being connected with our customers and community will continue to inform us on how best to deploy these programs.

Canadian Gaming Business | 31

industryq&a

extraordinaire

GM: While our community support and development programs prioritize a number of core funding areas, we’re always considering where there’s growing needs within our community.

Our partnerships with social service clubs and agencies, for ex ample, play a very important role in helping us to continually stay in-tune with citizens' needs, ensuring our outreach initiatives are increasingly relevant and valuable. As we continue our efforts to attract a new generation of customers, namely Millennials, our ability to share stories that spotlight the many ways our company is committed to social responsibility will further our connection with this socially-conscious demographic.

AS: We don’t believe the changing demographics will have an impact on “what” we say. No matter the audience, our message remains that we return 100 per cent of profits to our shareholders through safe and regulated gambling options. However, what will change is “how,” “where” and “when” we share the message. We need to continue to mine for consumer insights that guide our decisions on how best to reach new markets. Being relentlessly curious, asking questions, acting on our findings, trying new things and adjusting where required drives our approach to how we go to market.

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technology allow for conversations to take place across the country in a very public way. Technology allows us to know what is important to people, and where the needs are so we can respond appropriately.

As an example, when there were the wildfires in northern Saskatchewan in 2015, social media was critical in sharing messages and expressing the needs there.

As a result we were able to quickly identify a need and commit $100,000 through

the Prince Albert Grand Council, Lac La Ronge Indian Band and Meadow Lake Tribal Council to support their communities and the wildfire evacuees.

TG: Social media and digital make

it more cost effective to share your message with larger audiences. It also is a great channel for listening — to provide insights into how we can help. For example, recently we saw a video on Twitter from the mayor of Kelowna nominating people for the One Bag Challenge. As a result of this tweet we challenged all of our property employees to share it forward. As of mid-August, we have donated over $2,000 and close to 2,500 lbs of food to local food banks across Western Canada.

G M : W h e n u s e d a d e p t l y, n e w technology can be an integral part o f bu i l d i n g a n d s t r en g t hen i n g r e l a t i o n s h i p s . We c o n t i nu e t o expand our presence on social media promoting property-wide experiences but also giving transparency to our community relations efforts. Our presence on social platforms enables us to gain important public insight that informs and enhances our engagement strategies. Moreover, we’re able to offer added value to various community initiatives, outside of financial support, by bringing greater attention to local worthwhile causes among our own social networks.

AS: Our ability to understand and respond to the rapid changes in technology and social media affects our ability to be relevant to our consumers and grow our business responsibly.

A g ood ex a mple of a cha ng e in approach to community engagement is our use of a new social media campaign that encouraged community g roups to apply for sponsorship through Twitter — targeting and regionalizing messaging to connect at a community level to create awareness for community. A small but dedicated social media team focuses on building an engaged following to connect on a community level but also as a way to address questions, comments and concerns promptly and honestly.

industryq&a WHAT OTHER MARKETING AND COMMUNITY ENGAGEMENT FACTORS CAN GAMING ORGANIZATIONS LEVERAGE TO CREATE AWARENESS OF THEIR CHARITABLE AND COMMUNITY PROGRAMS?

PC: Opportunities to create awareness exist in investing more money in a smaller number of organizations, and mak ing the partnership more involved through s p o n s o r s h ip a c t i v a t i o n . T h i s m e a n s i d e nt i f y i n g sponsorships where a natural activation might f it and where the ROI would no doubt move beyond a logo or banner placement. For example, SIGA enjoys a strategic partnership with the Saskatchewan Roughriders that enables marketing and SIGA volunteers to collaborate in delivering marketing tactics while welcoming over 300 inner-city youth to a Roughriders game through community investment. This event creates a mutually beneficial relationship between the public and two large corporate entities.

TG: It might be obv ious but casino proper ties ow n valuable marketing inventory that can be deployed to generate awareness of programs — from in-house TV networks to restaurant table tops to hosting community events — properties can literally create millions of impressions within their own footprint at a marginal

cost. We also have thousands of team members that are ready and willing to volunteer their time to support the communities in which they work.

GM: We’ve experienced great success building a culture of social engagement; one that is deeply embedded in our corporate core values. Many casino associates, executives and senior managers are actively involved in the communit y, donating thousands of volunteer hours every year, creating valuable relationships with local organizations while making a positive difference.

Each of these partnerships, and more, foster positive word-of-mouth and put a public face on our company’s longstanding commitment to improve our community.

AS: A nother marketing and communit y engagement factor to consider is that research has shown that players like to play games of chance to help out the communities where they live and if they do win, they would have a propensity to give back to a cause or community charitable organization. These consumer insights speak to the success that organizations can have through earmarking programs, that is, an allocation of some or all of their profits to a cause or causes. We continue to monitor these type of programs to understand the impacts they are having on organizations and their communities.

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Canadian Gaming Business | 33

executiveq&a

TOM MUNGHAM Chief Operating Officer, AGCO

As Chief Operating Officer at the Alcohol and Gaming Commission of Ontario, Tom Mungham has been with AGCO since 2006 and oversees regulatory operations in the alcohol, horse racing, and commercial casino, lottery and charitable gaming sectors.

FOCUSED PRIMARILY on leading change and operations, Mungham’s working experience includes both the private and public sectors in diverse areas of regulation, law enforcement, correctional services and banking. Tom sits on the Board of the North American Gaming Regulators Association as its Canadian Regional Director, and co-chairs NAGRA’s internet gaming interest group.

WHAT AREAS OF YOUR ROLE AS COO OF AGCO ARE THE MOST CHALLENGING FOR YOU PERSONALLY AND WHAT ARE YOU MOST LOOKING FORWARD TO ACCOMPLISHING IN THE NEAR FUTURE?

As the AGCO’s Chief Operating Officer I oversee regulatory operations in the liquor, horse racing and gaming sectors. Each of these sectors brings its own unique challenges. Moving from one complex issue to another across each of these sectors, multiple times throughout a day is exactly the diversity in my role that I enjoy. Add to that the speed in which these issues are evolving and it makes for very interesting and rewarding work.

One of the AGCO’s strategic goals is to modernize our approach to regulating these important sectors. Exciting work is well underway transitioning land based casinos, charitable bingo halls using electronics, and the lottery sector to the Registrar’s Standards – our move away from a prescriptive, rules-based approach to one that is outcomes focused. Working with Ontario Lottery and Gaming and its private sector operators, we will be completing this transition in 2017.

I’m also looking forward to us implementing a regulatory framework for electronic raffles. By the time this article goes to print our stakeholder consultations will be well underway with the goal of developing a framework for implementation by the spring next year.

And, as many readers will know, the Ontario Racing Commission’s regulatory functions were merged with the 34 | Fall 2016

AGCO in April this year. In support of the horse racing sector, the AGCO has launched Moving Ahead: Horse Racing Regulation in Ontario, an initiative focused on identifying and implementing changes to the regulatory rules and procedures which govern horse racing in Ontario. With the benefit of significant stakeholder engagement, our goal is to develop regulatory policy reforms that will improve our regulatory rules and processes in this area.

I enjoy challenges and a broadening mandate. Merging the ORC’s regulatory functions with the AGCO over the past year has been both challenging and gratifying as I didn’t have much experience in the “sport of kings.” Now, with the federal government’s announcement that it is looking to legalize, regulate, and restrict access to marijuana, this could result in the AGCO having a new regulatory role. It would certainly be an interesting challenge to operationalize a regulatory framework for marijuana, an initiative that I look forward to working on should we play a role.

IN WHAT WAYS HAS YOUR PAST EXPERIENCE PREPARED YOU FOR YOUR ROLE AT AGCO?

Working in government and the private sector for more than three decades has given me many, many opportunities to learn and grow as a professional and as an individual. I’ve learned a tremendous amount from these experiences; as much or more from failures than any successes. The greatest experiences have been my involvement working in teams. As a member or the leader of a team, working in a team to accomplish a goal is very rewarding. Seldom is the path smooth - it’s successfully dealing with the challenges that is so gratifying.

Working with communities, association representatives, labour groups, elected officials, colleagues and staff and with central government agencies has taught me the importance of listening to and understanding other’s perspectives and the

executiveq&a value of collaboration. Whether it has been working in policing, correctional services, or banking, the opportunities to work with others to reach an objective, with all of the ups and downs along the way, has helped me significantly.

WHAT’S YOUR VISION FOR THE FUTURE OF AGCO AND ITS ROLE IN THE GAMING COMMUNITY IN THE PROVINCE AND CANADA?

Consumer tastes and interests change and over time they look for new products and services. Skills-based games, daily fantasy sports, single event sports wagering, “chase” or “catch the ace” have gained considerable attention in recent years. Which means that regulation in the public interest also needs to take the consumer into account. We need to make sure that our approach to regulation is flexible enough that we can adapt effectively to changes in consumer tastes and expectations, demographics, changing laws and the pace of technological change.

As we continue to modernize how we regulate the gaming, horse racing, and liquor sectors, my vision for the AGCO includes our continued hard work to reflect society’s views in our regulatory framework and to maintain and enhance the confidence of the government and the public.

WHAT DO YOU BELIEVE ARE THE GREATEST GROWTH OPPORTUNITIES FOR GAMING IN CANADA AND WHY?

Certainly there will be many opportunities for charities to enhance fundraising using the recently amended provisions of the Criminal Code allowing the use of computers for the sale of a ticket, selection of a winner, or the distribution of a prize in a licensed charity raffle. Depending on each province’s position, there is a strong likelihood that eRaffles will impact the gaming marketplace.

And, depending on the appetite of the federal government to make further amendments to the Criminal Code, there could well be growth opportunities in single event sports wagering and other forms of gaming activities – provided, of course, that they are done in a responsible manner that protects the public interest and the public accompanied by an effective enforcement strategy for illegal gambling, particularly in land based and internet gaming.

WHAT ARE THE GREATEST CHALLENGES FACING THE CANADIAN GAMING INDUSTRY TODAY AND HOW DO YOU THINK THEY SHOULD BE ADDRESSED?

In my view, the challenges are similar to those facing many other sectors of our economy and society in general. How do we adapt to new technologies? How does the gaming sector ensure that it is providing consumers what they want, when they want it and where they want it – but at the same time balancing other critical public interest issues such as Responsible Gambling, protection of the consumer, and prevention of fraud. Consumers very much are the drivers as they are in other areas of entertainment.

Society’s attitudes to certain activities is also evolving. We at the AGCO have seen that evolution in other areas within our mandate, such as liquor, and if the press reports are correct, in the regulation of recreational marijuana. The public’s concern for safety and responsible use and controls with respect to under age or vulnerable people remain and are perhaps enhanced in comparison to the days of “prohibition”.

But the basic legislative framework in the Criminal Code has not kept pace with the evolution of society’s attitudes and of the consumer’s knowledge and expectations. Finding a way

to modernize the Criminal Code in a manner that achieves an appropriate balance is both the biggest challenge facing the sector but also one of the best ways to address the issues facing the sector.

Prohibition in liquor and in gaming does not seem to be a successful response in the longer term. Unregulated internet gaming activities have demonstrated that a more nuanced response is needed. That response must address a number of public interest matters – responsible gambling, consumer protection, and revenues for government to pay for those public services that Canadians want and deserve.

Amendments to the Criminal Code would appear to be part of the public policy response. And perhaps it is time to consider more comprehensive amendments – for example, is it time to remove regulated gaming from the Criminal Code? Should it be something that each provincial jurisdiction addresses? What level of interprovincial alignment should there be? Are certain forms of gaming better delivered in an effective manner through the private sector? Should the recommendations of the Nadeau Report, for example, for a “licence and tax” regime for internet gaming be implemented?

The AGCO does not have the answers to these questions – and I certainly do not. But the Nadeau Report and others have pointed to the need for the Criminal Code to be reviewed to ensure that it meets the public interest of the 21st century. It has been more than a quarter century since the last substantial review of the Criminal Code – and some would argue closer to a half century – and much in society has changed in technology, expectations and attitudes.

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Canadian Gaming Business | 35

corporateprofile

INNOVA GAMING GROUP Growing world class gaming companies

INNOVA Gaming Group Inc. develops and grows companies that provide unique games and products to the global gaming industry, with particular focus on U.S. state and Canadian provincial lotteries.

INNOVA is a public company trading on the TSX under symbol IGG, and is the owner of Diamond Game Enterprises, a land-based gaming company.

36 |  Fall 2016

corporateprofile

DIAMOND GAME was founded in 1994 and maintains its head off ice and operations in Los Angeles, California.

Diamond Game develops, produces, markets, and services games, systems, and tickets for the global gaming industry. Its competitive advantage is its proven ability to enhance revenues of government-sponsored lotteries and other regulated operators by offering its unique products to reach new customers, often in non-traditional venues, and generate incremental revenue.

Diamond Game’s flagship product is its LT-3, a “stay-and-play” instant ticket vending machine. LT-3s dispense tickets while simultaneously displaying the results of each ticket in an entertaining way on a video monitor. Diamond Game holds five contracts with North American lotteries for the LT-3 as well as agreements with numerous tribal and commercial gaming operators for its alternative gaming products.

Canadian Gaming Business recently spoke with Richard Weil, CEO and Chairman of Innova Gaming Group, to learn more about the company, its area of expertise and its involvement in the Canadian gaming industry.

TELL US A BIT ABOUT HOW INNOVA CAME ABOUT AND ITS DEVELOPMENT SINCE THE IPO? Richard Weil: INNOVA Gaming Group is a public company that was formed to provide unique games and products to the global gaming industry. Diamond Game was INNOVA’S f irst wholly owned subsidiary and the objective was to combine the capital resources of INNOVA with the industry expertise of Diamond Game to deliver the best service and products that the lottery and charitable gaming industry need to accomplish its goals. O ver the years, Diamond Game has focused its resources on its lottery customers. The LT-3, Diamond Game’s core product, provides a whole new play experience for the lottery player. It also introduces lottery to retailer groups that have been

overlooked or are hard to engage, such as bars, veteran halls, bingo halls, and other age-restricted entertainment venues a nd social env ironment s.

INNOVA has built on that success by developing new products to capitalize on that opportunity. These new products and concepts will enhance our portfolio of solutions to help lotteries grow and contribute to charitable organizations.

WHAT HAVE BEEN INNOVA’S MOST SIGNIFICANT ACHIEVEMENTS SO FAR AND HOW WILL THOSE ACHIEVEMENTS FURTHER ENHANCE YOUR COMPANY’S PLACE IN THE GLOBAL GAMING MARKET? RW: We see our biggest achievements being

reflected in terms of increased deployments of LT-3 with current lottery customers and continued growth in net win. Our success in this regard demonstrates retailer acceptance of our products, player appeal of our games, operational and technical consistency, and overall value we create for our operating partners. Also, the launch of new jurisdictions underscores all of the above and demonstrates how, when lotteries need to find alternative channels in order to responsibly grow their revenues, we have a solution. Finally, being genuinely cross border, we have two important Canadian customers — OLG and LotoQuebec — and a sales and service facility in Stoney Creek, Ontario. We maintain our headquarters in Los A ngeles, California and have several service facilities throughout the U.S.

WHAT DO YOU BELIEVE ARE THE GREATEST GROWTH OPPORTUNITIES FOR INNOVA AND WHY? RW: Our market penetration with our product is in the very early stages, so the growth opportunity is huge. We believe we can leverage the trust that has been established with our government and commercial customers to ex pand our product, technology and content offerings into new lottery, charity and other gaming markets.

WHAT DO YOU SEE AS SOME OF THE BIGGEST CHALLENGES FOR THE GROWTH AND DEVELOPMENT OF INNOVA AND HOW DO YOU ANTICIPATE ADDRESSING SUCH CHALLENGES? RW: Organic growth can be a gradual

process given the security and reliability concerns of our customers and the speed of regulatory approvals. However, that also creates a barrier to entry for other vendors. At the same time, consolidation of mainstream industry vendors as the primary driver for growth has been the hallmark of the last few years. Finally, valuations have plummeted. So all of this makes for an environment in which you have to pick your spots carefully, and work closely with customers to ensure you are providing the right products to grow. Our strongest asset for addressing these challenges is our close relationships with our customers and players and an understanding of their needs and desires.

WHAT IS YOUR VISION FOR THE FUTURE OF INNOVA AND ITS ROLE IN BOTH THE CANADIAN AND GLOBAL GAMING COMMUNITY? RW: Broadening our niche as a supplier of carefully crafted products and services, recognized for high performance and operational excellence, into a go-to provider of a range of innovative products, primarily for the lotter y industry, that will drive growth for our customers.

WHAT’S YOUR PHILOSOPHY FOR DELIVERING THE BEST GAMING EXPERIENCE FOR ALL PARTIES INVOLVED, INCLUDING THE CUSTOMER, YOUR COMPANY AND THE INDUSTRY? RW: Understanding what our players and customers want and need and delivering it, respecting and appreciating each of our customers, and creating an environment in which our employees are having fun and feel encouraged to grow and innovate.

Canadian Gaming Business | 37

marketing

DIGITAL STRESS TEST Is your website meeting customer expectations?

BY LINDSAY MCLEOD

38 | Fall 2016 38 | Fall

marketing

Many companies are applying stress tests to their corporate websites to see how they measure up against their competitors and to validate whether they are meeting customer expectations.

You should be doing the same with your website. It's your point of differentiation and likely your greatest acquisition and retention tool.

YOU NEED TO make sure your website is up to par and ensure your customers’ needs are being met every time they visit. Take this simple seven-step stress test. If you can't answer “yes” to all seven questions you should be making plans to revise your site and improving your customer experience.

in your digital journey, and, more important, how much you spend to lose a customer. To do this you need to know what brought the user to the site, in how many steps, what converted them and where you lost them. This is the art of understanding attribution and the cost to acquire a customer. Ignoring this measurement will guarantee that clicks and impressions will continue to send false positives with little impact on the bottom line.

1. Do you k no w w h a t your c u s t omer journey looks like?

Where do they start this journey? Is your customer standing on property with a mobile device looking for a promotion? Did they see a billboard on the interstate and are now trying to find you online? It is important to acknowledge that the journey doesn't start simply at your website. It could start minutes, or even days before coming online. Understanding where your customers come from and then driving them through a journey that satisf ies their original question is paramount. Removing any barriers from that journey is the first step to success.

2. Do you know if your website supports all types of visitors?

Is it usable on mobile, tablet and desktop? And above all, does it meet current accessibility standards? It is crucial (and required by law) that all these user needs are met as customers become more savvy and f ickle. You have to be inclusive of the many devices in the marketplace.

4. Do you offer and reward your customers with exclusive content?

3. D o y o u k n o w y o ur digi t al c o s t o f acquisition?

No longer can you throw money against digital ads and assume they will work. Measuring only clicks and impressions are a thing of the past. It is imperative that you measure and know how much money you spend t o acqu i re a nd ret a i n c ust omer s

Technology has given us the ability to segment to a level that we now know what pair of shoes a customer last looked at online. Customers expect a personalized experience. Generic content does not satisfy the masses.

Custom content is key and only half of the equation. You need to put in as much effort producing rich content as you do providing it to your customer. Do you house it in a member-based mobile app?

Do you have to register to get access to this content? Customers are willing to work for content that is rewarding.

Asking for preferences and personalized data to access this content is a win for both marketer and customer.

5. Do you know what content you are posting / sharing / saying in t wo weeks, three months or six months?

Taking a reactionary position or, even worse, ignoring social content is a thing of the past. Having a content Canadian Gaming Business | 39

marketing

strateg y that supports a customer throug hout their dig it al jour ney is key. K nowing what that content lo ok s l i k e w e ek s a he a d i s e ven more important. This ensures your content is on brand, is strategic and delivers on your digital promise. It also gives you more time to focus on the organic discussions, humanizing

your brand and if need be - deal with a negative situation.

6. Do you know if you are you paying for inefficient keywords?

On the surface it looks like you are generating awareness and traffic, but from qualified customers? Unlikely.

So many times when reviewing a

client's adword setup we uncover the ugly truth — you are paying for broad match keywords that have nothing to do with your vertical, let alone your segment. The opportunity is endless to target very specific customers and tie it back to your ROI when done correctly. Knowing how to leverage that opportunity and implement a keyword strategy for both paid search and organic search that supports your customer journey is where many fall short.

7. D o y o u k n o w h o w y o u r e m a i l i s performing?

47 years old, male.

Has 3 casino rewards cards.

He’s not loyal to any of them because he gets the same offers from all of them.

We know your pain. We understand the challenges of your industry. But we also know your customers. And we can help you connect with them better than any other communications company. So if you’re looking for the most experienced casino marketing agency in Canada, give us a call.

We’re here to help.

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40 | Fall 2016

Emails have become a commodity in the digital space. At times worse than regular junk mail, with some of the messaging not even making it to our client’s digital doorstep. Yet email continues to serve a purpose — but you need to make it work even harder than loading up a generic blast and hitting send. Email is the delivery mechanism of your customer journey that you have control over. Ensuring it is personalized, exclusive and timely will prove of great value to your customer. Measuring open and click rates will no longer suffice. You need to understand where and what your customer does after they have opened and clicked. Tying email into your digital journey will give you the visibility you need to understand which customers to attract, retain and just how much you need to spend to keep them.

If you answered yes to all seven questions, congratulations you get a gold star!

If you didn't and you believe your d i g it a l st r at eg y do e sn't mea su re up, work with a marketing ex pert such as Marshall Fenn, which can help casinos across North America differentiate their brands from the c o m p e t it i o n , i n c r e a s e p r o p e r t y traffic and use mobile technology to increase customer traffic.

Lin d sa y Mc L e o d i s D ire c t or, D i g i t a l St ra t e g y a t Ma r s h a l l Fe n n Communications in Toronto. Marshall Fenn is a full-service marketing agency with over 20 years’ experience developing marketing and advertising campaigns for the casino industry in Canada and the U.S. For more information, visit www.marshall-fenn.com.

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regulatorycompliance

GOOD GOVERNANCE

Is it good business or just a catch-phrase?

BY NAV SANDHAWALIA AND TERRY MCINALLY

Some people refer to it as corporate governance, others just call it governance, and some simply refer to it as a pain in the you-know-what. Regardless of the name, one thing is certain: Good governance is a crucial element for any business, and the gaming industry is no exception.

THE DEFINITION of good governance varies depending on whom you might ask. Generally speaking, though, an organization with good governance has the proper structure, culture, and framework in place in order to exceptionally meet (and often go above and beyond) defined rules and regulations. We would take it one step further: Our definition of good governance would also include ensuring that concepts such as accountability, transparency, ethics, integrity, creation of long-term value, and equality are also in good standing.

Long gone are perceptions of mobsters running casinos with blatant disregard for standards of compliance or the law.

Regulators today are focused on ensuring gaming organizations have the right corporate elements in place to comply with requirements and are conducting business ethically. These practices are also all in the best interest of the organization’s shareholders.

The concept may seem overwhelming, but practising good governance can be invaluable (aka: save you money, time and effort in the long run!) not to mention also put you in good standing with your regulators. There are three areas we would recommend that gaming organizations focus on in order to get the biggest “bang-for-your-buck” when it comes to enhancing good governance and making your organization run more efficiently and effectively: 1. Boar d o f Dir ec t or s E duc a tion and Training:

This is important for obvious reasons.

Take, for example, the risk of anti-money laundering: How can directors oversee anti-money laundering initiatives, if they

do not understand the relevant rules, regulations, and associated risks? Often directors may not have the right technical knowledge to effectively oversee critical elements specific to the gaming industry.

It’s not to say that every director must be a Certified Anti-Money Laundering Specialist (‘CAMS’), but there should be a foundational element of understanding.

Consider including a training element in every board meeting; this can be a quick update on new directives or a longer session on more critical elements (e.g. session on newly created privacy rules).

Including educational sessions will enable your board to act with more confidence in decision making and provide regulators with more confidence in your board’s ability to govern.

2. The Role of Internal Audit:

This business function, which may be nightmare-inducing, can be your ally — really! Your internal audit function can serve as a proactive management tool.

An objective audit can uncover areas for improvement or provide suggestions to better meet regulatory requirements.

Consider re-thinking your internal audit function to include a mandate to assess areas for efficiency throughout your organization whether it be IT, compliance, finance, security, or otherwise. Gaming regulators can place reliance on an organization’s internal audit function, so why not make this function a broader component of your overall strategic planning and good governance agenda?

3. Risk Management:

Every organization needs to think about risk, whether it’s through a

formal risk management function or accomplished informally (as tends to be the case for smaller organizations).

“Risk” is not a mere buzzword. Risk m a n a g ement is a met ho d wh ich helps you focus your attention on the areas of greatest concern to your organization. Consider working with your Board of Directors and executive management to begin formalizing your risk management approach. Sharing pla ns a nd accomplishment s w ith respective regulators is also something organizations should consider.

Creating a culture of good governance and embedding it in your organization’s DNA can be cumbersome and is often a long road; however the reward in the end can be well worth the effort.

We advise our clients that it’s crucial to start formalizing this process by understanding their own organization’s current structure, and determining the steps needed to improve upon it.

Good governance goes beyond just a catch phrase and can help make your organization more efficient, effective, and generate long-term value for shareholders.

Nav Sandhawalia is a Vice President w it h R i cht e r an d can b e rea ch e d at n s a n d h a w a l i a @ r i c h t e r . c a . Te r r y McInally is a Partner with Richter and can be reached at tmcinally@richter.ca.

Founded in 1926, Richter is an audit, tax, wealth management and consulting firm with a dedicated gaming industry offering focusing on supporting regulators, operators, and the broader private sector.

Ri cht er h a s of f i ce s in Montreal an d Toronto.

Canadian Gaming Business | 41

gaminginnovation

GAMING WITH SKILL The great gamble for next generation gaming

BY STEVE WALTHER

Every business sector from automotive repair to breakfast cereal is reaching for the chequebooks (or Apple Pay Wallets) of the largest generation in history as it transitions to become the nation’s largest economic spending group. Canadian casinos are no exception to this Millennial market movement and they’re ready for bold new developments to make it happen.

42 | Fall 2016

gaminginnovation FOR 20 YEARS CANADIAN casinos have worked to optimize the gambling environments of their slot, table, horse racing, and even bingo areas. Significant research, testing, and investment are undertaken to improve guest experience for the best results within these gaming contexts. Recently, however, an entirely new sector of gambling has been identified as a potentially untapped income opportunity to further diversify gaming revenue; some people call it Millennial gambling and many people associate it with emerging skillbased legalization. It’s become a large focus for the industry and was a major topic of conversation when Konami got together with top operators during this year’s Canadian Gaming Summit.

Dotted among a few of the largest gambling hubs are examples where casinos are working to pioneer this new Millennial gaming sector through specialized zones designed to appeal to a younger player demographic, particularly those born in the 80’s and 90’s. These audiences have demonstrated clear connection to nongaming activities—such as restaurants, nightclubs, concerts, and retail—and Canadian gaming operators are particularly focused on how to blend these activities with gambling activities.

BRIDGING SLOTS TO SKILL

As a global gaming company, the team at Konami has met with casinos from all different jurisdictions and when it comes to the topic of skill-based games, Canada is perhaps one of the most ambitious in its pursuit. Canadian casinos have their core audience solidly established and they have the flexibility to reach toward emerging innovation to further grow their business.

Skill-based elements represent one new realm of available possibilities to achieve this.

We sat down with top casino professionals and executives from across the country to discuss this very topic during the 20th Annual Canadian Gaming Summit earlier this year. These are the target characteristics of skill-based gaming they unanimously identified as preferable for reaching millennial consumers: Must-haves for skill-based gaming: • It should appeal to new players with new gaming formats, and not preclude the existing core gambling audience from trying something new.

• It should both explicitly and visually communicate which gaming aspects are skill-dependent and which are

randomized. In the past, players have been wary of pseudo-skill bonuses so it’s crucial that new skill concepts are communicated with clarity.

• Similar to slot machines, it should provide an inherently captivating level of engagement that allows the player to immerse themselves in a fun and exciting gambling experience.

• These combined characteristics aim to cultivate true incremental revenue via untapped market demographics, without alienating the property’s loyal core slot players.

As BCLC CEO and President Jim Lightbody shared: “The potential of this new gaming segment is strikingly apparent to the Canadian gaming sector in particular.

We have a definite understanding of the Millennial’s casino experience today, and we have a vision for what that could become with the right products and positioning.”

BLENDING GAMING WITH GAMBLING

More than any other generation, gaming is mainstream entertainment for Millennial consumers. Mobile apps, consoles, PCs, and tablets act as major portals to which virtually all Millennials connect, from casual social games to hardcore console games. This casualization trend has held seemingly limitless opportunity for all gaming sectors, including casino gaming. Online formats have found success and continuing growth in reaching these audiences with for-wager content. However, the traditional landbased casino industry has yet to fully realize a for-wager offering that focuses on this audience which has enjoyed video games since their very earliest years.

W hen we spoke with Canadian operators on this issue, they asked for two things: value and variety. They’re looking to explore a broad spectrum of Millennial-centric gambling options with responsible investment that makes sense for their business.

“Konami has a solid appreciation for the Canadian gaming market and the objectives we are trying to achieve. The most important objective from my perspective is ensuring we offer highly entertaining value to all patrons,” said Niaz Nejad, vice president of lottery and gaming services at AGLC. “This is something that Konami is well positioned to assist us with based on their performance, innovation, and strategic plans for the future.”

Canadian casinos are looking for unique new “gamer” style skill-based, for-wager

products that can truly drive monetization t h r ou g h a r c a d e - s t y l e g a m bl i n g entertainment. As a company whose roots are in video game creative development, Konami is uniquely positioned to make this concept a reality.

“We’re interested to see what Konami's creativity can bring as the industry expands to new gambling formats,” Jim Lightbody said. “We may need to ‘gamblify’ the types of games that Millennial audiences enjoy on a daily basis, some of which are games that Konami has brought to their digital entertainment division over the years.”

GAMBLING HALLS VERSUS GAMING HUBS

Beyond innovat i n g t he pro duc t s themselves, our industry is also tasked with pioneering a new kind of casino environment where they are suited to thrive. These interactive, communitydriven, arcade-style skill games have little chance of survival among a sea of slots or clustered in with the card tables.

It’s essentially a new species of gambling for new players that have far different expectations when they put their dollar into a machine.

Whether it’s a slot lounge club or an arcade for grown-ups, operators are pretty united on the idea that these next generation products should appear within a certain dedicated section of the property.

The common theme we’ve heard from our customers across Canada is that it should be constructed around a concept of social play. Community jackpots, live music, competitive leaderboards, lounge seating, and bottle service are a few of the experiential details that have been suggested to create that social atmosphere with shared gambling interaction for those millennial audiences.

Ultimately, the goal for Canadian gaming operators is to deliver entertainment value for Millennial demographics, in order to pioneer a customer lifecycle that is successful in engaging new audiences. Realization of this goal is dependent on suppliers, operators, and regulators to explore new diversity while managing a good measure of uncertainty, risk, and revision. The odds are challenging, but as other industries have shown, this market evolution holds great opportunity.

Steve Walther is Senior Director of Games an d Sys t e m s Pro d u c t Man a g e m e n t , Konami Gaming, Inc. For more information visit www.konamigaming.

Canadian Gaming Business | 43

2016 SUMMIT HIGHLIGHTS The Canadian Gaming Summit, Canada’s premier annual conference and exhibition for gaming professionals, was held in Ottawa/Gatineau on June 13-15, 2016, delivering a diverse and comprehensive lineup of educational programming, trade show exhibitions and networking opportunities for attendees from all gaming sectors, disciplines

Delegate Receptions and Networking Events: Held on the tradeshow floor at the Shaw Centre in Ottawa, Tuesday night’s Delegate and Exhibitor reception was enjoyed by all who attended. The event included food and refreshments, in-depth conversations between network professionals in a relaxed and professional setting, and a raffle for four outstanding getaway trips around Quebec.

and regions within Canada and beyond. The Summit featured a virtual “who’s who” of the Canadian gaming industry and included gala receptions, insightful keynote presentations and first-rate concurrent charitable gaming and F&B conferences.

Here are just a few of the reason delegates travelled to our nation’s capital — in addition to being able to enjoy the outstanding amenities and hospitality of our host venues, Hilton Lac Leamy in Gatineau, Quebec, and the Shaw Centre in Ottawa.

• Its Unique Position – The Summit is Canada’s premier and only annual

conference and exhibition for gaming professionals.

• Networking – The Summit delivers face-to-face interaction between attending

delegates who represent all gaming sectors in Canada and beyond.

• Education – The Summit’s Education Program Committee developed an

amazing schedule for 2016. Keynote presentations, the annual Charitable Gaming Conference, the ever-growing Food and Beverage Conference and an outstanding array of educational tracks.

• New Products and Services – The Summit trade show floor, comprised of

major gaming product and service suppliers, displayed new and innovative offerings.

• Exchange of information – The Summit provided an opportunity for gaming

professionals to engage with one another and exchange ideas in private meetings.

If you want to experience everything the Canadian Gaming Summit has to offer, be sure to mark your calendar today to join us as the Summit heads to Vancouver on June 19-21, 2017. See you there!

First Nations Awards: The Annual First Nations Canadian Gaming Awards took place as part of the Summit’s Awards Reception.

These awards recognize the contributions of First Nations casinos to the First Nations and neighbouring communities.

The awards also honour the outstanding accomplishments and contributions of Aboriginal people employed by a First Nations casino within Canada and the continued development and improvements within their operations.

Exhibition Show Floor: The Exhibition floor offered delegates the opportunity to meet one-on-one with existing and prospective suppliers. Filled with the industry's top companies and service providers, this was the industry exhibition to attend. New gaming products and services were launched and showcased and multiple networking opportunities were also available.

Annual Industry Awards Reception: Since its inception 20 years ago, this prestigious event has honoured achievements in industry leadership.

We look forward to welcoming you to the 21st Annual Canadian Gaming Summit on June 19-21, 2017 in Vancouver, B.C. — See you there!

For more details visit www.CanadianGamingSummit.com

Golf Tournament: Thank you to all those who played in the 2016 CGS Golf Classic and congratulations to our winning team of Michael Orser, Ronda Gray, Randy Robbins and Rick Desjardins. As the golfers began their rounds sunny skies welcomed them to the breathtaking Marshes Golf Club where they got the chance to play the esteemed 18 hole course. After the round the golfers enjoyed a great BBQ meal and relaxed with cold drinks after a long day on the links.

Opening Reception: Attendees of the 2016 Canadian Gaming Summit Opening Reception, held at the beautiful Casino du Lac-Leamy in Gatineau, QC, experienced a night not to be forgotten. The delegates were treated to outstanding food and drink courtesy of our Food and Beverage sponsors and the Casino Lac-Leamy while mingling and meeting gaming industry professionals from across the country and taking in the great entertainment. Industry awards were given out throughout the night on the Casino Theatre stage. Congratulations to all of the award winners and thank you to everyone who helped make this an amazing night, from the Hilton and Casino staff to the delegates and sponsors.

Keynote and Education Sessions: We had two fantastic keynote and plenary sessions at the Summit: “No Silver Bullet – How casinos can appeal to different targets” presented by Paul Lauzon of Ipsos on Tuesday, June 14 and a roundtable plenary on Wednesday, June 15 where a panel of industry experts joined moderator Lyle Allen of HLT Advisory for a review of Canadian gaming revenue trends and supply changes over the past few years. The educational program was developed through extensive industry consultation to offer sessions covering a wide array of gaming topics, including Legal & Regulatory, Charitable Gaming, iGaming, Security & Surveillance, Marketing & Communications, Corporate Social Responsibility, Finance & Markets, Food & Beverage, Human Resources and much more.

finance

THE COMPLIANCE CHALLENGE

AML compliance in an era of privatized gaming

BY IAIN KENNY

As Canada’s Financial Transaction and Reports Analysis Center (FINTRAC) moves to improve the nation’s anti money laundering (AML) controls, many provincial governments and gaming operators are starting to find that their reporting structures and obligations are changing.

HAVING RECENTLY been designated as the ‘reporting entity’ for the province’s gaming activities, the Alberta Gaming and Liquor Commission (AGLC) is now starting to think carefully about how it might best work with its operators to improve compliance and drive greater process consistency across facilities.

Alberta is not alone. In Ontario, the privatization of operations of provincial gaming facilities will bring new AML reporting challenges to the province as Ontario Lottery and Gaming (OLG) works to train private operators and integrate their data back into the system. And in Manitoba and Alberta, direction from FINTRAC requiring the provincial government to take over some of the reporting of First Nations operations is also creating new complexities for AML reporting.

A RISING RISK

To be clear, the requirements of AML reporting have not changed. Operators will still be required to report financial transactions and they will still need to monitor and assess their high-risk patrons’ business interactions.

The difference is that – in some cases – the reporting entity has changed.

Rather than operators reporting directly to FINTRAC, it is now increasingly the responsibility of the province to “roll up” their operators’ data and consolidate their reporting to FINTRAC. And that means that those provinces will ultimately hold the responsibility for any errors, incomplete data or missed deadlines.

Not surprisingly, this is causing some consternation. The reality is that AML processes, capabilities and systems often vary by operator. Some boast a legacy of robust reporting; others, however, have historically struggled to meet their deadlines 46 | Fall 2016

and obligations. Where new operators are taking over facilities, new systems and processes will need to be developed.

FACILITATING THE TRANSITION

W here the province is taking over reporting from an existing operator, our experience suggests that gaming authorities may want to start by creating a solid benchmark of their operators’ capabilities before making any significant changes.

Current systems and controls should be properly assessed, as should the operator’s reporting history. This should provide the provincial authorities with a clear sense of where future problems may lie and where opportunities for tighter integration may exist.

Governments may also want to consider investing into improved automation and central systems to improve reporting reliability, consistency and efficiency.

Modern systems and analytics tools could improve compliance and increase efficiency while reducing the number of full time equivalents (FTEs) required to conduct manual risk assessments and record keeping.

Once the AML program is up and running, provincial authorities will also need to ensure that AML audits and reviews are being properly and thoroughly conducted. While this responsibility may ultimately fall on the Internal Audit function, our experience suggests that few internal auditors have any real operational experience navigating Canada’s Proceeds of Crime Act and other AML regulations.

Independent auditors will be required – at least on a rotational basis – to ensure that all regulations and requirements are being fulfilled. We often advise our clients to integrate internal audit team members with external auditors to further increase

their internal capabilities and reduce future audit costs.

TOWARDS STRONGER AML CONTROLS

Outside of Alberta – where the government has created a mechanism through which to fine operators for reporting errors or late submissions – government authorities will need to work closely with operators to encourage improved compliance and investment into risk management tools and systems.

This will not be easy. Aside from the obvious technical issues this may create, the provinces will need to work directly with operators to develop procedures that recognize and reflect the diversity of facilities and patrons within their jurisdiction while also ensuring that records are properly maintained and reports are correctly filed. Simply put, there is no “silver bullet” or template solution that can be applied across all facilities or jurisdictions.

However, we firmly believe that, with greater collaboration between governments and operators and the application of new technology solutions, Canada’s gaming industry will emerge from this transition with greater AML controls, reduced risk and improved regulatory compliance.

Iain Kenny, CAMS CISSP, CFE, CCE, is a Partner in the Forensic Technology Services group and the National leader of the Digital Evidence Recovery team at KPMG in Canada.

Working with a team of professionals across the country he provides Forensic Technology, Cyber incident, E-Discovery and Fraud investigation services to clients. In addition he provides specialized Anti Money Laundering services to Financial Institutions, Casinos, Money Services Businesses and other regulated entities. For more information, visit www.kpmg.ca.

“Where the Canadian Gaming Industry Meets”

June 19-21, 2017

Vancouver Convention Centre Vancouver, BC

SAVE THE DATE VANCOUVER 2017

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