Canadian Gaming Business | Spring 2016 by MediaEdge

Vol. 11 No. 1

Spring 2016

IGAMING IN CANADA

PM 40063056

Is it time for provincial operators to push “reset” on their iGaming strategy?

CanadianGamingSummit.com June 13-15, 2016 Ottawa/Lac-Leamy

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Spring 2016 Publisher

Volume 11 Number 1 Chuck Nervick chuckn@mediaedge.ca 416.512.8186 ext. 227

Editor Sean Moon seanm@mediaedge.ca

contents 14

www.CanadianGamingBusiness.com

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Proudly owned and published by:

President Kevin Brown

President & CEO Bill Rutsey

EDITOR’S NOTE

MESSAGE FROM THE CGA

8 COVER STORY iGaming in Canada: What’s Next?

A provocative reset strategy for provincial gaming operators

INDUSTRY Q&A

T he Best of Both Worlds: Managing the convergence of online and land-based gaming

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

SECURITY AND SURVEILLANCE Playing It Safe: Player and game protection and BCLC’s PlayNow.com

22 EXECUTIVE Q&A François-Patrick Allard, Managing Director, Société des bingos du Québec, Loto-Québec

24 FINANCE Taking Stock: A look at the price performance at Canadian iGaming stocks 28

FACILITY PROFILE Casino de Montréal: The Art of Entertainment

32 MARKETING IGaming on the Go: The mobile gaming bandwagon gains steam in Canada 36

GAMING INNOVATION Getting Personal: Mobile gaming and the move towards customized content

39 COMMUNITY GAMING Community Gaming Conference 2016: Charting the course for community gaming in Canada

EMPLOYEE ENGAGEMENT Managing Diversity: The importance of reducing unconscious bias in the workplace

45 ANALYTICS iGaming Analytics: Preparing for the next generation of players

Official Publication of the Canadian Gaming Summit

Canadian Gaming Business | 3

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editor'snote

The Challenge of Change CHANGE, AS THEY SAY, IS GOOD (at least according to my well-meaning wife every time she wants to discuss renovating the bathrooms or rearranging the furniture). Yet as many of us know, change can also be a challenge. For anyone in the gaming industry, we realize that the pace of change is accelerating at an astounding rate. Whether it is working to accommodate the latest technological innovation on the gaming f loor or attracting a new demographic through the increased use of mobile and social media applications, our industry is facing some of its toughest challenges ever, all thanks to the pace of change. In this issue of Canadian Gaming Business, we ask the critical question when it comes to all this change: What’s next? Starting with our cover story, industry analyst and consultant Terry Debono addresses the notion that the Canadian iGaming industry in particular is at a crossroads, and that the provincial governments and lottery corporations face a serious decision: Continue down the path of offering selected iGaming products from suppliers using a monopoly model, or reset their strategy to allow a wider range of iGaming products and suppliers to become licensed and regulated in their jurisdictions. Also within the framework of “What’s Next,” we look at the many other varied sectors of the gaming industry and how they are adapting to ongoing developments in regulatory policy, technology and demographics including: • An insightful roundtable discussion featuring a diverse panel of industry insiders on the convergence of online and mobile gaming with their bricks-and-mortar counterparts; • A look at player and system protection and security on one of the country’s largest online provincial gaming sites; • An analysis of several top Canadian iGaming stocks and the outlook for the future; and, • How iGaming analytics can help companies prepare for the next generation of players. Added to the above, we also have our usual stellar lineup of features and columns, including a visit to Casino de Montréal for our Facility Profile, an Executive Q&A profile with a leader in community gaming in Québec and a look at how reducing unconscious bias in the workplace can help organizations better manage diversity and create a more inclusive work environment. 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

Kids These Days

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

MILLENNIALS (young adults in their early 20’s to age 35) have been on my mind lately, and not just because I have a 27-year-old daughter. They are now the biggest cohort in the Canadian workforce, a demographic juggernaut that will further consolidate as baby boomer retirement accelerates. Historically, as the gaming industry grew on the backs of the baby boomers it was able to mostly resist innovation and ignore nascent changes in customer preferences. For too many years properties and companies have spent too much time and energy trying to make their customers conform to their offerings. With the demographic shift underway this is no longer realistic. The tables are now turning. According to the Economist, we have a Millennials economic advantage here in Canada compared to the United States. Canadians aged 25 to 34 are more likely to have jobs than Americans of the same age (nearly 80% are employed, compared with less than 75% of Americans), their household incomes are 16% higher and just over half are homeowners, compared with 36% in the United States. T h at ’s g o o d new s! So, t he quest ion s of c r it ica l importance are – what do they like and how do we give it to them? The bad news for the gaming industry is that they don’t much like traditional casino games, especially slot machines, but like most everyone, they do like to have fun and aren’t afraid to spend money. This presents both a huge problem and opportunity. This is the challenge for our industr y – to create reasons, experiences and environments for Millennials to spend their entertainment dollars with us as opposed to elsewhere – to reinvent our business models to match up with these new customer preferences. The integrated resorts in Las Vegas were the first to react by delivering dayclubs and nightclubs, including expensive booths and bottle service, and now the rest of the casino industry is adapting. Tony Cabot, in a recent Global Gaming

6 | Spring 2016

Business Magazine opinion piece quoted MGM Chairman Jim Murren on the subject. When asked about younger customers in a television interview Murren said, “Many of them have no interest in gambling, and that’s fine with me.” And, he is exactly right, because they still have an appetite to be entertained. BroBible, the Millennial male’s lifestyle guide, recently picked up on this, observing casinos elsewhere mimicking Las Vegas by, as they characterized it, “pulling some devious tricks.” The devious tricks BroBible revealed included tattoo studios, mixed martial art competitions, enhanced entertainment venues, booking top electronic dance acts and remaking their gaming f loors by removing slot machines to make way for more poker and other table games favored by younger gamblers. BroBible may call this devious; I prefer to call it good business and reinventing your product offering to give your customers what they want. And as true as this is for bricks and mortar facilities, it’s even more critical in the v ir tual env ironment. Millennials never put down their phones. They expect instant communication, instant information and instant g rat if icat ion. W hen you ma r r y this w ith I nter net gambling, online poker, single-event sports betting and daily fantasy sports the only realistic response should be to embrace change. Instead, we are all caught in a miasma of prohibition and struggle for monopoly. However, that’s a subject for another column. I ’ l l clo s e w it h t he hop ef u l t hou g ht t h at i f t he entertainment preferences of Millennials means that t radit iona l g a ming facilit ies a nd product s w ill be reinvented and repurposed to meet those preferences and expectations, then our industry is on the right track for a bright and sustainable future.

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coverstory

IGAMING IN CA — WHAT’S NEX NE In the following article, industry analyst and consultant Terry Debono takes a look at how provincial governments regulate and operate liquor sales and offers a provocative reset strategy for iGaming in Canada.

8 | Spring 2016 8 | Spring

coverstory

ANADA EXT? Canadian Gaming Business | 9

coverstory

iGaming in Canada: What’s Next? BY TERRY DEBONO

With the iGaming industry in Canada at a crossroads, the provincial governments and lottery corporations face a serious decision: Continue down the path of offering selected iGaming products from suppliers using a monopoly model, or reset their strategy to allow a wider range of iGaming products and suppliers to become licensed and regulated in their jurisdictions. THE REALITY? iGaming products offered by Canadian lotteries to date have failed to meet government expectations of revenue generation and net contribution to provincial treasuries.

10 | Spring 2016

The rea son is simple: Mobile phone technology, Internet search eng ines and ubiquitous w ireless Internet access have fundamentally changed how people consume their

infor mation and enter t ainment. This shift ha s funda ment a lly disrupted the iGaming business models currently in use by lotteries in Canada.

coverstory VARIETY NEEDED

MASSIVE ONLINE SHIFT

A nyone w ith a mobile phone can listen to music (they don’t need to visit a record store), watch a movie (they don’t need to wait until 9 p.m. on Friday), get the weather forecast (they don’t need to watch TV or listen to the radio), read the news (they don’t need to buy a newspaper), play a game (they don’t need to turn on the Xbox and the TV), buy a concert ticket (they don’t need to line up at the stadium or call the box office), or look at a photograph (they don’t need to visit their local camera store). If they want to gamble they don’t need to go to their local convenience store, race track, casino or provincial lottery website as consumers can get these and many more entertainment industry products quickly and seamlessly on their current mobile devices. Very simply, and perhaps obviously, mobile has changed the how, where, what and when process of gambling and, in doing so, it has dramatically increased the selection of products that are available to consumers today. Consumers carr y their w ireless computer with them wherever they go. Consumers no longer live in an Internet world — they live in a mobile one. Mobile has become a basic consumer mindset. Like an A ME X card, you really can’t “iLeave” home without it. Consumers want what they want, when they want it, where they wa nt it – a nd they have the knowledge on how to get it.

DISRUPTIVE BEHAVIOUR

This change in consumer behaviour has been particularly disruptive to the gaming and entertainment industries. Any product that can be consumed on an electronic device has the potential of replacing conventional deliver y systems. Record stores have been replaced by iTunes, book stores have been replaced by Kindle and a myriad of e-reader products, and video rental stores have been replaced by Netf lix and other streaming services. Any lottery’s product that can be consumed on a mobile device must now deliver a truly competitive range of products to these same consumers. Otherwise lotteries will face the reality of increasingly competitive iGaming products eroding consumers’ existing relationships with lottery operators. L ot ter ies now face t he rea lit y of continuous disruption by new technologies and shifting consumer behavior. Lottery operators’ business models need to change immediately. Failing to change business models to comply with new technologies and consumer behavior killed once dominant companies such as Kodak, Blockbuster Video, Sam the Record Man, Borders Books stores and various magazine publications. Numerous other industries are in the midst of upheaval including major TV and radio networks and the entire taxi industry. The fact is, no industry is immune from changes in consumer behaviour — not even monopolies.

It is no longer enough for lotter y operators to offer a small range of Internet-based iGaming products. L ot t er ie s now ne e d t o prov ide consumers with the products that the customer actually wants on the devices the customer currently use — not just the products that lotteries want to sell consumers on a restricted set of specific devices. Failure to do this will mean that con su mer s w i l l i nc rea si n g ly g o elsewhere with their purchasing power, using their “anywhere, anytime, any device” mobile mindset. One option for governments and lotteries is to abandon their current efforts and convert their iGaming strategy to a license and taxation based model. Several provinces are now reviewing this business model under their interpretations of the “Conduct and Manage” rules and regulations contained within sections s.206 and s.207 of the Canadian Criminal Code. It is important to note that not all provinces interpret these sections of Canadian Criminal code in the same way. Under some interpretations of these rules, iGaming companies could be licensed and taxed and could conduct business directly with consumers within the applicable jurisdiction. U.K. APPROACH

This model is essentially the U.K. licensing approach adapted to a Canadian province. In return for being licensed, the iGaming operator is in a direct relationship with the consumer and not via the lottery’s existing online site. Under an alternate interpretation of the rules, governments and lotteries could also move to a “storefront” model where a wide range of products from multiple iGaming vendors would be offered via the existing lottery’s online site. In both models, all iGaming products would be licensed, tested and approved by the applicable gaming regulator. Sourcing from multiple competitive iGaming vendors will allow lotteries to offer a comprehensive range of products to consumers from within its lottery

“Consumers no longer live in an Internet world — they live in a mobile one.” Canadian Gaming Business | 11

coverstory

“Lotteries now face the reality of continuous disruption by new technologies and shifting consumer behaviour. Lottery operators’ business models need to change immediately.” site or alongside it. Both options are viable alternatives to the current lottery iGaming business models that are being used across Canada. TECHNOLOGICAL DILEMMA

E x acerbating the need to review current iGaming business strategies in Canada is the forthcoming impact of new products and new regulations. New technologies such as Augmented Reality and Virtual Reality Casinos are now under construction and will soon be available for the iGaming industry. New delivery platforms such as wearable devices and enhanced vision systems will soon be part of iGaming. New product categories such as live dealer, skill gaming, skill/chance hybrid games, proxy-play, in-game wagering, community games, social casino, fantasy sports, and e-Sports are already being delivered to Canadian consumers. Pending changes to the Canadian Criminal Code may allow for the introduction of single outcome sports wagering and sports books to operate in Canada. Recent changes to the Federal Criminal code (Bill C-43) will soon allow charities to conduct raffles and draws using electronic devices, bypassing the provincial lotteries entirely. All of this is happening now. Right now. The speed of product innovation and technology in gaming is actually accelerating and consumers’ appetite for how, what, where and when they play is growing at the same pace. The time has arrived and almost past that governments and lottery operators must reset their iGaming business models. HEALTHY COMPETITION

The resets will allow new concepts, technologies, games, and state-of-theart delivery systems to be brought to the Canadian market in a timely and competitive manner by the competing suppliers. These products can be brought to market in accordance with rules and oversight from the lottery corporations as well as the applicable 12 | Spring 2016

regulatory bodies in accordance with responsible gaming initiatives. Engaging multiple iGaming suppliers under a license and taxation model or storefront model will shift the burden of product innovation away from the government and lotter y operators and directly onto the shoulders of the iGaming suppliers. All we have to do is look at Canada’s regulated liquor and spirits industry. THE POWER OF CHOICE

Consumers are given the ability to choose the product that suits their needs. They are never in a position where they can only buy one type of red wine from one specific supplier and at one price point. The provinces have varying methods of selling alcohol including government-run monopolies and private-sector retailing. The one thing that the provinces have in common is that they don’t make the wine or spirits that are sold. The provinces set the rules for what products can be sold, they approve which retailers can sell the products, how products can be advertised and promoted and pricing guidelines. Ultimately it is the consumer who decides what products they want to purchase. W hen a consumer walk s into a liquor store, they are assured that the products for sale have been tested by the government for quality control. They can see by the labeling on the product where it was manufactured and what the ingredients are. They can shop by a brand name and varietal style. They can see the relevant alcohol-per-cent content information. Prior to completing their purchase consumers must pass a stringent (usually two pieces of ID if there is a question) age verification test by the retailer’s trained staff. If I was to ask anyone who works in the Canadian gaming industry how they would respond if they went into a liquor store and were only allowed to buy only one specific brand or type of wine, I am certain that their frustrated responses would be quite creative.

STOREFRONT MODEL SUCCESS

In this method of operation, the government generates its revenues by ensuring that consumers are able to access a wide range of products from absinthe to Zinfandels. The government does not make the products that are going to be sold in the stores; they either operate the stores directly or license companies to run the stores. The government always remains responsible for ensuring that the products for sale are safe for consumption. Variety, value and the ability for a consumer to make a personal selection are the key to success of the storefront model of alcohol sales in Canada. While there are significant similarities between the sale of alcohol and gaming products in Canada, the similarity ends in how the products can be consumed. A lcohol is a physica l pro duc t , iGaming is not. The current iGaming business model has proven that it does not meet the goals of offering Canadian consumers the products they desire on the delivery systems they wish to use. Further it does not adequately contribute the revenues to the provincial treasuries that are needed to support the economy. T h e r e a l it y i s , it i s t i m e fo r government and lotteries to hit “reset” on their business models for iGaming. Failure to do so will only increase the diff iculty and cost of making these changes later. Terry Debono is a partner in the Debono Group which provides consulting, management and operational services to clients worldwide including: Lotteries, land-based and online casino operators, gaming technology companies, gaming regulators, government policy makers, media companies and financial analysts. He is also a partner in Boom Gaming, a social gaming company that creates games for the Internet, Facebook, iOS Android, Kindle, Roku and AppleTV platforms. Debono is a member of numerous gaming industry associations and is a regular speaker at conferences worldwide. He can be reached at terry@debono.ca

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industryq&a

THE BEST OF BOTH WORLDS Managing the convergence of online and land-based gaming in Canada

14 | Spring 2016

industryq&a

As the lines continue to blur between gaming in a bricks-and-mortar casino and gambling online through multiple Internet and mobile channels, Canadian gaming organizations are faced with a growing number of challenges with how to manage this convergence of players, technology and evolving regulations. Canadian Gaming Business recently reached out to a number of senior leaders, managers and industry insiders to get their take on how companies and provincial lottery corporations can adapt to be able to make the best of both of these worlds. Participants:

Monica Bohm

Matteo Monteverdi

Luc Morin

Katy Yam

Vice President eGaming, BCLC

Senior Vice President IGT Interactive

General Manager Espacejeux, LotoQuébec’s online gaming platform

Product Management & Development and Business Intelligence Manager for LotoQuébec’s land based casinos

Ontario Lottery and Gaming Corp. – Composite

Troy Ross President TRM Public Affairs

senior management responses

WHAT WILL BE SOME OF THE BIGGEST CHALLENGES FACING GAMING ORGANIZATIONS IN THE COMING MONTHS AND YEARS WITH THE ONGOING CONVERGENCE OF ONLINE AND LAND-BASED GAMING?

our customers with their deployment. Combining this all together in the form of big data will present the biggest challenge during the mid-term. How to collect, organize, analyze and execute the data will be a differentiating point.

Monica Bohm : Most Canadian gaming organizations today have land-based as well as some online operations but they are generally run by different business units. Like many organizations, we struggle to understand our customer relationships and opportunities across channels. Convergence is not about offering the same product in all channels but about offering a seamless customer experience through our various channels and touchpoints. It requires us to take a new approach to our business, coordinated around a single view of the player, to deliver products, services and entertainment experiences to meet customer expectations. This will change how we work in our organizations as well as how we design products and experiences in the future. To succeed, we need to be open to changing processes and skill sets; it will require us to make investments in enhancing capabilities in areas like customer experience and customer understanding.

Luc Morin and Katy Yam: Creating a truly seamless experience

Matteo Monteverdi: In the short-term, it is finding faster, more efficient ways to bring content to market across all devices while simultaneously understanding how that content can perform across various channels. Knowledge is key — how to keep the game experience consistent while modifying the play features, such as the pace of a game of special configurations by device, or minimal changes made to a game so it’s customized to a device or channel are important. In addition, launch strategies will increasingly become valuable. Each game is set to have a strategy of its own. Suppliers like IGT will need to evaluate in the preliminary stages and throughout the process discussion on whether it’s best to have a triple launch simultaneously across channels or a specific channel launch first. This will help determine how we can support

for our clients as they oscillate between our online and physical storefronts. We need to be like Walmart or Best Buy where a client can find the same products in-store and online, where the brand experience is fluid from first contact all the way to check out regardless of the interface the client decides to use be it from mobile to web to in-store. Consumers do not care about the logistical issues, supplier availabilities or internal silos that challenge us behind the scenes; they expect to engage with one sole entity in a consistent and reliable way. For us, we want them to know they are interacting with Loto-Quebec across all the interfaces we decide to offer. Easier said than done but very possible. As a first step, we are working to align the game mix across the infamous trio of interfaces (mobile, web and physical casino) – deciding which games will be identical, complementary or unique to a specific interface.

OLG: OLG has recently moved into the Internet gaming space with our new website, PlayOLG, to compete with the numerous unregulated grey market providers in Ontario where over $500 million is spent each year by Ontario players. As a new line of business, our Internet Gaming team is tasked with applying the type of thinking and corporate culture necessary to produce a competitive product and evolve with industry trends, best practices and consumer preferences. The experience and journey of the customer differ greatly between traditional land based and the Internet channels. Understanding the journey and mindset of the customer in each one is critical to success. We believe both channels can continue to grow and complement each other as the

industryq&a

consumer has indicated they want the choice to choose the channel that best fits their need. Troy Ross: Convergence is much more than simply traditional

online casino games, and land-based gaming. Digital entertainment today includes: Internet, social gaming, skillbased gaming, eSports, and fantasy sports. These are not necessarily gambling products but they are competition for the digital gaming entertainment dollar. Our antiquated Criminal Code poses a major challenge for the industry. I think the key is to have a conduct-and-manage definition that allows for regulation and some oversight function. Governments should ensure that gambling is conducted with integrity and security, that the privacy of citizens is protected and that games and software are of the utmost quality. Government processes, politics and legislative timetables are also significant challenges, which can slow down even the most entrepreneurial gaming agency.

WHAT DO YOU SEE AS SOME OF THE GREATEST OPPORTUNITIES FOR GAMING ORGANIZATIONS AS A RESULT OF THIS CONVERGENCE AND WHY?

MB: The greatest opportunity for gaming organizations is to

increase player participation and loyalty in our casino, lottery and sports categories. The entertainment space is highly competitive and it is critical for us to keep pace with changes in customer expectations for service, engagement and entertainment in order to maintain and grow our business into the future. Opportunities exist for us to leverage the power of digital technology and customer knowledge to better customize our content for different player segments and help modernize the image of our industry over the long term by attracting younger player segments like the Millennials. This is important for the long-term health of a mature retail gambling business in Canada.

MM: We are recognizing the benefits of convergence. Players

cross the boundaries of gaming from lottery to casino to online content. Players have their favorite titles and enjoy these games across different channels, which enable them to experience games in different contexts. As a converged company, IGT can experience the synergies of having crosschannel teams working together and sharing key ideas. This will provide enhanced products, player experiences and translate it to increased revenues for our partners. We think it is valuable to share our expertise and learnings internally, and also with our customers. Through our “Customer First” approach, we can benefit from the feedback we receive to continue developing successful products.

LM and KY: Let’s be honest for a moment and acknowledge that revenues are the driving force behind our need to converge; with traditional gaming revenues migrating to a multitude of entertainment options in particular mobile and web platforms, we need to converge to stay relevant or 16 | Spring 2016

die. This is the ultimate benefit for us and the industry. As for opportunities, there are more than we can count – with VR within reach of the average consumer with Google Cardboard, Samsung Gear and Oculus Rift, it won’t be long until we can move beyond merely offering our land-based games online, but to create unique gaming experiences that push beyond our current definition of “bricks and clicks.” OLG: OLG is presented with many opportunities across the organization. Online gaming is a growth industry with significant potential to further develop and grow PlayOLG. We will add more products, new categories of games and services. OLG is changing the way lottery and gaming is delivered in Ontario to refresh the gaming experience for customers and ensure the success of the industry well into the future. Through OLG’s modernization, service providers will focus on delivering certain day-to-day operations, while OLG maintains control and accountability. In addition, capital costs of building, expanding, improving and maintaining gaming facilities will be taken on by the private sector, not the government. As a result of modernization, OLG will become even more customer-focused; expand the regulated private sector delivery of lottery and gaming; and renew its role in the conduct and management of lottery and gaming. TR: There are significant opportunities to cross promote

online with terrestrial gaming and benefit both business divisions. However, there are significant opportunities with social gaming as well. Social can be used as an inexpensive customer acquisition tool but can also create opportunities to: • Build, develop and maintain a relationship with customers when they are not visiting your facility • Advertise and promote special events to a targeted market • Create an ongoing dialogue with customers • Data mine the information that customers share via social gaming apps and that data can be co-indexed to create player profiles and demographic research.

WHAT KIND OF AN IMPACT WILL MOBILE TECHNOLOGY, THE INTERNET AND SOCIAL MEDIA HAVE ON THE GROWTH AND DEVELOPMENT OF BOTH ONLINE AND LAND-BASED GAMING? MB: Mobile technology is having a massive impact on player expectations. We have all seen the statistics about mobile proliferation, growth in time and money spent on mobile devices, and multi-screen usage. It’s clear that digital disruption is impacting our strategies. In fact, mobile has been hailed as the omni-channel game changer. I believe mobile will impact how people buy, play and get service in our land-based experiences over time. Players already want to track their loyalty points, reserve restaurants and connect with casino hosts using mobile. Today, mobile is the fastest growing part of our online gaming business, and PlayNow receives over 30 per cent of player registrations through mobile devices. This year, one third of PlayNow’s Super Bowl 50 bets were placed on mobile, a 35-per-cent increase over last year’s amount. We will have to leverage agile methodologies

industryq&a

and new technologies that enable us to move faster and be more responsive to player needs and preferences. I expect our marketing will continue to evolve to be more targeted, digital and customer focused as well. MM: With increased mobile interaction among users, IGT is working to incorporate technology and social changes into our games and align them with what users are already experiencing in their daily lives. Integrating supplemental devices into the gaming experience can develop unique experience to players with innovations such as virtual reality. This concept extends to player marketing and communications as well. Integrated solutions such as the IGT OnPremise™ mobile solution incorporates mobile, online, and land/retail systems to provide a smarter and more satisfying experience to players. LM and KY: The Internet has already made its impact known since the 1990’s. Mobiles have replaced desktops worldwide. Media is almost done its market shift from print to digital, and social online platforms are now the medium to reach mass markets quickly. The impacts are far-reaching and require us to be more on demand, to operate on our consumers’ schedules instead of the reverse; hence why an online gaming offer is critical in our evolution to capture and be part of this migration. As with any industry, operations and marketing need to move in lock-step with our consumers. We have no choice but to educate and equip our communications teams and customer service touch points to stay relevant and engaging, otherwise consumers will go elsewhere. OLG: Mobile technology is an important growth sector for

OLG and this again comes to being in the place that our customers want us to be in, not only to access our games and products, but to also provide feedback and obtain information. Social media is becoming increasingly dominant in the way that people engage in two-way communication with organizations. This is also an important platform for OLG to market to and engage with our customers.

TR: A strong online presence today is essential. Businesses

must engage their customers at their physical locations but also online, particularly as an ever-growing segment of the marketplace wants to game online. This online or mobile engagement must happen in real time. A mobile, social presence provides operators with accessibility (the Internet provides information about your products and services 24 hours a day). It should solidify the brand and reach a much greater audience than traditional marketing. WHAT ARE SOME INNOVATIVE WAYS FOR GAMING ORGANIZATIONS TO BETTER INTEGRATE ONLINE OR MOBILE GAMING INTO THEIR LAND-BASED OFFERINGS AND VICE-VERSA? MB: When was the last time you offered your land-based players an opportunity to learn blackjack or put down a sports bet online? I believe our level one opportunity is to offer

our land-based players an unintimidating new gambling experience online and to promote the live action in a casino to online players. We need to get over the fear of cannibalization and embrace the opportunity to engage players in the full value gaming experience available today. We can start by asking our players once for their signup information and by aligning our program registration processes. Today players expect a single, integrated player account and loyalty program. MM: Establishing this integrated approach is important to

the evolution of gaming and particularly so in markets such as Canada, where all gaming forms are controlled by provincial corporations. The process begins with capturing the data, from games to other retail touch points; understanding the implications of the data; and then leveraging the information to provide a seamless gaming experience. Once executed, it can offer exciting entertainment, with timely and appropriate rewards that are designed to make the most sense for players. It goes beyond trying to change the casino experience or enhance the online or mobile gaming experience alone in a vacuum, and rather focuses on it holistically, similar to our approach with IGT OnPremise technology. LM and KY: The following are some ways to improve

integration: a) Demand simultaneous online and land-based game titles and game play with suppliers to facilitate seamless gaming; b) Offer shared jackpots and progressives, potentially even across several jurisdictions to create a Lotto-Max effect – play to the big dream of winning a life-changing amount; c) Integrate client and transactional data to get a complete view of consumers across interfaces (mobile, web, brick and mortar) to chose better products and optimize marketing efforts; d) Weather-driven marketing emails that are deployed to promote our online offer when adverse weather is in play (extreme cold or heat) to remain top of mind at home.

OLG: OLG is currently working through and planning for

integrated strategies. Examples of the integration of online and traditional gaming can include access to people’s favourite games and providing for new payment methods through their phones that can be used cross-platform. TR : Integration cannot happen fast enough in Canada. Consumer behavior should be driving business decisions and Canadian consumers are downloading apps and using their mobile devices for everything. They use Apple Pay to buy products, or a Starbucks app to get their morning coffee. They use their phones to do their banking, order an Uber, shop, watch TV or listen to music and, of course, they use them to play games or to gamble. Mobile applications and social gaming allows organizations to learn more about their customers and reward them for their loyalty. The gaming corporations need to be in the mobile space — and soon, because Canadians are already there. Canadian Gaming Business | 17

security&surveillance

PLAYING IT SAFE A look at player and game protection on BCLC’s PlayNow.com BY ROB KROEKER

With emerging technology and changing consumer habits, the online gaming industry is in a constant state of evolution. This means we need to monitor the risks of new developments in online and social gambling, ensure our operating systems and programming are effective, and that our players are protected in this ever-changing environment.

18 | Spring 2016

security&surveillance

full product portfolio consisting of traditional lottery games as well as sports, poker, bingo, and casino products. But behind the scenes, a key part of that success is due to the fact that BCLC also has strong controls in place to help mitigate problem gambling. On PlayNow.com players can clearly see how long they’ve played and how much they’ve wagered; there is a player pre-set deposit limit with a 24-hour hold on increase requests; and ready access to GameSense information and problem gambling resources. MAINTAINING QUALITY ASSURANCE

SI N C E J O I N I N G T H E B r i t i s h C o l u m b i a L o t t e r y Corporation (BCLC) as Vice President of Security and Compliance in September 2015, I have learned many things about the inner workings of this organization and, perhaps more importantly, its values. In addition to building public trust through good corporate citizenship and taking our social responsibilities seriously throughout every part of our business, the integrit y of our games and the protection of our players are of the utmost importance to BCLC. OPPORTUNITIES FOR GROWTH

The PlayNow.com platform and games are thoroughly tested by BCLC's highly trained Quality Assurance team, by our numerous industry-leading software vendors, and by third-party Accredited Testing Facilities, with considerable experience in international gaming jurisdictions. PlayNow. com is held to the TGS-5 technical standard, which is administered by our regulator, the Gaming Policy and Enforcement Branch (GPEB) of British Columbia. TGS-5 is a highly detailed and rigorous standard, covering all critical aspects of game play and system operation. Furthermore, in regard to online gaming, GPEB is a sophisticated and involved regulator. It plays a key role in the certification of all important software changes, updates and game launches on PlayNow.com. BCLC works closely with GPEB to build a compliance framework that meets the needs of all stakeholders,

“A lot has changed in 12 years, and we know we must remain vigilant in keeping up with online trends, risks and prospects for fraudulent activity.”

BCLC has offered regulated online gambling since 2004 to players in British Columbia through PlayNow.com. A lot has changed in 12 years, and we know we must remain vigilant in keeping up with online trends, risks and prospects for fraudulent activity. eGaming currently represents approximately two per cent of BCLC’s net income and provides multiple strategic growth opportunities for the organization, including the ability to offer players gaming experiences across multiple channels. BCLC has seen success with all of its products and continues to enhance its offerings to provide greater value to our players. Part of that success has been offering a

ultimately reinforcing the integrity of gaming in British Columbia and partner provinces. BCLC and GPEB recently agreed on an augmented process for the validation of game configuration and help/rules screen content prior to launch. This is a key element of the compliance lifecycle for new games, since these configurable elements can potentially be set one way or another without impacting the signatures/ digital checksums of the games. CONTROL CHALLENGES

One of the major hurdles that we face with online gaming Canadian Gaming Business | 19

security&surveillance is the uncontrolled environment of the Internet. W hile our PlayNow. com software is built by industr yleading developers, and thoroughly t e st e d t o m i n i m i z e r i sk s , we're st ill left w ith lit tle cont rol over the end-user's choice of computer, operating system, and web browser. It is diff icult, if not impossible, to anticipate every possible combination of hardware and soft ware on the player's side, not to mention the my riad of conf ig uration setting s available to each user. Every possible combination of player device can p o t e nt i a l l y r e s u lt i n a s l i g ht l y d i f ferent g a me pl ay ex p er ience; sometimes with unintended results. W hile these are the same challenges faced by all eCommerce org anizations, the dif ference for BCLC is that we are a Crow n corporation. Our commitment to our players is more than just a business decision or about corporate image, it is a strict requirement enforced by regulation. Maintaining compliance

with the TGS-5 standard requires an ongoing commitment, particularly with so many variables at play that are effectively outside of BCLC's control. For example, every time a new Microsoft, Apple or A ndroid OS version is released, it triggers a fresh wave of testing on software that was previously demonstrated to be error-free. BCLC and developer resources must always be on the ready to build new soft ware f ixes and augmentations at a moment's notice. PREVENTING AND DETECTING FRAUD

This environment can make investig ating player-raised issues pa r t ic u l a rly ch a l len g i n g. BCL C t a kes ever y player inquir y or complaint ser iously, pa r ticula rly where the player has raised a concern about the integ r it y of the g ames or transactions. However, until a thoroug h investig ation ha s been conducted by trained resources, it is impossible to conclude whether

a ny g iven issue wa s caused by a fault in the PlayNow.com software, a corruption in the player's installed web browser or supporting software, or merely the result of user error or misunderstanding. W hile many of our off-shore competitors may have no obligation or be willing to address game integrity issues, it is incumbent on BCLC as a Crown corporation to fully investigate and respond to all integrity issues in an open and transparent fashion. W hile the vast majorit y of our players a re honest, we still have to keep an eye out for fraudsters at t empt i n g t o e x ploit Pl ayNow. com for g a i n . S ome w i l l t r y t o reg ister player account s using false identities a nd stolen credit c a rd s , re qu i r i n g ou r a nt i-f r au d team to monitor transactions and account reg istrations. W hile our team has a wide range of tools and methodologies at their disposal, the challenge becomes staying ahead of the cur ve. As fraudsters learn our

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security&surveillance controls, they modify their strategies accordin g ly so a s to circu mvent those controls. It requires ongoing vigilance. For ex ample, they may make use of special net work tools and websites to obscure the true origin of their Internet connection, requiring us to evolve our methods. DIGITAL FORENSICS REQUIRED

A nother challenge with fraudsters is their propensity to use doctored screenshot s a s a veh icle to ra ise b a s e l e s s cl a i m s a b o u t g a m e o r transaction faults. This approach specif ically targets BCLC's commitment to our player and to the integrity of our games. A picture may be worth a thousand words, but those words might not necessarily be the truth. Digital forensics must be used on any suspect screenshot, in order to confirm the validity of the image. Often, the truth can only be found through a combination of software a na lysis a nd g ood old-fa shioned human interview techniques. Many

end up exposing their own scam by betraying a vital piece of information to our team of investigators. BCLC 's st ance remains that identity and credit card fraud are not victimless crimes. As such, we help support efforts by the RCMP and local police to catch those who harm our businesses and directly impact the lives of Canadians. The suite of controls implemented by BCLC aims to protect our regulated PlayNow. com website from fraud, which in turn protects players and the public from identity and credit card fraud. We invest in a g reat amount of t e ch nolo g y, t i me, a nd e x p er t i se to help ensure we meet the everchanging expectations and challenges of eGa ming, while ma k ing g reat strides to stay ahead of the cur ve i n order t o rem a i n sa fe, sec u re, competitive and relevant. These are the standards players ex pect when they play on a regulated gaming site in Canada.

I N T R O D U C I N G

As the Vice-President of Corporate Security and Compliance, Rob Kroeker leads the development and implementation of corporate security and compliance policies and procedures for BCLC, its players and private sector service providers. He is responsible for all aspects of security, compliance, legal services, privacy and Freedom of Information administration. Rob currently serves as President of the Gaming Security Professionals of Canada and sits on the Board of Governors for the Justice Institute of British Columbia.

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executiveq&a

FRANCOISPATRICK

ALLARD

Managing Director, Société des bingos du Québec, Loto-Québec From 1998 to 2003, François-Patrick Allard consecutively occupied the positions of consultant, analyst, specialist and department head of the Research and Analysis team at Loto-Québec’s subsidiary Société des casinos du Québec. He went on to become Director of Business Intelligence from 2004 to 2005 with the same organization, while simultaneously taking on the responsibilities, in 2005, of interim Relationship Marketing Director. In October 2008 he became Managing Director of another Loto-Québec subsidiary, Société des bingos du Québec. BEFORE HIS ARRIVAL AT LOTO-QUÉBEC, Allard was employed as survey methodologist (statistician) for three years at Statistics Canada. Allard has a degree from Université de Montréal in Mathematics, specializing in statistics and actuarial studies. Canadian Gaming Business recently asked him about his current role at Société des bingos du Québec and his career of leadership within the Canadian gaming industry. WHAT ARE THE MOST PERSONALLY REWARDING ASPECTS OF WORKING IN A LEADERSHIP ROLE IN THE COMMUNITY GAMING INDUSTRY AND WHY?

The part of my work that involves community gaming is especially rewarding because it gives me the opportunity to see how our actions impact the community. In Québec, there are over 1,000 NPOs that receive bingo or Kinzo profits. For those NPOs, that cash injection is often vital to 22 | Spring 2016

their survival, as it represents an average 37 per cent of their operating budget. These organizations are involved in such causes as amateur sports, support for disabled persons and activities for seniors, which are all important components of Quebec’s social fabric. WHAT AREAS HAVE BEEN THE MOST CHALLENGING FOR YOU PERSONALLY AS A LEADER IN THE COMMUNITY GAMING INDUSTRY AND WHAT GOALS ARE YOU MOST LOOKING FORWARD TO ACCOMPLISHING?

I believe that the biggest challenge the gaming industry and particularly community gaming face is customer base renewal. When Loto-Québec started offering network bingo in 1997, the average bingo customer was 47 years of age; in 2015, the average was 60 years of age. The fact that average customer age increased by 13 years means it is a market with

executiveq&a

“I think we need to stop seeing community gaming as a stand-alone entity. New customers wish to have a variety of entertainment activities.” few new participants. We need to find other ways to bring in new customers. Kinzo, which draws customers averaging 45 years of age, is one piece of the puzzle. We were able to rejuvenate our clientele by offering up-to-date entertainment and a more modern ambiance. Also, there are no set game sessions – people arrive and leave when they wish. Younger players do not want to feel locked in to a fixed schedule. In my opinion however, the most potent customer renewal will be achieved through an evolution of game offerings. Younger players want to have an impact on their destiny and influence outcomes using strategy or skill. In that regard, bingo offers interesting potential, as it is not an individual game, but rather a race to be the first to complete the figure. With the addition of one more component – electronics – I believe we can achieve renewal. IN WHAT WAYS DID YOUR PREVIOUS CAREER EXPERIENCE PREPARE YOU FOR YOUR CURRENT ROLE WITH LOTO-QUÉBEC?

W hen I f irst arrived at Loto-Québec, my training in mathematics (statistics and actuarial science) helped me analyze products and promotions from a different viewpoint. Then, circumstances drew me closer to marketing, where I directed the Casino Privilèges loyalty program. Beyond training and work experience, and doing a good job, I thought it essential to keep well-informed about what worked well and not so well elsewhere in the industry. Interjurisdictional cooperation is a key part of my decision-making. WHAT DO YOU BELIEVE ARE THE GREATEST GROWTH OPPORTUNITIES FOR BINGO AND OTHER FORMS OF COMMUNITY GAMING IN QUÉBEC AND WHY?

In Québec, the best opportunity for bingo growth is certainly the arrival of electronic bingo. Again, thanks to excellent inter-provincial cooperation, we share the results of our initiatives. Information on what is done in other provinces gives us a basis on which to build our strategy. As for Kinzo, we are always in continuous improvement mode. Every year, we introduce a new game. This past year, it was Kinzo Mystère, a product allowing the winner to spin a virtual wheel projected on 19 Kinzo network hall screens. WHAT ARE THE GREATEST CHALLENGES FACING THE COMMUNITY GAMING INDUSTRY TODAY AND HOW DO YOU THINK THEY SHOULD BE ADDRESSED?

In addition to the customer renewal issue that I mentioned earlier, another big challenge is hall set-up. Like Kinzo, we

will need to apply a more standard look to all halls so that future ads can present a credible promise. An excellent example of standard hall set-up is what British Columbia has done with its Chances establishments. WHAT PRODUCT AND SERVICE OFFERINGS DOES YOUR DIVISION OF LOTO-QUÉBEC CURRENTLY BRING TO THE INDUSTRY AND HOW DO YOU SEE THESE EVOLVING OR EXPANDING IN THE COMING MONTHS AND YEARS?

One of Loto-Québec’s latest changes in the past two years lies in its desire to implement cross marketing programs between its business units. For instance, when a new bingo product is launched, it is advertised on the company’s 10,000 lottery terminal screens found throughout the province, on the online website as well as on screens in our casinos. In the same manner, advertising for Lotto Max and Maxmillions was broadcast throughout the bingo network, including in over 50 halls. Just in the past year, Loto-Québec ran approximately 50 cross marketing ads in its establishments, constituting a quite inexpensive yet lucrative initiative. What’s more, we have begun to implement cross promotion activities between products. For instance, the premium $25 Célébration ticket could be deposited at any Loto-Québec establishment for an additional chance to participate in the gala event in which a grand prize of $1,000,000 is awarded live. This promotion was extremely successful, driving an extra 100,000 visits to our establishments. WHAT’S YOUR VISION FOR THE FUTURE OF THE COMMUNITY GAMING DIVISION OF LOTO-QUÉBEC AND ITS ROLE IN GAMING IN CANADA?

In December 2014, our community gaming unit was merged with the one responsible for Québec’s network of 12,000 VLTs and two gaming halls. The new entity, the Société des établissements de jeux du Québec (SEJQ), manages all LotoQuébec gaming establishments operated by third parties. The decision was made to improve corporate efficiency of course, but also to maximize convergence, given that we share the same network. A little more than a year later, we’ve concluded that the corporation made a sound decision. I think we need to stop seeing community gaming as a stand-alone entity. New customers wish to have a variety of entertainment activities. Generally speaking, our establishments with the highest year-after-year growth are those that offer a wide range of games (bingo, Kinzo, VLTs, billiards, bowling, etc.). We have not observed cannibalization between activities and actually, the opposite is true! Canadian Gaming Business | 23

finance

TAKING STOCK A look at the price performance of Canadian iGaming stocks

BY DAVID MCFADGEN

24 | Spring 2016

finance

Canada’s iGaming stocks have had a rough last 12 months (ending Jan 31, 2016) in terms of share price performance. Of all the iGaming stocks that I track for Cormark Securities Inc., only the three Canadian-listed iGaming companies saw a drop in share prices, whereas all the European stocks showed an increase. This begs the obvious question: Why have the Canadian iGaming stocks done so poorly? AT TIME OF WRITING, Amaya (AYATSX) was down 55%, Intertain Group (IT-TSX) was down 49% and N Y X Gaming (NY X-TSXV) was down 37% on an LTM basis. The best performing iGaming stock that I track is 32Red, which was up 217% on a LTM basis. In my opinion, there are several reasons for this discrepancy – some company specific and some macro-driven. The Canadian TSX was one of the worst performing indices in the world

ending January 31, 2016, with the US DJI A , UK FTSE , German DA X , Sweden OMX and Japan Nikkei all performing better. This is likely the result of a number of macro-economic factors, including the depreciation of the Canadian dollar (versus the U.S. dollar), as well as the drop in oil prices and other commodities. The Canadian dollar has devalued against its U.S. counterpart by $0.10 on an LTM basis and is currently trading in the $0.70 range. All of the

aforementioned has caused investors to sell Canadian listed stocks and move money out of Canada. Consequently, the Canadian listed iGaming stocks have likely also suffered from the flow of funds out of Canada. ONGOING CHALLENGES

A m aya h a s h ad compa ny speci f ic issues that contributed to its share price performance. First, PokerStars began to reflect the impact of the U.S. dollar’s

STOCK PRICE PERFORMANCE ON AN LTM BASIS

Source: CapitalIQ

Canadian Gaming Business | 25

finance appreciation versus the euro, Canadian dollar, ruble and other currencies in the Q3/15 results, and more importantly, likely in the Q4/15 results which have yet to be released. Poker players deposit funds in local currency on the global shared liquidity network, which are then converted to U.S. dollars for play, accounting for approximately 80% of revenue. As the U.S. dollar appreciated versus other currencies, the amount of money for play declined, although initially poker players resisted this trend and increased their local currency deposits to keep the U.S. dollar play approximately the same. However, PokerStars is now expected to more fully reflect the effects of the U.S. dollar move in its Q4/15 results; Amaya disclosed with the release of its Q3/15 results that the U.S. dollar move against other currencies resulted in a 19% reduction in purchasing power for its players. Other factors that may have impacted the share price include the delayed rollout of its sportsbook product to better enhance the customer product experience, and the fact that the PokerStars business was temporarily affected by the economic situation in Greece and licensing issues in Portugal. All of the aforementioned resulted in Amaya reducing its 2015 guidance and the stock reacted quite negatively, dropping from the $30 range to the low $20 range in a couple of days in mid-August 2015. Then, the stock took another hit on December 24, 2015, when Amaya announced that it lost a judgement issued by a state judge in Kentucky that sought recovery of alleged losses by Kentucky residents who played real-money poker on the PokerStars website between 2006 and 2011. The judge imposed a US$870 million (trebled from US$290 million) award. The court awarded the plaintiff the gross losses and not net losses. The gross losses are estimated by the state to be US$290 million and the net losses are estimated to be US$26 million. However, this case predates Amaya’s acquisition of PokerStars, and there is US$315 million in an escrow account, funded by the sellers of PokerStars, to cover any unforeseen liabilities such as this. It seems absurd that an award would only be based on losses as opposed to net losses. Amaya is appealing the entire case. POKERSTARS ON THE RISE

Over the last 12 months, Amaya’s stock has been impacted by issues that are frankly beyond management’s control, whereas operations that management can control have done well. For example, the PokerStars casino business has done very well, generating 350,000 quarterly unique players in Q3/15 resulting in it being one of the largest online casino sites in the world based on unique players. Also, despite the fact that Amaya issued a release on January 21, 2016, stating that it expects to report Q4/15 results at the high end of its guidance, its stock continued to decline, likely due to the overall macro environment. Then, in a surprise announcement on February 1, 2016, Amaya announced that David Baazov, CEO of Amaya, intends to make an all-cash bid for Amaya at an approximate price of $21 per share. Clearly Baazov believes that Amaya is worth a lot more than that which the market is currently valuing the company. Amaya should be a strong free-cashflow (FCF) business and this should prove Baazov’s timing to be opportune.

The specific issues that have impacted Intertain’s share price performance are mostly encapsulated by its Management Incentive Plan (MIP) and a short seller report published by a U.S. research firm. Intertain disclosed the details of its MIP with the release of its Management Information Circular on May 20, 2015, specifically creating a MIP bonus pool representing 2% of each transaction value successfully executed by the company. The details of the MIP became more broadly known with the release of its Q2/15 results and disclosure that management was awarded a bonus for the Gamesys transaction of $16.4 million. Shareholders were upset with this level of compensation and as a result, Intertain held a conference call on September 1, 2015, to respond to shareholder concerns. Despite strong Q2/15 and Q3/15 results, the stock continued to be under pressure, prompting management to cancel the MIP. A new draft MIP was released that can be characterized as “plain vanilla,” so there shouldn’t be any concerns about the MIP going forward. IMPACT OF REPORT

A short seller report was published on December 17, 2015, resulting in a strong sell off of the stock. Management acknowledged the report and issued a press release on December 22, 2015, responding to the some of the factual inaccuracies contained in the report. Intertain also formed an independent committee to review the report and it “will publicly disclose the outcome of the Committee’s review.” Actual results have been strong, despite the two aforementioned issues. Intertain issued a press release on January 11, 2016, stating that it expects to exceed its previously reported guidance for the fiscal year ending December 31, 2015. Despite this, the stock hasn’t responded likely due to macro events discussed previously. NYX’s stock performance is likely the result of a “risk off” trade in the markets. Most companies that have significant operational execution in front of them, or the perception of execution risk, have seen their stock prices come under considerable pressure. The consensus estimates for NYX are forecasting for EBITDA to increase from -$0.3 million in 2015 to $28.8 million in 2016, which are predicated on the successful execution of the company’s business plan. If we look at actual results, NYX’s core casino and social business has been quite strong with revenue and EBITDA growing 66% and 6%, respectively, for the first nine months of 2015. Ongame has unfortunately reported heavy losses weighing down overall results. Despite strong core results, NYX’s stock price performance has suffered due to the “risk off” trade and macro conditions. However, we expect that as the company reports results that demonstrate the successful execution of its business plan, the stock should reflect the positive momentum Online gaming companies can be strong growth vehicles with solid FCF generation. Once the Canadian outlook and other macro factors stabilize these stocks should benefit, with valuations reflecting the growth potential. Let’s hope that 2016 looks a lot better for Canada’s iGaming stocks. David McFadgen, CFA, is Director, Institutional Equity Research, Communications & Media, Gaming & Leisure, for Cormark Securities Inc. For important information on disclosures related to this article, please visit: http://www.canadiangamingbusiness.com/ TakingStockCanadianiGamingStocks.aspx

Disclaimer: I, David McFadgen, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company(ies) and its (their) securities. I also certify that I have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report. Please note that during the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities for Amaya Gaming Group Inc., Intertain Group Ltd. and NYX Gaming Group Limited. A full list of our disclosure statements as well as our research dissemination policies and procedures can be found on our website at: www.cormark.com 26 | Spring 2016

June 13 – 15, 2016

Casino du Lac-Leamy, Gatineau, QC Ottawa Convention Centre, Ottawa, ON

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If you are interested in exhibiting or sponsoring, please contact; Chuck Nervick at chuckn@mediaedge.ca or 416.512.8186 x227.

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facilityprofile

CASINO DE MONTRÉAL

28 | Spring 2016

The Art of Entertainment

facilityprofile

The Casino de Montréal first opened its doors to the public on October 9, 1993. Housed in the former Expo 67 World’s Fair Pavillon de la France, the current Casino de Montréal has undergone numerous expansion projects over the years, adding the former Pavillon du Québec to the complex in 1996. THE CASINO OF THE FUTURE

I n A p r i l 2 0 0 9, L o t o - Q u é b e c unveiled a signif icant casino fouryear renovation plan requiring $305.7 million in investments. On time and on budget, the Casino de Montréal was proud to show off its new gaming and entertainment areas on November 21, 2013. The renovations have resulted in a more attractive and spacious casino, with restaurant services that are more in line with current trends and a completely reimagined interior design. Spectacular visual effects projected on a gigantic multimedia wall 14 metres wide by 21 metres tall complete the transformation. All of this was accomplished by capitalizing on the building’s heritage value and its natural surroundings as well as the location’s recreational tourism vocation, while maintaining the architectural style of the buildings themselves. Today, the Casino de Montréal of fers v isitors nea rly 2 ,70 0 slot machines and 117 gaming tables, 21 of which are reserved for Texas

Hold’em Poker and 38 seats for Keno. Open 24 hours a day, 365 days a year, the facilit y has welcomed close to 115 million visitors since opening its doors in 1993. Approximately 10 per

cent of its clientele originates from outside Québec. THE ZONE

T he Zone is arguably the biggest gaming innovation in recent years. The concept is unique to Québec’s casinos, as it brings together 80 multi-game electronic terminals, a giant screen and game hosts who are as fun-loving as they are dynamic and always ready to create the most unique atmosphere possible. Graphic sequences on 39 high resolution screens, sound effects and lighting from 26 projectors and eight robot cameras are choreographed at the touch of the game host’s fingers. The game host becomes a veritable playmaker and ambiance catalyst.

Canadian Gaming Business | 29

facilityprofile

the casino but also Montréal, whose reputation as a choice gastronomic destination in North A merica is already well-established. The Atelier de Joël Robuchon will serve sublime dishes to 50 diners seated around an open kitchen in a refined and always friendly atmosphere. Casino visitors may choose from four restaurants designed to satisfy all appetites, each offering a distinct ambiance fast food at L’Inst ant, exquisite Asian concoctions at Ajia, gourmet buffet offerings at Pavillon 67, or à la carte delights at Le Montréal. ONE CASINO, TWO PERFORMANCE VENUES

The Zone is for customers who believe that excitement, fun and escape, in addition to socializing, are essential to the entertainment experience. In the Zone’s electrifying décor, players can play alongside friends, even if they like to play different games, including blackjack, baccarat and roulette, as well as slot machine games, and enjoy the moment together: it’s an incomparable entertainment experience. Many gaming house operators from the Americas, Europe and even Asia come to the Casino de Montréal to see how the Zone transforms customers’ entertainment experience. This product is definitely the ultimate in modern gaming. A FOCUS ON GAMING

Poker features prominently among Casino de Montréal’s game offerings. In fact, the Casino will host the only Canadian stop on the World Series of Poker ( WSOP) circuit this coming spring. From April 20 to May 1, 2016, 10 tournaments will be held at the Casino de Montréal. The player with the highest number of points during this step and the winner of the main event will each win a seat for the WSOP Circuit National Championship to be held in the United States. 30 | Spring 2016

New generations of players really a ppre c i at e how t e ch nolo g y a nd multimedia have been integrated in game offerings. However, spectacular packaging is not always necessary. Over the past few months, customers have enthusiastically welcomed the addition of $10 blackjack tables. The casino also promotes popular theme-based slot machines (Ironman, Walking Dead, Michael Jackson, etc.), which are set up in special areas of the casino to greatly improve customer experience. The casino is also getting ready to open a new sports betting section near the poker hall. A UNIQUE DINING EXPERIENCE

But that is only part of the story, as many more features contribute to the casino’s reputation for excellence. With regard to food services, the casino compares very well with the best restaurants in the city. In fact, the Casino de Montréal will soon welcome the highest-rated chef in the world, Joël Robuchon who has earned no less than 25 Michelin Guide stars over the years. He will be opening an Atelier de Joël Robuchon restaurant here to complement those currently operating in Paris, Hong Kong and Las Vegas. The new restaurant is sure to be a tremendous asset not only for

One of the most significant elements of casino renovations is the new Cabaret performance hall, which op ene d i n t he f a l l of 2 015. It s state-of-the-art technology creates immersive ambiances and optimal sound regardless of where the listener is seated. In addition to winning matinée and dinner show formats, the Cabaret’s hall can be scaled according to need for a variety of events and productions, including boxing galas, poker tournaments as well as private, corporate or charitable events. The Casino de Montréal is set to host an exceptional array of shows and entertainment of all kinds. A nd Gregor y Charles’ L e Qube, with its capacity of 800, adds to the programming. Today, it is hard to imagine Montréal without the elegant silhouette of its casino — often compared to a beautiful diamond adorning the shores of the St. Lawrence River. Situated on Île NotreDame just minutes from downtown Mont réa l, t he g a m i n g house is the biggest in the country and has become one of the city’s most popular tourist attractions. Renowned for the beauty of its surroundings, lively ent er t a i n ment a nd out st a nd i n g customer service, the establishment welcomes more than 6.5 million visitors each year. For more information, visit http://www. casinosduquebec.com/montreal.

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marketing

IGAMING ON THE GO

The mobile gaming bandwagon gains steam in Canada BY DAVID ZBAR

The recent announcement by the Ontario Lottery and Gaming (OLG) that its online gaming property known as Play OLG will be moving to smartphones and tablets in 2016 is a positive indication that gaming in Ontario is heading in the right direction. In fact, a strong case can be made that mobile gaming is the future of online gaming and this initiative among others is a clear indication of the importance of mobile for iGaming marketers.

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marketing

C A N A DI A N S L OV E M O BIL E . W it h smartphone penetration in Canada amongst the highest in the world, the timing couldn’t be better for online gaming to move to the mobile device in a more impactful way. More online traffic is generated via mobile browsers than traditional PCs or desktops, while the penetration of smartphones versus feature phones has also risen to greater than more than half of all Canadians. POPULAR ON THE RISE

According to eMarketer, smartphone usage reached the halfway mark for Canada’s general population in 2014, and penetration will continue to expand year after year. Though growth is slowing, eMarketer forecasts there will be more than six million new smartphone users in Canada between 2014 and 2018 and at that point, this group will represent nearly two-thirds of the country’s overall population. eMarketer also claims that more than 80 per cent of 18 to 34 yearolds used such a device in 2014, and by 2018, about 98 per cent of individuals in this age range will do so. Penetration is a bit lower for adults in the 35-to-44 and 45-to-54 categories, as well as teens, though these age segments still overindex in usage. So why is this important for iGaming? What does this mean for marketers tr y ing to attract gamers to their properties, which include both physical locations and online venues alike? SOPHISTICATED CONSUMER

First and foremost, understanding your audience is the hallmark of any marketer’s success. Marketing in today’s multi-channel environment requires a level of sophistication unparalleled in campaigns of the past. Today’s consumer is inundated with advertising on a daily basis so it‘s critical that marketers deliver relevant advertising via a relevant medium. It’s not enough to just get the message right — that’s only half the battle. Turning intentions into actions is equally dependent on the medium, and the mobile medium has opened the door to new user experiences that can lead to immediate engagement, increased frequency of play and ultimately more

conversion — an opportunity any casino marketer would welcome. The mobile device has become an extension of the individual. It is always with us and it is always on. Unlike traditional media (television, radio, print), the Internet will follow us everywhere we go. Depending on your privacy settings and your willingness to permit location-based services which are usually embedded within an app, our mobile devices allow marketers to have insights into patterns of behaviour that other mediums are challenged to equal. Our phones and tablets contain a wealth of information about where we shop, how often we visit certain locations, which goods and services we place in our shopping cart, and even how much and how often we spend our money. For casino marketers this information is as valuable, if not more so, than a traditional database. This kind of information is insightful and comes in real time, allowing marketers

to adapt messages and offers based on the data they receive. MARKETING NIRVANA

Naturally, the amount of information we share is completely within our control. That said, the allure of instant alerts, special offers, “checking in,” and the popularity of social media feeds, which have become our de facto source for current events, has superseded our desire for privacy. This is especially true of the 18-34-year-old demographic who have embraced technology, emerging media, and social gaming with less concern as to the amount of information they share than other demographics. Fortunately, when it comes to the security of this information, the mobile device offers security features that extend beyond traditional e-commerce security methods. According to Jordan Kay, an Emerging Pay ments consultant and former employee of both Visa and MasterCard in

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sas.com/ca/igaming

SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. © 2015 SAS Institute Inc. All rights reserved. S144062US.0815

Canadian Gaming Business | 33

marketing

“Smartphone penetration in Canada continues to rise while security and payment methods are constantly evolving to meet user needs and expectations.”

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ENHANCED SECURITY

“There are three security features I would point to as differentiating factors when comparing traditional e-commerce to mobile commerce. The f irst is the use of a device ID, which is a unique identifier specific to each device. The second is biometrics such as a fingerprint, which is unique to an individual. And f inally, and perhaps most important is the use tokenization. Tokenization allows for real account data (your debit/credit card information) to be replaced with a token that is encrypted and stored on the device and then decrypted on the server side for payments processing. This means that your personal account number never needs to be stored on the device itself and therefore is not subject to attacks via malware.” In addition to providing security, a simplified payments process can also be used to enhance the online gaming experience. The process of depositing and withdrawing funds can be made much easier via mobile as new technologies have removed a lot of the friction typically seen with the distribution of funds online. Smartphone penetration in Canada continues to rise while security and payment methods are constantly evolving to meet user needs and expectations. All of this provides a big opportunity for iGaming growth in Ontario and Canada. Hopefully, the ongoing move to the smartphone continues to create enhanced ways for consumers to buy lottery tickets, legally bet on sports, and play online table games right in the palm of their hand. If moving to the online world was seen as a game changer just a few years back, the launch of the smartphone/tablet version can become the realization of this vision. It will be interesting to see if 2016 is the year iGaming in Canada ups the ante to meet the demand. David Zbar is SVP, Partner at Marshall Fenn Communications in Toronto and leads the digital practice. 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.

marketing agency in Canada, give us a call.

34 | Spring 2016

the field of mobile payments, the mobile device can be utilized to add additional levels of security for online commerce.

3/15/16 12:37 PM

Business is Booming in the Canadian Gaming Market:

New Casinos Can Bet on Technology Advances to Attract Patrons and Improve Customer Service Gaming is the largest single component of Canada’s entertainment industry, representing $10 billion in current capital construction.1 This makes it no surprise that new casino complexes are being built across the country to take advantage of Canada’s positive gaming market. Whether they’re large resorts or smaller slot casinos, new gaming properties must do all they can to get a leg up on the competition in order to attract patrons – and keep them coming back. For many, this means increased focus on customer service. Investments in ticket and currency processing technology can help casinos enhance customer service by improving speed and accuracy when processing a patron’s cash and tickets. Quickly Convert Customer Winnings with Money and Ticket Counters The cash cage is one of the few areas where casinos have to provide specific customer service to their clientele outside of the gaming floor. And having a way to quickly convert winnings into cash at the cage is an important aspec t of maintaining an ef ficient and satisfactory gaming operation. Today’s advanced money and ticket counters, such as the Cummins Allison JetScan iFX® line of ticket and currency scanners, give casinos a way to efficiently and accurately process money won by the players. Using ticket-in, ticket-out (TITO) reading technology, these devices scan and sort each note, making the exchange process quick and accurate. The ability to read and image mixed tickets and cash in a single pass eliminates the need to presort tickets and cash before processing, further enhancing speed and efficiency. As a result, patrons can spend less time waiting in line and more time on the gaming floor. Imaging tickets also provides the additional benefit of allowing casinos to eliminate many of the costs associated with ticket storage. Plus, it lets them quickly and accurately retrieve ticket information at a later date without having to dig through boxes, all without hindering the customer experience. With ticket-based machines that read slips and sort the winners’ money, the exchange process is quick and efficient. This can help casinos retain customers overall and enable growth over the long term.

s m a r t te c hn o lo g y de c i s io n s th a t w ill deliver a quick ROI. Multi-pocket currency counters and sorters, like the Cummins Allison JetScan® MPS line of products, deliver greater count room efficiencies via continuous batch processing and automatic strapping. These features provide time, cost and labour savings. In addition, these solutions allow operators to work faster and more accurately, which means employees can spend more time focusing their attention where it matters most – on their patrons. The JetScan MPS solutions also deliver fitness sorting, which ensures that repurposed cash meets casinos’ highest standards for refilling ATMs and other self-service machines and where note quality matters most. Note quality also improves uptime and reduces services calls for cash dispensing devices; two critical areas for new casinos that are building their reputation with patrons.

For more information about how your property can improve customer service with money and ticket counters, visit http://www.cumminsallison. ca/go-ca/gaming

Sources: 1 Canadian Gaming Association, http://www. canadiangaming.ca/ About Cummins Allison Cummins Allison is the leading innovator and provider of cheque, bar-coded ticket, currency and coin handling solutions. Our world-class sales and service network includes hundreds of local representatives in more than 50 offices in North America, 6 wholly-owned subsidiaries and is represented in more than 70 countries around the world. For more information about our award-winning solutions, visit www.cumminsallison.ca.

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gaminginnovation

GETTING PERSONAL Mobile gaming and the move towards customized content BY MARK GIBSON

It's easy to forget when you're immersed in the digital gaming world that although gaming is an age-old industry, online and mobile gaming is not. Indeed, mobile gaming is just 10 years old in any recognizable form. In that time mobile has moved from being something of a novelty to being the cornerstone of player revenue development within the digital gaming space.

AS A MOBILE communications specialist, mkodo believes that one of the key g row th a rea s for mobile this yea r will be CRM (customer relationship management) and personalization on mobile. A mobile device is just about the most personal of all devices. As such, giving your players the ability to personalize their own experience and to customize their own presentation w ill en ha nce the user ex per ience, player returns and loyalty. CONTENT PERSONALIZATION

There are many options, in terms of utilizing a mobile platform's CR M and functionalit y, which can y ield g reat div idends for operators. The personalization or customization of

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the player experience on mobile can take many forms, for example: • Dynamic re-ordering of content, on a player-by-player basis, based on the previous behaviour of that player; • Variation of promotional content based on player-profile; • Content prioritization based on the capabilit y, size and feature support of the mobile device; • Re-ordering menus and navigation based on player selection (playercont rol le d p er son a l i z at ion or customization), • Loyalty and bonus offers that are reactive to the player’s personal preferences. Enabling such a strateg y requires commitment and a mobile platform that can provide f lexibility regarding the application of different component s of person a lizat ion; there are different requirements between bingo, casino, sportsbook, etc. An operator may also benef it from working with a mobile partner that has experience of integrating with a gaming operator's back-office player management platform.

MOBILE CRM AND PERSONALIZATION

It ’s key to con nect your content personalization strateg y w ith your out ward CR M strateg y. We see sig nif icant upside for gaming operators connecting data derived from personalization, such as game favourites, bet types, content group preferences (e.g. most popular bets), etc., to an outbound communication strateg y. These strategies can link player actions and preferences to personalize a subsequent outbound contact (e.g. a direct offer to a game previously or recently ‘favourited’ by the player, including the player’s na me or reference to their pr ior activity). As always, an important consideration when personalizing c o nt e nt d el i v e r e d o n m o b i l e i s that whatever content you do personalize, make sure you get it r i g ht , m a k e it t i mel y a nd m a k e it releva nt. Deliver ing poorly p er s o n a l i z e d c o nt ent ver g e s o n counter-productive. However, when planned with insight and executed with precision, personalization will improve response rates, enha nce loyalty and peer advocacy.

Canadian Gaming Business | 37

Gaming Innovation

“The mobile device also provides a great opportunity to map, by location, usage patterns for an overall user-base and also on a detailed, individual basis.” O ne of t he mo st va lu able a nd cost-effective means of delivering CR M to drive activit y is via Push Notif ications. You can send a Push Notification to a device with an app or a Chrome browser installed that includes a Push SDK . The Push Notif ication w ill be seen by the player whether or not the app is open at the time and is an excellent prompt to open and engage with the product. The Push, if selected, will open the app and can also open it to a relevant contex t w ithin the app, such as a specific match in a sportsbook. Push is a very effective tool, especially in scenarios of time-sensitivit y (e.g. in-running betting). PUSH NOTIFICATION DELIVERY

CR M and personalization across mobile messaging should be delivered across SMS and Push Notif ication m o bi l e ch a n n el s . To m e e t t h i s requirement mkodo has developed its client-management suite of tools, mCloud, to enable our clients to send the same marketing campaign, from the same platform, to its user base and send that message via SMS or App Push (using mkodo’s Push SDK in their app) dependent on whether the customer has an app or not. Push delivers stand-out opt-in rates compared to other marketing channels — overall, the average notification optin rate stands at 43 per cent of app users (across a variety of verticals). Apps use Push Notif ications as a primar y marketing channel given that it can deliver four times greater engagement and two times greater r et ent io n r at e s (e. g . u s er s w it h Push enabled for an app are two to three times more likely to launch an app multiple times). However, 38 | Spring 2016

it’s important to recognize that the difference in performance on these metrics, between average and highper for ming apps, ca n be not able — targeted personalization in your Push messaging is key to maximizing potential and response to a CTA. LOCATION PERSONALIZATION

The mobile dev ice also prov ides a g r e at o pp or t u n it y t o m a p, b y location, usage patterns for an overall user-base and also on a det ailed, individual basis. Insightful business intelligence will be derived regarding t he cont e x t of en g a g ement ; t he efficacy of promotional campaigns. The combination of mobile and location also opens the door to a w ide range of methods of mobile marketing using iBeacons and proximity marketing that not only is effective but that also provide added value for your customer and genuine motive to engage with your brands and services. On a mobile device, and especially if the customer ha s dow n loaded a n app, players ex pect to be communicated with, to be sold to and to receive offers. Players will be accepting of, and even happy with, this as long as the communication is timely, relevant and personal. Mark Gibson is Business Development D i r e c t o r, m k o d o. m k o d o w o r k s f o r a wi de range of cli ent s in cluding BCLC, Rank Digital, T he Atlantic L ot t e r y Cor p orati on an d t h e BBC . mkodo offers mobile sportsbook, mobile gaming, mobile bingo and mobile lottery products plus related mobile marketing and CRM services. For more information contact mark.gibson@mkodo.com or visit www.mkodo.com.

communitygaming

2016 COMMUNITY GAMING CONFERENCE: Charting the course for community gaming in Canada Following a hugely successful inaugural event in 2015, the second annual Community Gaming Conference recently saw hundreds of delegates, exhibitors, regulators and thought leaders come together in Toronto to help chart the course for community, charitable and commercial gaming organizations across Canada.

Canadian Gaming Businessâ&#x20AC;&#x201A;|â&#x20AC;&#x201A;39

communitygaming

From left to right: Top: Marty Carroll, Rick Gray, Shelli Donofrio Ubriaco, Paula Antoniazzi, François-Patrick Allard Bottom: Tony Rosa, Jim Peterson, Peter Howard, Tom Aikins, Terry Debono, Don Bourgeois, Danielle Bush and Hai Ng

HELD AT THE Westin Bristol Place on January 26-27, the 2016 conference was desig ned from the outset to provide an unparalleled educational program for Canada’s communit y gaming professionals and featured an outstanding lineup of speakers, presenters and exhibitors over two jampacked days. The educational program covered a wide range of important topics critical to the g row th and continued success of the community gaming industry, including: • A n o p e n i n g p l e n a r y s e s s i o n on the st ate of the communit y gaming industry in Canada, where Ca n ad ia n G a m i n g A sso ciat ion P resident Bill Rut sey joi ned a panel of industry experts from the Commercial Gaming Association of Ontario (CEO Peter McMahon), the AGCO (Director of Regulatory Assurance Peter MacAloney) and Loto-Québec (Managing Director, Société des bingos du Québec, Francois-Patrick Allard); 40 | Spring 2016

• A Wednesday mor ning key note session on how charities benef it both f ina ncia lly a nd by building relationships in the bingo communit y that featured a presentation by Vik ki Gilmour, Fundraising and Event Co- ordinator of VON Durham Hospice; • A second morning keynote session presented by Paula A nton ia zzi (Prog ram Director, RG - C) and Sh el l i D o n o f r i o ( R e s p o n sibl e Ga ming Business Rea lt ionship Manager, OLG -RG team), who discussed the impor tance of embracing and eng a g ing social r e s p o n s i b i l it y i nt o t h e f a b r i c o f c o m mu n it y g a m i n g c e nt r e environments; and, • Fi ve en l i g ht en i n g e duc at ion a l sessions that included topics such as managing community gaming in the dig it a l a g e, ma na g ing hospitality and managing people.

In addition to the comprehensive education program, attendees had a chance to discuss the latest products and technological innovations for communit y gaming organizations while visiting the many supplier booths on the surrounding exhibition f loor. They were also treated to an array of delicious food and refreshments generously provided by a multitude of valued sponsors. Add to that a number of social and networking events and the 2016 edition of the Community G a m i n g C on fer enc e r e c ei ve d a resounding thumbs-up from those in attendance. While a great number of people are responsible for putting together such a unique and successful event, we would like to thank the following industry leaders and sponsors who went above and beyond in providing both the educational and hospitality programs that will have attendees eagerly looking forward to future conferences:

communitygaming ADVISORY COMMITTEE: Francois-Patrick Allard, Managing Director – Loto-Quebec Paul Burns Vice President, Public Affairs – CGA Terry Debono Partner – The Debono Group Shawn Fisher COO – Delta Bingo Rick Gray VP c-Gaming – OLG Peter Howard Director – Diamond Game Darren Jang Manager, Product Management – BCLC Kellie Manning Manager, Strategic Initiatives & Corporate Social Responsibility – NS Lottery Peter McMahon CEO – CGAO Chuck Nervick Senior Vice President – MediaEdge Communications Tony Rosa President – Community Gaming Troy Ross President – TRM Consulting John Szumlas CEO – Bingo Alberta CONFERENCE SPONSORS: Platinum Level: Diamond Game, Grover Gaming Gold Level: Arrow Games/Bazzar and Novelty Silver Level: AGI/PlayLinxx, BetRite, Gasser Chair Co., Canadian Bank Note Education Program Sponsor: OLG Food and Beverage Sponsors: Smucker Foods of Canada Corp., McCormick Bourrie, Reuven International, Tyson Foods Canada

Thanks also to all who attended this year’s event and please make sure to pass your feedback along to Rachel Leslie, Show Operations Manager (rachell@mediaedge.ca) or contact Chuck Ner vi ck , Seni or Vi ce Pre si dent , Me di a E dg e Comm uni cati on s (chuckn@ mediaedge.ca) for sponsorship opportunities. See you again in 2017!

Celebrating Success Charitable gaming revitalization celebrates $100 Million Since 2005, Ontario Lottery and Gaming has partnered with charities, commercial bingo centre operators, and municipalities on the revitalization of charitable bingo by introducing technology to support traditional charitable gaming products. Following six successful pilots, the decision was made to expand and offer the new model to interested charities, operators and municipalities. The Charitable Gaming (cGaming) initiative is all about supporting Ontario organizations such as food banks, women’s shelters, hospitals, service clubs, programs for special needs children, youth sports programs and seniors’ programs. We were very excited to recently achieve a very significant milestone. We have now raised over $100 million across the 31 cGaming sites benefiting 1,800 charities and nonprofits that provide vital services in their communities. A special celebration of this achievement was held at Barrie Boardwalk Gaming Centre on February 4, 2016. The Barrie venue was the first pilot site for cGaming back in 2005, so it was very fitting that the celebration took place there. A cheque presentation representing the $100 million was supported by MPP Ann Hoggarth; Mayor Jeff Lehman; Greg McKenzie, COO, Ontario Lottery and Gaming; and Lynn Cassidy, Executive Director, Ontario Charitable Gaming Association. The event was well attended by many charities and their volunteers. This initiative with OLG is a unique partnership between charities, commercial operators, municipalities and the Alcohol and Gaming Commission of Ontario. The 31 cGaming sites have seen significant investments by the commercial operators and OLG and have provided increased employment opportunities in their communities. Over 10,000 volunteers are actively involved in the sites, assisting with customer care and promoting the good works their charities and non-profits contribute to their local communities. For more information contact Lynn Cassidy, Executive Director, Ontario Charitable Gaming Association, 905-824-5478 or lcassidy@charitablegaming.com

Canadian Gaming Business | 41

employeeengagement

MANAGING DIVERSITY

The importance of reducing unconscious bias in the workplace BY NATALIE HOLDER

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employeeengagement

Diversity and inclusion have definitely grown up over the past 20 years. Studies have shown that diversity management tops the list of priorities that businesses will have in the coming years. And, within the last 10 years, there has been an explosion of seniorlevel diversity officer roles in corporations, higher education, and law firms. With all of these resources being put toward increasing diversity, why have most organizations not achieved the change they seek?

YO U MIGH T NOT H AV E a n a n s wer because despite much societ a l advancement, there are reminders that people are treated unfairly because of their faith, how they look or how they sound. Our silence might also be acknowledging that we do not know how to achieve the diversity we seek. In the workplace, part of the issue is not knowing the difference between diversity and inclusion. Think of the high-school lunch table as a metaphor for ex per iencin g t he dist inc t ion between the two. DIVERSITY VS. INCLUSION

Do you remember what your highschool cafeteria looked like, sounded like, and what it smelled like? You probably had a group of friends that you ate lunch with every day. Imagine that one day, you asked a different group if you could sit with them and they enthusiastically made room for you. However, after a few minutes at

this new table, you noticed that you were not a part of the conversation. People were mak ing plans for the weekend without asking if you would like to join them. W hen you tried to tell a joke, everyone stared at you dismissively. People talked over you and cut you off mid-sentence. While you were invited to sit at the table, you were not invited to engage at the table. Many organizations do a great job of recruiting for the diversit y they seek, but fail to create inclusive environments. Engagement is a measurement of a person’s inclusion in an organization and drives the overall quality of the human capital brought to the table. SOCIAL NEEDS ARE KEY

A br a h a m M a slow ’s wel l-k now n “ h iera rchy of nee ds” st at es t h at everyone has needs that must be met before they can reach a level of selfactualization. In the workplace, an

employee’s safety and psychological needs a re most likely t a ken ca re of because their jobs provide the financial resources to clothe and feed themselves. However, the difficulty in most workplaces starts with the social needs. When you have friends and positive relationships at work, it creates a sense of belonging. Next are your esteem needs. Everyone has a need to have their work recognized by senior leadership. If employees never hear that they are doing a good job, they may doubt their work and themselves. L a stly, i f a ll you r ot her needs are met, you may reach the level of self-actualization at work. Selfactualization is the point where you take initiative and solve the critical problems in your organization. When your social and esteem needs are met, you have the space, room and security to think about new and different ways to contribute to your company’s business goals. If one of these rungs on the ladder to eng agement are missing, however, it could financially impact the organization. For instance, employee turnover is one consequence of not having engagement. If your organization had 75,000 employees, and 50% were women and non-white but saw a 3.6% attrition rate with this population, it would cost the organization $2.2 million if it costs $10,000 to replace an employee. IGNORANCE NOT ALWAYS BLISS

So how a nd why does exclusion still take place when there are direct benefits to inclusion? Often, without even realizing it, people engage in micro-inequities that are driven by their unconscious biases. Micro inequities are the subtle gestures, comment s, a nd interactions that Canadian Gaming Business | 43

employeeengagement

make you feel included or excluded by another. It’s feeling ignored when you’re talking to someone and they glance at their watch when you make an important point. It’s being left off of an email chain when you should have been included. Think of microinequities as the waves that threaten to erode your beautiful beach house that sits on wooden stilts. Over time, the waves deteriorate the wooden stilts, often in ways that are unseen by the eye. While there are a number of ways to uncover exclusion and unconscious bias in an organization— and eventually eradicate it—the process may start with three questions: 1. Is there a team member who would view my feedback as negative if I give them any feedback at all? 2. W ho on t he t ea m do I disli ke working with? 3. Which person on the team makes me say, “I am having such a difficult time getting to know this person?”

Most likely the person or people who surface in your responses are feeling excluded from your work groups. In a training session for a large g over n ment a g enc y, there wa s a senior leader who admitted that while he was committed to diversity as a cause, he was not putting his actions into practice with certain individuals on his team. He courageously ad m it t ed t h at he creat ed a sel ffulfilling prophecy where his favorite employees were excelling and the others, whom he did not connect with and had ignored, were struggling. Invitations to his afternoon coffee excursions to Starbucks were only extended to the people on his team that he connected to and liked. Even those with the best intentions have diff iculty tying their words to their actions. Creating an inclusive culture takes shaking our unconscious minds awake and questioning our actions.

Natalie Holder is an employment lawyer, speaker, corporate trainer and author of Exclusion: Strategies for Increasing Diversity in Recruitment, Retention, and Promotion. As the co-founder of the New York State Bar Association’s Labor & Employment’s Diversity Fellowship she developed strategies to increase diversity and retention for various bar associations. In 2013, NYU honored her with the Martin Luther King, Jr. Humanitarian Award. For more information on Natalie Holder please visit www.QuestDiversity.com.

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IGAMING

ANALYTICS

Preparing for the next generation of players BY LOUIS TEOH

Globally, online gambling is an estimated $20-billion-a-year industry. About $400 million is estimated to be played annually in Ontario alone1. Considering that only a few years ago Canada was considered inexperienced in the iGaming scene, and that traditional gaming revenues remain stagnant (for the most part) while iGaming revenues soar, there is no denying demand for online gaming is on the rise.

PART OF THIS GROWING popularity can be attributed to the fact that digital is transforming nearly every aspect of how people work and play, all over the world. Just as online retailing and online banking have become the norm, consumers have come to expect online services for just about everything, and you can bet the gaming industry will see the same digital demand. In the not too distant future, the novelty of iGaming will likely wear off as it too becomes the norm; for the next generation of gamers, digital is already ingrained

into their ver y way of life. These g amers ex pect ser v ices delivered through a single swipe – whether it’s arranging car ser vice via Uber or booking a vacation spot through Airbnb – it’s got to be fast, efficient and available across devices. In a big data world, the insights to be garnered and leveraged to truly drive the popularity of iGaming are endless. Traditionally, the industry has used rudimentary analytics, but if it is to have an impact, today’s analytics must go beyond business intelligence and repor ting to

include prediction, forecasting and optimization. Here’s a look at how the iGaming industry can put analytics to work to their advantage. PLAYER PROFILING

Predicting the future worth of gamblers is the ultimate goal of analytics in the casino industry. The gaming industry is inherently suited to advanced analytics due to the vast amount of data and information they can collect. iGaming is no different, offering even more data points and player insights than other forms of gaming. Right from the start, players are legally required to register before they are allowed access to a game, creating an abundance of immediate data points, including gender, age, location, and others. As the player continues gaming there is even more data to collect such as online usage – games played, what happened in the game, and win/loss ratios, just to mention a few. Now combine all those data points w ith what they might already know about the player and you have an in-depth profile that will help to ensure that your marketing time, dollars and effor ts are that much more effective. With real-time information, you can deliver the right Canadian Gaming Business | 45

analytics offer at the right time to the right person, maximizing the chances of engagement. SUPPLIER/GAME ANALYTICS

Keeping players engaged also rests he av i l y on t he g a me it sel f. A re there particular games that perform better than others? Is there a game that a specif ic customer segment is interested in? W hich games drive the most prof itabilit y? Do certain game types (slots, card, etc.) appeal to certain customer segments? These are all questions that can be answered when analy tics are applied at the game level. Increa si n g ly g a me suppl ier s a re usi n g a n a ly t ics to d r ive a nd ref ine game development. Just as the industr y is look ing to market effectively to customers via player prof iling the same concept applies to identifying which games will best be suited to pa r ticula r customer seg ments. It has tr uly never been more about personalization a nd appea ling to a n indiv idua l ’s preferences. Gone are the days of g uess-work , a n a ly t ics h a s t a k en the driver’s seat in g uiding game suppliers a nd the indust r y in producing and serving the right type of content to the right individual. Recommendations: Cross-sell and Upsell Capabilities

Most nex t-best act ion st rateg ies fo c u s o n t h e u p s el l , c r o s s - s el l side of marketing, and have yet to incorporate the broader customer experience. As with other industries, the g aming industr y needs to be mindful of marketing fatigue: if your customers are constantly bombarded with marketing messages and offers, even ones that are relevant to them, they’re more likely to opt-out or leave. The challenge for the gaming industr y is to f ind the right blend of marketing, service, and support. To get this right, the industry needs to understand and anticipate what it is that customers want and need. That’s where nex t-best offers and a na ly t ics come in. For ex a mple, using automated recommendation engines like Amazon (e.g. customers like you selected ABC or X YZ), gets information to customers faster. 46 | Spring 2016

Analytics drive the deep understanding of customers, uncovering meaningful interactions and offers that will ultimately drive profitable growth. Customers’ digital footprints are growing with increased use of mobile devices, social media, and the transactional breadcrumbs they leave behind. Customers are expecting this data will be used to their benefit. In iGaming it’s truly about motivating the player to play the next game. And while iGaming offers quick insights via real-time, the window of opportunity is only open when the player is in session. Leveraging all of these insights and data points to ensure you are anticipating demand and serving up the next best game will keep players engaged and ultimately drive player profitability. Forecasting: The Possibilities

With today’s advances in big data analytics, the abilit y to accurately predict user behavior with a fairly high degree of certainty is a reality. In the gaming industry, this means predicting player actions a nd using that information to inform strategy, improve product, retain key players, and increase monetization opportunities. Forecasting can also help predict future prof itabilit y by look ing at factors such as a player’s average number of wa g ers placed over a period of time, or by calculating their average worth. By identifying who the most valuable players are, the industry can ensure they are driving the right offers that will keep the right players engaged. On the other hand, analytics are also proving to be a worthwhile tool to help identify problematic gamblers. Using predictive analytics software to underst a nd player beh av iour, a n a ler t c a n b e t r i g g ere d w hen operators see an individual’s behavior becoming more risky. At that point, an intervention such as a pop-up can ask them to assess the amount spent, or an offer that triggers the player to cease gaming can be made. W hile there is much work to be done in this area, many casinos are taking steps in the right direction with analytics proving to be a promising tool to fight addiction.

The industry is also looking at qualitative data such as weather and traffic conditions and how it may impact revenues/traffic. For example, do rainy days drive iGaming usage while decreasing visits to land-based casinos? Can the industry entice the online gamer with an offer to get them to the land-based casino? Data truly is the future of gaming. The insights it can offer will increase profitability by quickly providing actionable results that can drive offers in real time, building a stronger relationship between provider and patron. iGaming: The Sure Bet

The online gaming market is without a doubt growing in popularity. Morgan Stanley predicts that online gambling will be worth $9.3 billion in the U.S. alone by the year 2020. The popularity of iGaming in Canada is also clear, as nearly every province has made moves to legalize it. Future gamers want this capability and will look to offshore gaming options if governments don’t deliver homegrown options. In Canada we already see how casinos are adapting to appeal to this new generation of gamers. One of the most innovative examples is Montreal’s the ZONE, which offers a multigame space with live hosts and interactive terminals to play alone or in a group. In what could be described as a nightclub casino experience it is one example of this evolution. Many casinos are already starting to think about how they can use the iGaming experience to drive patrons back to land-based casinos. As the industry continues to makes moves to market to the new generation of digitally sav vy players, casinos should place their bets on the enormous potential analytics can deliver. L o u i s Te o h i s a S e n i o r A n a l y t i c s Technology Consultant at SAS Institute Inc. He is a graduate of the National University of Singapore with a BSc in Computer Science and a specialization in International Business Management. Today, Louis is an evangelist for SAS’ Predi ctive An alyti cs and focuse s his time between the telecommunications, hospitality, gaming and energy sectors across Canada. 1. http://www.canadiangamingbusiness.com/ iGamingRoundtable.aspx

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