Canadian Gaming Business | Winter 2013

Canada's Premier Gaming Industry Magazine

Vol. 7 No. 4

www.CanadianGamingBusiness.com

Winter 2012-13

Managing

Casino Talent Creating a winning workforce

Inside: PM 40063056

iGaming Roundtable Playing Green at Niagara Casinos Innovations in Printers and Validators Q&A with Loto-Québec's Gérard Bibeau

June 17-19, 2013 Palais des congrès Montréal, Québec www.CanadianGamingSummit.com

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Winter 2012-13 Volume 7 Number 4 Publisher

Richard Swayze richards@mediaedge.ca 416.512.8186 ext. 246

Editor

Matthew Bradford matthewb@mediaedge.ca

Advertising Sales

Richard Swayze richards@mediaedge.ca

Senior Designer

Annette Carlucci

annettec@mediaedge.ca

Designer

Jennifer Carter

jenc@mediaedge.ca

Production Manager

Rachel Selbie

rachels@mediaedge.ca

Circulation Manager

Lina Trunina

linat@mediaedge.ca

contents 10

www.CanadianGamingBusiness.com

22

4

PUBLISHER'S NOTE

6

MESSAGE FROM THE CGA

Proudly owned and published by:

8

COVER STORY:

President Kevin Brown

President & CEO Bill Rutsey

GAMING TRENDS:

kevinb@mediaedge.ca

wrutsey@canadiangaming.ca

14

Senior Vice President Chuck Nervick

Vice President, Public Affairs Paul Burns

chuckn@mediaedge.ca

pburns@canadiangaming.ca

18

42

30

Managing Casino Talent: Creating a winning workforce

Playing Green at Niagara Casinos: A study in casino sustainability

SPECIAL SUPPLEMENT:

The Constantly Evolving AML Environment: Going forward while keeping the past in mind

Canadian Gaming Business is published four times a year as a joint venture between MediaEdge Communications and The Canadian Gaming Association

22

FACILITY PROFILE:

To advertise: For information on CGB’s print or digital advertising opportunities: Richard Swayze 416-512-8186 ext. 246 richards@mediaedge.ca

24 GAMING TECHNOLOGY: Innovations in Printers and Validators

Copyright 2012 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

Manitoba's McPhillips Station Casino: Enhancing old-world elegance with a modern twist

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EXECUTIVE Q&A:

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CHARITABLE GAMING:

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IGAMING SUPPLEMENT:

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MARKETING:

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LEGAL:

42

FINANCE:

Gérard Bibeau, President and CEO of Loto-Québec

Kinzo Winning Big in Québec: A look at Loto-Québec’s new entertainment product

iGaming Roundtable: Insights from the frontlines of online gaming

Online Casinos Are Coming (And They're Going to Affect You)

Redefining Poker: US Federal court judge declares poker as game of skill Make Your Situation Less Taxing: Getting the most out of tax credits for online game developers

Official Publication of the Canadian Gaming Summit

Canadian Gaming Business | 3

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After 18 years in trade shows and publishing, I was thrilled this past spring to take on a new challenge: Managing this great publication and the annual Canadian Gaming Summit’s sales efforts. I look forward to ensuring that Canadian Gaming Business (CGB) continues to be informative, topical, entertaining, and visually engaging. We appreciate the ongoing support of our advertisers, contributors and our partners at the CGA, and to our readers; this magazine is for you. Our editor Matthew Bradford and I welcome your feedback. Here’s to an exciting year ahead for CGB and for this dynamic industry!

So...what’s inside our winter issue? With all the innovations driving gaming in Canada, we have an incisive look at some of the elements affecting this evolution, beginning with a nationwide study of employee development programs in our Cover Story, “Managing Casino Talent,” penned by Dayna Hinkel and Judith Hayes from the Canadian Gaming Centre of Excellence (Manitoba Lotteries). Speaking of Manitoba, enjoy our facility profile on the Winnipeg casino styled around a turn-of-the-century railway station and grand hotel, the McPhillips Station Casino.

Please also check out the report on sustainable strategies in the Gaming Trends feature, “Playing Green at Niagara Casinos”, from Jennifer Murphy at the Fallsview Casino Resort; and our look ahead at pending changes for Canada's anti-money laundering regulations from expert Jean-Francois Lefebvre: “The Constantly Evolving AML Environment”.

We have also included a temperature check on the growth of iGaming in Canada, with an in-depth roundtable discussion featuring Ontario Lottery and Gaming Corporation's Sr. VP of Lottery, George Sweny, Interactive Gaming Council's Amanda Brewer and Troy Ross, and OpenBet's CEO David Loveday.

Next, we take, we take a look at the cash handling sector with the newest innovations in casino printers and validators in our Gaming Technology feature.

With the annual Gaming Summit landing in Montreal in less than 6 months, we’ve also turned this issue’s spotlight on Québec with an insightful Q&A featuring Loto-Québec President and CEO Gérard Bibeau, as well as taking a closer look at the province's Kinzo charity gaming initiative.

As always, enjoy our quarterly Finance, Marketing, and Legal departments, including KPMG's analysis of app development tax credits in, “Make Your Situation Less Taxing”; Marshall Fenn's perspective on iGaming in, “Online Casinos are Coming (And They're Going to Affect You)”; and Heydary Hayes's “Redefining Poker”.

From all of us here at CGB and the Canadian Gaming Summit, we wish you and yours all the very best for the new year.

Richard Swayze Publisher, richards@mediaedge.ca

4 | Winter 2012-13

messagefromtheCGA

2012 in review: The beginnings of significant change

By Bill Rutsey, President and CEO of the Canadian Gaming Association

2012 has been quite a year for potential progress and change in the Canadian gaming industry, from both regulatory and operational perspectives.

The federal government began a consultation process to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, including the policies, procedures, and regulations with respect to casino gaming and online gaming. We expect to take part in further conversations on the matter in 2013.

As well, 2012 saw an attempt to bring clarity as to whether or not single event sports betting will be legalized in Canada.

A bill to amend the Criminal Code of Canada (Bill C-290) is in the final stages of progress through the Canadian Parliament, and the matter may well be decided prior to the publication of this article. Should the bill pass, look for some provincial lottery and gaming corporations to offer it in a variety of forms, including in casino sports books, online, and potentially on mobile devices.

The Alcohol and Gaming Commission of Ontario (AGCO) began a process to introduce meaningful regulatory reform to introduce more compliance and risk-based approaches across the various industry segments that it regulates, including gaming. The object is to ensure that regulatory priorities and objectives are properly aligned to present-day risks and expectations, which includes an environment of multi-party private sector ownership and operation. The AGCO also released a new draft of its Electronic Gaming Equipment Minimum Technical Standards for discussion in November, to be finalized early in the new year.

The biggest potential opportunities for operational change arose in Ontario, stemming from Ontario Lottery and Gaming’s (OLG) spring announcement of the outcomes of its strategic business review. The key outcomes of the review are for OLG to become more customer focused, to expand 6 | Winter 2012-13

private sector delivery of lottery and gaming by transferring ownership and day-to-day operations to the private sector, and to renew and enhance OLG’s oversight role.

The pla n for increa sed customer focus includes closing or relocating underperforming facilities, ending the direct support of horse racing through the slots at racetracks program, and allowing new gaming sites in convenient locations where there is customer interest and tourism potential.

With OLG currently responsible for 23,000 slot machines and over 500 table games, as well as 27 gaming facilities and over 10,000 lottery terminals, this is a huge potential opportunity for the private sector, including the development of a destination resort facility in downtown Toronto, should the city approve.

The modernization process is well underway, with a Request for Information (RFI) having been released seeking private sector feedback on new facilities development, ongoing conversations with municipal governments throughout the province, and the recent Requests for PreQualification (RFPQ) from parties interested in developing and operating gaming businesses in the Ottawa, East and North bundles. This is to be followed by RFPQs for the balance of the province and then Requests for Proposals (RFP) from qualified developers and operators. Overhanging all this is the likely provincial election expected in early 2013.

Finally, online gaming is now an established fact, with British Columbia Lottery Corporation, Loto-Québec, and Atlantic Lottery Corporation all offering online product, to be joined in 2013 by at least Manitoba Lotteries and OLG. 2012 has indeed been busy. The Canadian Gaming Association has been part and party to all of these initiatives, and will continue to play an active role in them, as well as other matters pertaining to our industry as they arise.

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coverstory

Managing Casino Talent Creating a winning workforce

By Judith Hayes and Dayna Hinkel

8  |  Winter 2012-13

coverstory

Talent management has become a buzz phrase in recent years, but what is the real importance of developing a talent management program for your gaming organization? What does it entail and who does it include? Does managing talent only refer to senior level positions within the organization?

Is there only one right approach to leveraging talent in the gaming world?

In this article, we will examine the talent questions and challenges facing our industry in the coming years and take a peek behind the scenes to see how Canadian public, private, and Aboriginal gaming organizations are approaching their talent management issues.

“Talent management is very important in the casino industry. In fact, it has become the emerging focus within our gaming operations and the related ancillary services we now offer to our guests,” says Sally Hart, Executive Director Human Resources for Great Canadian Gaming Corporation.

In the past twenty years, the Canadian gaming and casino industry has grown from local bingo halls and break-open tickets to state-of-the-art casinos with slots, electronic gaming, table games, and race tracks; as well as food, entertainment, and retail venues. Gaming has grown by 127% since 1995 and, at over $15 billion, is Canada’s biggest entertainment industry, measuring almost the same size as movies, TV, recorded music, and professional sports combined.

Currently, over 135,000 people are directly employed by the gaming industry, creating an multi-billion dollar sector that has become a vital part of the Canadian economy. Technological advancements continue to shape the gaming business by allowing more sophisticated gaming equipment and automated systems to support employees as they provide the highest levels of customer service. And, as technology plays a greater role in employee productivity, it also impacts the skills employees require to be successful in their positions. Additionally, this technological focus allows for more complex data analysis

at a time when strategic decision making is critical to the success of a property.

With immigration high on the federal government's agenda and the Aboriginal population growing in Canada, these two potential employee groups will play a major role in future staffing initiatives.

Both groups represent a large, untapped market in a fast moving industry with room for growth from entry level positions through to more senior levels.

Defining Talent Management for Gaming Talent management refers to the strategic human resources strategies that gaming properties are taking to attract, retain, manage, and develop staff so that the businesses can succeed now and into the future. The goal of a solid talent management strategy is to ensure the right people are in the right jobs doing the right things to address the organization’s strategic goals. Brent J. Fleming, Vice President of Human Resources, Organizational Development, Paragon Gaming is one such professional who addresses talent management and the need for employees to fully understand the organization’s value system. He notes: “Paragon Gaming is focused on developing talent in-house to ensure our employees have the tools and resources they need to perform well, receive proper compensation, and transition to leadership roles. Internally developed leaders are valuable assets because over time they have developed the necessary core competencies and internalized company values.”

Canada has a number of different models of casino business management across the nation with casinos operating Canadian Gaming Business | 9

coverstory

as public sector, private sector, and Aboriginal casino properties. More and more within these properties, talent management is becoming an approach, or series of approaches, rather than an exclusive program. As such, there are a broad variety of approaches that have been used at gaming properties nationwide to achieve similar goals. However, before these industry examples can be examined, it's important to assess some common denominators in the area of talent management outcomes.

In a snapshot across the country, talent management programs aim to ensure growth occurs for: • Senior management employees, to focus on leadership and innovation to ensure strength in business guidance and growth in the coming years.

• Mid-management, to ensure the organization has the required management skills to meet current and future employee and business needs.

• Frontline employees, to allow them to meet changing business, technical, and customer needs.

Throughout all talent management initiatives, gaming organizations are also highlighting the need to be mindful of 'Essential Skill' challenges (i.e., reading, writing, and oral communication), generational differences, and cultural differences that require special consideration for inclusion both within our employee base and our customer base.

Strategies for Senior Management Developing senior level management, those involved in determining the strategic direction of the organization, more commonly combines education from recognized institutions 10 | Winter 2012-13

coupled with practical application of the newly acquired skills in a supported environment.

“The gaming industry has traditionally been one where learning has occurred on the job. With rapid expansion and competition the need to develop talent and leaders has never been greater,” says Jim McClenahan, Director, Management & Executive Programs, University of Nevada, Reno, (UNR) Extended Studies. “It is the role of universities, like the University of Nevada in Reno, to develop world-class programs to develop future leaders in the industry. We think talent management is an integral part of global gaming organizational strategy.”

In northern Manitoba, Aseneskak Casino has embarked upon an in-house development program delivered by UNR to achieve their goals of Aboriginal leadership in key strategic positions.

Monthly courses allow time between classes for participants to consider how the new learning can be applied to the organization’s unique strategic environment. The program is addressing the need for strong Aboriginal leadership in gaming for the future.

Elsewhere, Ontario Lottery and Gaming Corporation (OLG) has devoted resources to developing a multilevel talent management approach. During this time of transition, the senior level program, titled Emerging L eaders, ha s proven to be quite successful. In it, participants spend a year in secondment situations in a variety of gaming management areas to better learn the broad scope of the business. They also develop 30, 60, and 90 day learning plans to support them as they use the corporately developed set of tools to help them think, act, and ref lect on the developmental experience. The goal of the Emerging Leaders program is to develop the next generation of general managers for the corporation.

coverstory In Manitoba, Manitoba Lotteries utilizes a multi-layered approach to senior leadership development. Educational opportunities are supplemented with rotational assignments and special projects. Potential leaders may attend an MBA, leadership certificate, and/or UNR’s Executive Development Program to learn the theory behind the strategy. Additionally, during work placements over a two year period, participants observe and participate in the application of strategy in the unique gaming environment. This program develops a small talent management pool ready to take the lead in higher level positions.

In the west, British Columbia Lottery Corporation (BCLC) applies a three level approach to leadership development across the corporation. Their Business Leadership program, with an educational link to UBC’s Sauder School of Business, assists participants in gaining theoretical and practical skills that are translated into participant developed Action Learning Projects.

The best of these innovative projects are adopted by the organization as organizational improvement projects.

The Gaming Leadership Certificate, offered in partnership with Athabasca University and the Canadian Gaming Centre of Excellence (CGCE), is one of the educational programs employed by a mix of gaming organizations across Canada.

This certificate was designed with input from gaming industry experts across the country and is delivered through a blend of online media resources to meet the special needs of a 24/7/365 industry. Currently in its second year, the program combines recognized leadership development with a tailored gaming-specific approach to developing strategic

skills in problem solving. Potential leaders from Manitoba Lotteries, OLG, Caesars Windsor, Great Canadian Gaming, and Casino Rama have enrolled in the program.

Starting in 2013, a new University of Nevada Reno initiative to offer select CGCE courses online for credit in the Gaming Management Certificate will also increase access to educational opportunities for those wishing to pursue management development.

Strategies for Middle Management Development of middle management, those involved in the daily running of the business, focuses on supervisory skills and management skills in both gaming-specific areas of the business and, in larger organizations, the corporate areas of the business.

This is a heavily invested area of talent management for many gaming organizations. As Sally Hart confirms: “Over the past 30 years, Great Canadian has developed the lion’s share of gaming managers from within using a ‘learn as you go’ focus. Today, we are focused on retaining and attracting ‘top talent’ and building a proactive approach that identifies and develops our managers and their leadership talent throughout our properties.”

At Aseneskak Casino, middle management development encompasses an on-the-job training and cross training approach.

A supervisor can assume a management role and have an opportunity to ‘try on the role’ with support from their existing manager. Based on this experience, during the performance appraisal process the supervisor can then set goals and identify a development plan for the coming year. The supervisor will work

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Canadian Gaming Business | 11 Untitled-1 1

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coverstory with his or her manager to build skills and achieve the new goal of eventually competing for a management role.

OLG takes a structured approach to developing middle management skills. Through the use of their Supervisor Roadmap and Manager Roadmap, the organization provides a robust toolkit to help employees take control of their gaming career. There are a number of phases in the journey which include self-assessments, classroom training, online tutorials, support tools, and guidelines to discussing career goals with a manager. With OLG’s desire to develop employees, the key to the success of the Supervisor and Manager Roadmaps is building confidence, fostering a self-directed approach to employee growth, and providing organizational support along the way.

“Talent management is very important to organizational growth.

We believe in developing employees from within,” states, Priscilla Fraser, Senior Manager Training and Development, OLG. Meanwhile, Manitoba Lotteries uses its Dimensions in Leadership Program, a four level development approach based on corporate competencies. This program is offered to management and supervisory employees and provides them with the necessary leadership skills, a clear understanding of the organization’s strategic focus, and development in the day-to-day skills required in managing employees in a gaming operation. Each level of the program builds on existing management skill levels. The program is offered jointly by Manitoba Lotteries, the UNR, and the University of Winnipeg. It utilizes a strong Level 4 evaluation process that culminates in a Personal Development Project that allows participants to evaluate their competency growth and reflect on their learning.

BCLC’s path to middle management development, Leadership Essentials, promotes a blended learning approach combining classroom, e-learning, and coaching over an extended time.

“BCLC is committed to the ‘build versus buy’ approach,” says Mitch Romanchook, Manager Talent Development, BCLC. “We believe in building our internal talent, not just buying it.”

In addition, the Canadian Gaming Centre of Excellence is introducing a series of six Gaming Management Practicums in partnership with UNR that provides a structured and supervised approach to training and development for gaming management positions. The practicums combine department-specific technical knowledge, leadership competencies, human resource abilities, and essential skills required for casino department managers to Larry Wandowich, Chief C ommunit y Relations & Marketing Officer, illustrates how when employees with the ability, organizational commitment, and motivation are recognized and supported with educational oppor tunities, organizations benefit. Larry, who started as a security manager, has risen through the organization over the past decade from general manager to executive general manager through vice president to his current position. Manitoba Lotteries provided educational support in an MBA degree and opportunities to apply the learning through their rotational assignment program, to capitalize on Larry's talent.

12 | Winter 2012-13

meet the ever-changing needs of this vibrant industry. The Gaming Management Practicum provides hands-on experience to enhance participants’ developmental activities as they strive to achieve academic credit and management status in the casino industry. The work-based, eight-week Gaming Management Practicum helps connect participants with senior leaders in their organization to increase their levels of proficiency.

Strategies for Frontline Employees Frontline employee development approaches include new employees as well as seasoned staff, and involves different paths in different gaming organizations. Frontline employees are the primary connection to our gaming customers. These employees need to be highly engaged in achieving customer service excellence and they provide the raw talent that gaming organizations will develop into more advanced skill sets over time. Carrie Manitopyes, Human Resources Manager, Grey Eagle Casino supports this view, noting, “Grey Eagle Casino actively recruits First Nation candidates for our front line jobs with the goal of promoting to middle management and senior level positions. Our long term goal is to have Tsuu T’ina Nation representation at all levels of the organization.”

The organizations highlighted in this article have similar goals for development of frontline staff: Essential skill growth, customer service excellence, competence within their position, increased technical competence, and an ability to be crosstrained. Development activities include extensive on-boarding programs, strong performance management processes with employee planning and goal setting, frontline mentorship programs, and training. Two common threads through all frontline development initiatives are the fostering of a selfdirected approach to learning and on-going coaching and support provided by caring supervisors and managers.

“We are helping supervisors and managers learn how to coach and mentor because that’s what supervisors and managers are doing – growing the next supervisor or manager,” says Delores Lavallee, Human Resources Manager, Aseneskak Casino.

Developing for the Future “In today’s competitive market, the calibre of talent laying dormant within the company waiting for someone to recognize and develop them is now critical to achieving success as demand for highly skilled people outstrips supply,” adds Brent J. Fleming, Vice President of Human Resources, Organizational Development, Paragon Gaming.

Across the country many organizations have chosen to look inside when considering talent for the future. While the talent management approaches vary, the outcomes are similarly focused at all levels of the organization. How important is managing talent in your organization? What are your unique challenges? How will you ensure your talent management house advantage?

Written by Judith Hayes (judith.hayes@mlc.mb.ca), Director; and Dayna Hinkel (dayna.hinkel@mlc.mb.ca) Business Development Officer, with Canadian Gaming Centre of Excellence, a subsidiary of Manitoba Lotteries - one of Canada’s Top 100 Employers for 2012 and 2013. For info, visit: www.gamingcentreofexcellence.ca/gamingleadership-certificate-program/.

gamingtrends

Playing Green at Niagara Casinos A study in casino sustainability

By Jennifer Murphy

There’s a different mentality spreading throughout Ontario’s gaming industry as sustainable business practices gain greater adoption and visibility. In an attempt to remain competitive in a modernized landscape, many forward-thinking companies are embracing the value of sustainability and are leveraging their greener CSR efforts to narrow the competitive gap.

There’s no doubt that one of the largest drivers to go green is to save green (as in money). However, there is a realization that good business today means more than a healthy bottom line. Now, companies are considering the value of going green and are measuring success based on economic, social, and environmental performance— also referred to as the triple bottom line.

The Green Giant For organizations in the industr y that a re commit ted to improv ing their environmental and social performance, the difficulty isn’t whether to implement sustainability into core business strategies, but how. Much ca n be lea r ned from ot her s who h ave a l rea dy m a de g reat headway in their sustainability pursuits like Fallsview Casino Resort and Casino Niagara (Niagara Casinos) in Niagara Falls, Ontario.

14 | Winter 2012-13

Niagara Casinos is bullish on corporate social responsibility, working collaboratively to improve the lives of others in its local community, championing ethical corporate behaviour, and minimizing its environmental foot pr int. I n 2 0 0 8 , Nia g a ra Ca sinos introduced the “Green Initiative”, a proactive approach to reducing its environmental impact and improv ing eff icienc y and profitability. Over the years, Niagara Casinos’ green initiatives have yielded significant financial, social, and environmental rewards.

As a tribute to its excellence in environmental stewardship, it was recently recognized with an Environmental Leadership Award from the Niagara Business Achievement Awards.

T h e fo l l o w i n g o u t l i n e s N i a g a r a Casinos’ approach to effectively embed sustainabilit y principles into all facets of it s m a n a g ement , o p er at ion s , a nd decision-making; and to foster a culture of environmental responsibility.

Interior LED lighting, Front Lobby, Fallsview Casino

See Green There are as many motivations as there are approaches to go green. The first step in crafting a comprehensive environmental strategy is to develop a long-term sustainability vision. Niagara Casinos’ Green Initiative program serves as a catalyst to facilitating its sustainable initiatives that aim to reduce environmental impact, increase operational eff iciency, and position Niagara Casinos in the vanguard of green leadership in the community.

Despite operating within the same industry, gaming organizations can have numerous differences such as cor porate culture, organizational structures, and business practices.

Therefore, to establish a relevant, st rateg ic env ironment al pla n, companies need to address a number of questions, including: How does improved sustainability performance affect overall business success, viability, and growth? How do current business practices impact the environment?

A nd what factors are driving the development of sust ainabilit y initiatives? Understanding answers to these questions and more will help set goals, measure performance, and manage change.

Create a Win-Win For a sustainability program to gain adoption, it must be clearly aligned with overall business strategies. Some of the challenges with integrating green initiatives may include shifts in business strategies, operational processes, organizational structures,

Hybrid/Electric Charging Station, Fallsview Casino parking garage

and corporate culture. Therefore, garnering the support and buy-in from top management is a critical success factor. In the case of Niagara Casinos, a Green Advisory Committee was established, a collaborative group comprised of senior managers and department leaders to help manage and advise on green initiatives.

Employees also play a key role in driving sustainability. While top-down vision and commitment is essential, on-t he - g rou nd t ea m s help t u r n strategy into action and offer valuable, innovative ideas to boost workplace sustainabilit y. A lthough it can be challenging to change behaviours,

there are a number of ways to gain employee support in a transformative way. In addition to environmental educational initiatives, informal and formal recognition of excellence in green performance can effectively reinforce new behaviours and motivate participation.

To formerly award associates for their environmental achievements in the workplace and community, Niagara Casinos created the Green L eader Award. In 2012, its ‘Falls Deli’ food and beverage team was honoured for their green leadership in sustainable food ser v ice, whereby operational efficiencies were improved and waste production was reduced by 81%.

Canadian Gaming Business | 15

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Property-wide recycling receptacles

Green Up A successful approach to greening your organization can be simple or complex, short term or long term. At the onset of its Green Initiative program, Niagara Casinos conducted shortterm departmental audits, which generated easy, yet effective, solutions to reducing office-related waste. To elevate its program, Niagara Casinos completed third-party environmental audits to better understand where investments in sustainability would net the greatest operational impact. This benchmarking process helped identify and prioritize both short- and longterm sustainable strategies. For example, Niagara Casinos implemented a waste management program that results in a 61% diversion rate. Additionally, various mechanical and electrical upgrades have been made that generate a combined savings of over $750,000 per year.

You Are What You Measure It’s not enough to say that projects are sustainable. To avoid greenwashing, regular monitoring and reporting on sustainable outcomes add credibility to greening efforts and are major aspects of continuous improvement.

Ongoing benchmarking provides the opportunity to revise sustainability strategies and optimize performance by taking advantage of new advancements such as technological innovations, new government incentives, and emerging best practices. To ensure ongoing assessment and evaluation of its sustainable programs, Niagara Casinos’ Green Advisory

16 | Winter 2012-13

Deb Naturelle™ Hair and Body Shampoo dispensers in Fallsview’s Four Diamond Hotel

Committee tracks monthly progress, which culminates in the publication of a comprehensive annual report that is presented to senior management.

Communicate Results Frequent and effective communication yields a number of benefits both internally and externally. Smart companies are marketing their sust ainabilit y per for mance to establish credibility, recruit and retain top talent and demon st rat e cor porat e so c ia l a nd env i ron ment a l responsibility. Internally disseminating green successes can help keep employees engaged, sustain for ward momentum of green initiatives, encourage continual improvement, and fortify company-wide commitment to environmentally friendly business practices.

The trend to go green in the gaming industry will continue to grow as leading organizations realize the positive financial and environmental paybacks from investing in green initiatives. Each organization’s path to capturing value from sustainability will be unique; however, by embracing the long-term strategic and competitive advantages of sustainability, companies of all sizes will be best positioned in the future: economically, environmentally and socially.

By Jennifer Murphy, Communications Specialist, Niagara Casinos. She can be contacted via email at jmurphy@ FallsviewCasinoResort.com

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The Constantly Evolving AML Environment Going forward while keeping the past in mind

By Jean-François Lefebvre

18 | Winter 2012-13

W e ’ v e c o m e a l o n g way si n c e t h e v e r y f i r s t t i m e F I N T R AC ( Fin a ncia l Tra nsac t ions Repor t s Analysis Centre of Canada) visited g a ming proper t ies to conduct so-called compliance examinations.

At t h at t i me, v isit s by Ca n ad a’s Financial Intelligence Unit (FIU) were perceived by many as a 'walk in the park', since they primarily consisted of a brief meeting and a high level discussion concerning t h e o r g a n i z a t i o n’s a n t i - m o n e y lau nder in g (“A M L”) complia nce regime. Hands were shaken at the beg inning and at the end of this informal meeting and, for the most part, that was the end of it.

It's important to keep in mind that back in 2004 and 2005, FINTR AC wa s just beg inning it s onsite

compliance monitoring activities. We must a lso remember the approach of Canada’s FIU was a cooperative one at that time. Times have since changed, and what was true way back then is not so anymore. By now, most in the industry know that this federal a g en c y i s m o r e l a w en fo r c em ent oriented than it was in the past, and it has been conducting its activities this way for almost four years (the A d m i n ist rat ive Monet a r y Pen a lt y system came into force on December 30, 2008). As such, some uncertainty remains as to what Canadian casinos c a n e x p e c t i n t he ne x t fe w ye a r s a nd wh at it is t hey need t o do t o ensure they a re complia nt despite the constantly evolving A ML env i ron ment b ot h i n Ca n a d a a nd internationally.

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“As a casino organization, you should be ready for changes that will have a significant impact on the resources required to achieve AML compliance.”

T h i s f a l l , a ne w d i re c t or w a s appointed to FINTR AC, leav ing organizations to wonder if this new nomination will bring signif icant changes to the way the agency fulfills his role as one of the main actors of Canada’s A ML Regime. Last time a new director wa s appointed at FINTR AC (a change I personally ex perienced while work ing from the inside w ith the agenc y at the t i m e) d r a st ic ch a n g e s o c c u r re d both internally and ex ternally. It was the beginning of a new era for 1 'repor t i n g ent it ies ' n at ionw ide, a nd t he messa g e spread out not long after was that it was time for all regulated organizations under t he P ro ce e d s of Cr i me (Mone y laundering) and Terrorist Financing A c t ( P C M LT F A ) t o d o t h e i r 'homework' and achieve compliance.

Fur thermore, it had been almost ten years since the agency had been created and had been doing outreach to inform regulated organizations.

O ne should a lso remember t h at 2 FATF ’s rev iew of our Ca nadia n A ML Regime revealed important issues that our federal government needed to remedy in a short period of time. Bill C-25 corrected many of these issues, but not all of them.

That lead the Minister of Finances to dra ft t wo consult ation papers

in November and December 2011.

Time was given to Canadian casinos, as well as other regulated sectors, to comment on these proposed changes and inform the Minister of Finances of potential issues or challenges they would most likely face when and if these proposed changes come into force. Now, one year later, we are waiting for these new regulations to be finalized and put into effect, and one would be justified in wondering what the global impacts on their organization w ill be. If there are some g rey a rea s concer n i n g t he burden casino properties will have to deal with, one thing is for sure: This burden will not decrease.

PCMLTFA and associated proposed regulations changes M a ny fac t s m ay ex pla in at lea st partly why Canadian casinos should (and need to) expect more work to be done in terms of AML compliance.

3 O n t op of e x t ende d C DD a nd record keeping requirements, the proposed changes to the PCMLTFA a nd it s associated reg ulations w ill most likely require more monitoring—or, should we say, more ongoing monitoring. The 'business relationship' concept will certainly i mpo se a n i nc rea se d bu rden on gaming properties to k now more

a b o ut t h ei r c u s t o m e r s a n d t h ei r activities. As a casino organization, you should be ready for changes that will have a signif icant impact on the resources required to achieve A ML compliance. Depending on the number of customers, slot s machines, a nd table games available on the gaming f loor, there will be differences in the resources needed to comply. That said, one aspect will remain the same for all gaming venues: The fact that more staff, more money, and more time will need to be dedicated to the AML compliance regime in order to adhere to the new rules.

What is not k nown at this time is how much more work will be required to stay on top of A ML compliance.

As such, different approaches may be taken right now. One may decide to stay passive and wait until there is more guidance from the Minister of Finances and FINTR AC. A lthough it m ay a pp e a r le g it i m at e t o ' w a it and see', this might not be the best approach. Being proactive is certainly a s a fer w ay t o prepa re for f ut u re legislative changes and the additional ch a l len g e s Ca n a d i a n c a si no s w i l l most likely encounter.

So how can we be proactive? What should we do to get ready in advance?

W here a re t he r isk s a nd wh at a re they? These are all worthy questions,

1. All persons and entities to which the PCMLTFA applies 2. The Financial Action Task Force (http://www.fatf-gafi.org/) 3. Customer Due Diligence Canadian Gaming Business | 19

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“More time, staff, and money will have to be dedicated to the organization’s AML compliance regime.” and they are a good start for any Canadian casino organization that wants to prevent potential issues (or at least most of them) before they occur. Our Canadian FIU would call these 'mitigation measures', and they are def initely worth it. Concretely, these questions should be discussed at the higher levels of the organization. The impacts of the proposed legislative changes should be discussed and all aspects should be taken into account. Will we need more AML staff to achieve compliance with the new rules? Will we need to hire new people in order to do so? Will we require new software, automated processes, or manual processes to ensure the organization is compliant with these new requirements?

A g ain, if we don’t k now how cumbersome the new burden imposed on casinos and other 'reporting entities' nationwide will be, there are a few things one should take for granted.

Certainly, the first is that more time, staff, and money will have to be dedicated to the organization’s A ML compliance regime. Secondly, it's possible FINTRAC will continue monitoring the level of compliance within 20 | Winter 2012-13

Canadian casinos. And with everything that happened over the last few years in Canada from a penalty perspective, and everything that keeps happening these days, if one were to bet on how FINTRAC will handle the monitoring of activities at Canadian gaming venues in the future, the safe bet would be that these activities will be reinforced.

One could argue they are already asking a lot from casinos right now, and that would not be false. However, I would not take this as meaning they can’t ask even more from your organization, since they will most likely do ask more in the near future. That is true for land-based casinos.

Online Gaming Online Gaming is a hot topic. A few jurisdictions are already involved in this field, with more expected to join in the near future. iGaming is a huge market and is certainly attractive considering the always growing popularity of internet gaming and the signif icant amount of money being spent by players online. When it comes to discussing the impacts of the PCMLTFA on online gaming, it can be a tricky topic for many reasons. In short: The online activities of the Canadian casinos would not fall under

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the actual definition of a casino in the PCMLTFA. If the Minister of Finances is to bring some clarification on that aspect, and if the casino industry is justif ied to expect more guidance from FINTR AC at some point along the road when this clarification has been shared and explained to the industry, it is probably also safer to expect online gaming to be covered when the def inition of a casino changes in the law. This will certainly create important challenges for any jurisdiction involved in online gaming.

Indeed, under the actual regulations and the actual business models utilized to offer internet gaming, it appears close to impossible to comply with all these rules.

Many reasons may explain this situation, but one of them is def initely that the internet world has not been taken into consideration when these regulations were enacted; at least, not for internet gaming purposes. Furthermore, they were most likely written using the f inancial sector context and business models. It appears to be possible for banks and other financial institutions to comply with the PCMLTFA rules for internet banking activities with their actual business models, however the case may be quite different as far as online gaming activities are concerned.

And while much more could be said on this matter, for now it is important to keep in mind that sooner than later, the AML compliance resources needed to comply with the new rules for land-based casinos will continue to grow… and sometime along the road the online gaming activities will certainly add to this burden.

Preparing for What's Next The idea here is not to be alarmist, but rather safeguard organizations from bad and unnecessary surprises. I always smile when I hear NHL players say they can only focus on what they can control and forget about the things that are beyond their control. The rationale behind their reasoning makes sense, though, and could be used for the purposes of this article. Canadian casinos can’t control everything on the AML compliance side. However, they can definitely be proactive, discuss challenges and risks beforehand, and give the organization some assurance that no matter what the future changes are, they will be ready to quickly comply with all these new requirements. This is the safer way to approach things, and this is what FINTR AC will most likely expect from all gaming venues. One would do well not to rely too much on the federal agency to

allow a long grace period to implement new policies, processes, and controls to ensure compliance with the new regulations when they come into force.

Jean-François Lefebvre is an Anti-Money laundering expert and has been advising clients in the gaming industry for over 8 years now. Mr. Lefebvre has worked with small, mediumsize and large Canadian casinos and has gained an extended knowledge of the AML compliance and best practices within the industry. His in-depth expertise allows him to give highly valuable practical advice. Mr. Lefebvre can be reached at (514) 608-0684 or jeanfrancoislefebvre9@gmail.com.

ANALYTICS Don’t leave golden opportunities to chance.

SAS can help you increase revenue and profits by maximizing patron satisfaction, improving customer retention and optimizing operations.

sas.com/industry/hospitality/casinos for more information

© 2012 SAS Institute Inc. All rights reserved. S99412US.1012

Canadian Gaming Business | 21

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Manitoba's McPhillips Station Casino Enhancing old-world elegance with a modern twist

Capturing the true spirit of the Manitoba’s historic railway culture, McPhillips Station Casino invites guests to explore a vibrant train station and turn-ofthe century hotel, complete with a grand staircases and dazzling chandeliers. Its combination of classic décor and modern amenities make this gaming facility a first class ticket for fun with a flavour of Winnipeg history.

Following its opening in 1993, and renovations in 1999, McPhillips Station Casino is now being upgraded to enhance its old-world elegance with a modern twist. To the benefit and delight of casino guests, McPhillips Station Casino has introduced an array of exciting changes on the gaming floor while improving table games and refreshing electronic gaming devices. In addition to improving the gaming areas, the casino features the newly renovated Crystal Room and Double Down Lounge which convey a distinctively refined appeal, reflecting the revitalized atmosphere of the casino.

22 | Winter 2012-13

It’s no secret that Manitobans are passionate about their sports, and that makes the Upperdeck Sports Bar one of the casino’s key attractions. Decorated with historical sports memorabilia and multiple HD screens, and ready to serve with outstanding food and beverage options, the Upperdeck is perfect for avid sports fans looking to watch the big game or even play a few themselves. The Upperdeck also features billiard and shuffleboard tables, a five-table poker room, as well as a weekly PubStumpers Trivia League.

The Club at the Upperdeck is an ideal place to enjoy great entertainment and hit the dance floor in style, featuring weekly karaoke with a live band.

The mainstage at McPhillips Station Casino also takes popular entertainment to a whole new level, offering guests a unique venue to enjoy popular performers from Canada and around the world. Its intimate setting allows audiences to get up close and personal with acts like Carly Rae Jepsen, Boyz II Men, Bret Michaels,

Michelle Wright, Billy Ocean, and the Midtown Men. Unbeknownst to McPhillips Station Casino's customers, their casino visits have been greatly enhanced thanks to the completion of a state-of-the-art centralized surveillance room that serves to enhance property security, safety, and gaming integrity; as well as ensure an effective response to patrons or employees requiring assistance.

One of the most significant developments at McPhillips Station Casino will commence in 2013, when Canad Inns will begin construction on a neighbouring hotel. In response to research showing that customers desire a stay and play venue, the hotel will be linked to the casino through an all-season skywalk. Scheduled to open in 2014, this allinclusive entertainment destination is sure to become an instant landmark for the area.

For more information about McPhillips Station Casino, visit www.casinosofwinnipeg.com.

HSVL BLUEWAVE

It’s in our DNA. You might think things evolve slowly. At JCM Global, they evolve at light speed, wirelessly, and make your gaming operations better, smarter and faster than ever before.

At ICE Totally Gaming 2013, our signature iVIZIONÂŽ bill validator is now evolving, giving operators and OEMs more power, more options, and more capabilities than ever before.

Evolve with JCM at ICE Totally Gaming, stand S9-240.

gamingtechnology

Innovations in Printers and Validators For our final gaming technology report of 2012, we asked some of the industry's leading cash-handling suppliers to show us how their products are keeping pace with the demands of gaming facilities. See what innovations and advancements are evolving the casino floor...

CashTech Currency Products Handling cash on today's casino floor demands technology that can keep up with volume without slowing down operations. To that end, CashTech Currency Products Inc. offers the innovative Glory USF-100, UW-500, and UW-600 currency sorters; a next generation currency sorter line that increases productivity and lowers operating costs.

With the Glory USF and UW series, gaming properties will realize faster currency processing speeds and an extremely low note rejection rate, thereby boosting productivity in the count room or at the cages.

The state-of-the-art GLORY USF-100, UW-500 and UW-600 were developed based on an in-depth analysis of banknote handling processes in order to lower the operator's burden and further reduce overall processing time. They are equipped with a variety of new features, such as a multi-stacker system that improves sorting and separating performance, a twin reject stacker system that can hold more rejected notes, and a large capacity hopper with an Assisted Feeding Mechanism. The UW-500/600 also offers outstanding cost-performance features at outstanding prices.

They are GLORY's latest answer to the need for smoother, more efficient, and continuous processing of large amounts 24  |  Winter 2012-13

of banknotes. The UW-500/600 will optimize your work process and dramatically reduce your processing expenses.

The Glory USF-100, UW-500, and UW-600 will also easily process the new polymer-based Canadian notes. One of the most common concerns with notes incorporating polymer is static. Since their inception, the USF and UW line of currency sorters have addressed this issue by using static dissipating components throughout the bill path.

Originally developed to be used to process polymer-based currency in countries such as Australia, Mexico and New Zealand with no problems whatsoever, these components have been proven through continuous testing with the Bank of Canada during the design of the new currency to ensure that the equipment can process the new notes quickly, accurately, and problem-free.

Crane Payment Solutions On average, each bill validator accepts a quarter of a million dollars per year and connects directly to patrons, making it a vital component to gaming machines. A s such, there are many 'must-haves' for casino validators, and they are different for each user.

Firstly, patrons come to casinos for entertainment a nd fun. We accept their bill or barcode quickly and efficiently, as well as provide the credit to begin their entertainment experience. We provide world class acceptance rates to any street grade paper or polymer bills; and our multi sensor technology makes it easy for them to play for as long as they choose.

Secondly, for casino operations, a reliable bill validator makes it easy to manage, maintain, and service their gaming

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machines while also saving investment dollars. Having the CashCode one validator provides casinos with several advantages, including the ability to perform SW upgrades without spending capital dollars on the memory card, store all future polymer and paper bill capability (large memory) with no more e-prom upgrades, and use different sizes of cashboxes if necessary (600 to 900 to 2500). It also provides world class reliability and makes it easy to swap units from one OEM to the other, or swap up-stack to down-stack.

Finally, casino executives want to ensure they're receiving the best ROI on their investments. CashCode's oneCheck feature provides the ability to future-proof your bill validator, meaning whatever you buy today has the ability to be upgraded tomorrow. With it, you can hand your patrons a receipt for their dispute resolution, and provide preventative controls to your slot techs for when and what to service and track. Our performance report reduces time spent on the number of service work orders by 50% and allows operations to focus on player development. It also provides an asset tracking and cash management system designed to improve soft count and drop process significantly. For more info, visit www.craneps.com.

Cummins Allison The Cummins Allison JetScan iFX® currenc y scanner is a nex t generation scanner that increases productiv it y and lowers operating costs for gaming properties.

With the JetScan iFX, casinos can enhance product iv it y at the cages or in the count room thanks to quicker currency processing speeds and an extremely low note rejection rate.

The JetScan iFX line utilizes breakthrough imaging technology to sort and count currency, plus image and process tickets with extreme accuracy, speed, and efficiency.

Smaller, faster, and more f lexible than other sorters, this line offers desktop units with full ticket image capture and currency processing on one machine, eliminating operational redundancy and bringing processing efficiencies to even the most compact areas of casinos. The iFX product line also includes f lexible multi-pocket sorters designed to create up to nine pockets in a space-saving vertical configuration barely larger than a desktop sorter.

The scanner’s imaging technology denominates and authenticates Canadian currency at speeds of up to 1,000 notes per minute, including polymer, with minimal rejection rates, while also taking an image of every note's serial number at the same time. Using the JetScan iFX imaging capabilities, casinos can maintain a serial number database of money processed from each cashier and gaming table, and in the event counterfeit notes are later found, each can be traced back to the source and potential problems can be monitored and curtailed.

The JetScan iFX currency scanner will also easily process polymer-based Canadian notes and utilizes static dissipating components to address the most common concern with notes incorporating polymer—static. Cummins Allison worked closely with the Bank of Canada during the design of the new currency to ensure that its equipment will process the new notes quickly, accurately, and problem-free.

Future Logic Casino operators require printing solutions that can keep pace with current and future demands of promotional couponing, server-based gaming, and the continually evolving TITO market. In all these areas, Future-Logic's GEN3 Evolution® printer delivers.

Reducing operator’s costs, the GEN3 Evolution® printer is equipped with the industry’s largest standard paper capacity of 450 tickets, saving operators up to 30 refills or $300 per printer annually. The printer’s advanced low paper sensor provides additional savings by eliminating paper waste and taking the ticket stack down to the last ticket.

The unit offers an optional on-board promotional s y s t em mo du le t h at c r e at e s s ep a r at e a n d s e c u r e processing environments for both TITO and promotional Canadian Gaming Business | 25

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couponing. This optional module also makes precision grayscale printing a possibilit y through an advance temperature control technolog y, yielding the highest resolution output for printing eye-catching promotional coupons. Furthermore, at eight inches per second, the GEN3 Evolution® printer is one of the fastest printers in gaming, printing, and presenting a ticket or coupon in less than one second.

To accommodate all game types, the GEN3 Evolution® is equipped with multiple ports including USB 2.0 (GSA, GDS, SPC/IGT, SBG), RS232, NetPlex, and Ethernet.

The unit utilizes ITH® (Intelligent Ticket Handling) technology, making a ticket or coupon available only after fully printed internally and automatically burst, virtually eliminating torn, smeared, and crumpled tickets and coupons. The unit’s IntelligentBezel™ technology also helps reduce instances of paper jams; if bezel is blocked, the printer attempts to present a ticket or coupon up to 6 times for 30 seconds.

JCM Global The topic of casino validators is a stor y of 'givens' and 'must-haves'.

I t ’s a g i v e n t h a t t h e core technolog y of bill validators is the ability to accept, scan, validate, and stack a bank note or ticket.

It’s a given that the core technology of printers is the ability to accurately print and present a ticket.

Those are givens, and JCM is a proven world leader in 'given' technology for both validators and printers.

However, today’s musthave for both bill validators and printers goes beyond a particular product or product feature, and is innovative technology itself. Today, and into the foreseeable future, the must-have is technology that allows gaming establishments to operate with maximum efficiency and security.

JCM has been evolving our product line to provide the must-have technolog y. We have proven that with developments such as the Intelligent Cash Box (ICB®), 26 | Winter 2012-13

the new Dynamic Network Applications (DNA) launched at G2E, promotional couponing, and secure wireless communication from system servers to peripherals. In addition, JCM's iVIZION bill validator, was specifically created to be the foundation of intelligent validation, meaning that all of the future technology JCM will develop and deploy in the casino will use iVIZION as the base. All of these technologies help add security from the beginning to the end of a gaming transaction, as well as profit to the bottom line.

So the answer to the question of what are 'must haves' on a casino, it is more than a product or a feature. The must-have for operators is the ability to adapt quickly to new environments, and the must-have for suppliers is the innovative technology to help operators evolve.

MEI Casino operators understand the value of the note acceptor that prov ides the hig hest acceptance rates, unrivalled security, best jam performance, and lowest cost of ownership in the industry. There are many add-ons a v a i l a ble f r o m n o t e acceptor manufacturers, but MEI focuses on the features that improve t he m o s t i mp o r t a nt factor: Profitability.

MEI's CASHFLOW SC redef ined ex pectations for note acceptors since its introduction in 2002. The deployment of nearly 1.5 million units is a testament to both the product’s reliability and the importance of maximizing acceptance rate and security while reducing the jam rate and cost of operation. MEI’s commitment to continuous improvement has resulted in another step forward with the introduction into new features to improve performance of the SC Advance.

All the enhancements to SC Advance have been centralized in the acceptor head. This allows the SC Advance to work in tandem with legacy CASHFLOW SC units, including

gamingtechnology

backwards compatibility between products —extending the value associated with past and present investments in MEI. CASHFLOW SC units include backwards compatibility between products, extending the value associated with past and present investments in MEI. Access to the full SC portfolio of solutions, including EASITR A X, the PPM (portable programming module) and multiple sized cashboxes, means that implementing the SC Advance into your fleet of equipment will be a seamless transition.

Looking to Advance your bottom line?

You designed the answer.

MEI has made it possible with

TransAct Technologies TransAct Technologies’ Epic 950® award-winning ticket printer is currently installed in over half a million slots in casinos around the world. The Epic 950® has emerged as the industry’s leading ticket printer due to its unsurpassed reliability and innovative technology. It offers a myriad of advanced features including reliable ticket burst and present, quick disconnect, expandable ticket capacity from the standard 400 tickets to 600 tickets, and the industry’s best low-ticket sensor. Collectively, these features make the Epic 950® the clear choice for casino operators who demand only the highest quality products on their casino f loors. With the Epic 950®, casinos can easily upgrade to TransAct’s revolutionary Epicentral® software system—an easy-touse, cost-efficient software system that enables casinos to internally develop marketing programs and promotional coupons and deliver them to customers on a real-time basis at a slot machine while they are playing. The ability to present multiple promotions and incentives directly to the player enhances the casino’s ability to connect directly with their players, to increase time spent on the casino floor, encourage additional visits, and generate revenue for other venues within the property.

MEI has redefined expectations of note acceptors yet again with SC Advance. Enhancements were driven by customer requests to improve upon core measures of performance— acceptance, speed and security— and do so in a manner that is backwards compatible with the existing installed base.

By maximizing the number of street-grade notes accepted, while simultaneously increasing the security against counterfeit notes, the MEI SC Advance is a step forward on the most important measure…operator profitability.

Learn how to specify cashboxes in your property that fill up faster than ever before.

Contact a BetRite representative at 204-489-8260 to schedule a SC Advance demonstration.

Proven performance.

Increased profits. meigroup.com MEI is ISO 9001:2000 certified. ©2013 MEI. All rights reserved.

Canadian Gaming Business | 27

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Executive Q&A:

Gérard Bibeau President and CEO of Loto-Québec

For over 25 years, Gérard Bibeau has played a key part in Québec's growth throughout all levels of civil service. A member of the Quebec Bar Association since 1992, he has been an advocate for evolution in all of his roles, and now as president and chief executive off icer of Loto-Québec he continues to move the province forward in the arena of gaming. In this issue, we asked Gérard to share his thoughts on Québec's gaming i n du s t r y, it s m ajor t r en d s , a n d biggest opportunities...

What are the most significant trends driving gaming in Québec?

As for many—if not all— jur isdict ions in Nor th A mer ica , the most signif icant trends driving the gaming industry in Québec are relat ed t o demog raph ics. You n g adults don’t play as much as previous generations used to, and their playing habits won’t change unless they are offered games created specif ically for them (rather than their parents or g ra ndpa rent s). T h is is where ou r vent u re into on line g a m i n g comes into play. The need to attract young adults is even more critical 28 | Winter 2012-13

when you look at the conclusions of longitudinal tracking studies, which show t h at each g enerat ion plays less once it reaches the age of 65.

Baby boomers, who account for the biggest share of our gaming revenues (for both lotteries and casinos), are starting to reach that age.

Québec has made some significant steps toward iGaming. How has this impacted the industry, and how do you see it evolving?

Our venture into online gaming is relatively new. It started in December 2010 with the best-k now n casino games, such as poker, blackjack and rou let t e, a nd slot m ach i ne -t y pe games. In the spring of 2012, sports lotteries were added to the offer, followed in Aug ust by our most popular lotteries (Lotto Max, Lotto 6/49, etc). Online bingo will also join the mix eventually.

To some ex tent, we are still at phase one of this new initiative. So far, our online portfolio basically consists of a string of products that players are already familiar w ith.

The m id-ter m g oa l, however, is not t o repl ic at e w h at i s re a d i l y

available in our lotter y distribution or in our casinos, but rather to make a creative use of the internet to appeal to a new generation of players with original games that will offer a social, interactive, or competitive component.

Where else do you see the greatest opportunities for growth for LotoQuébec?

New technologies also have a great potential for our brick and mor tar lotter y network, and this is true for ever y line of business Loto-Québec manages. The launch of 'f lash games' featured on the customer screen when someone buys a Lotto Poker or Sprinto ticket is a good example, as well as the group play feature available at retailers, in which every member gets its own ticket which can be redeemed any time he pleases. Furthermore, our 1,80 0 L oto -E x press un it s a re a w ireless solution that allows the customer to buy lotteries at the lane of their choice in multi-lane stores.

Furthermore, the video lot ter y subsidiar y w ill replace current machines—and the telecommunications central—between March and Aug ust 2013. Produced

executiveq&a

Renovated Casino de Montréal to offer upgraded gaming experience

by IGT and Spielo, these VLTs will offer f ine and entertaining games while reminding customers to play responsibly at all times.

with much-needed funding for their good causes. Since bingo is the game of choice for NPOs, Loto-Québec h a s b e en i nvolve d i n t wo w ay s: Since 1997 with net work bingo, a twice-a-day 20-minute game played i n doz en s of bi n g o h a l l s a c ro s s the prov ince; a nd w ith K in zo, a quick game (3 minutes) available t h r ou g h out t h e d a y i n a d o z en d i f f e r e nt h a l l s . L o t o - Q u é b e c ’s i nvolvement i n t hese g a mes h a s t r a n s l a t e d i n t o a $1 3 5 m i l l i o n payment to NPOs over the past 15 years. The Kinzo program, launched t wo yea rs a g o, holds prom ise a s it appea ls to a young er clientele and also allows people to eat and drink in a pleasant atmosphere. We will open more K inzo halls in the coming year.

Casino de Montréal is currently undergoing a renovation. What can players expect?

An enchanting overall entertainment experience including a topf light mix of games in much improved facilities, meaning more room bet ween slot m a ch i ne s , ref u r bi she d qu a r t er s for high rollers, and a spectacular multimedia environmen. It will also include four top-notch restaurants located on the same f loor, which w ill accommodate customers quicker; a unique entrance leading the way to an impressive hub; great customer ser vice, which has been the trademark of our casinos; and a multi-faceted cabaret for all kinds of What’s next for gaming in Québec?

Throughout its 42-year existence, shows and events.

L ot o - Q uéb e c h a s b enef it t e d i n several ways from innovation, and Are there unique challenges and/or we think its importance will be even advantages to delivering charitable greater in the future. Our industry gaming in Québec? How are these is facing a major challenge linked being addressed?

One of the main challenges is to to its future g row th, and today’s prov ide non-prof it organizations maturit y could possibly turn into

decline if we fail to attract new players.

As well, the monopoly (in terms of lo t t e r y a n d c a s i n o m a n a g e m e nt) which has allowed Loto-Québec to thrive is seriously challenged. These days, we face very stiff international competition for online gaming. The landscape has changed dramatically; the player does not seem care that much whether he is playing legally or illegally, so it’s becoming a whole new ball game. It is too soon to tell what the next generation of gaming products will be, but one thing is sure: Our teams of product developers are hard at work to def ine them and to make them happen.

H o w e v e r, L o t o - Q u é b e c w i l l continue, as it plans for the future, ensure that it continues to incorporate responsible g a ming into all it s initiatives. We are very proud of the fact that Loto-Québec was the f irst lot ter y operator to achieve the W L A’s L evel 4 responsible gaming cer tif ication, a nd a lso the f irst to have been recer tif ied at this level.

T he prop er b a l a nc e b et we en ou r commercial and social responsibilities must be maintained. This is in LotoQuébec’s DNA. Canadian Gaming Business | 29

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Kinzo Winning Big in Québec A look at Loto-Québec’s new entertainment product

The Kinzo network currently has 14 halls and is rapidly expanding. The SBQ expects that, within three to five years, about forty halls, each seating about 50 participants, will be operational.

By Julie Brunet

As is the case everywhere else, Québec’s bingo industry is in significant decline. The Société des bingos du Québec (SBQ) therefore developed a concrete solution to counter lower revenues and enable the Corporation to maintain its contributions to non-profit organizations (NPOs). In October 2010, the Corporation launched a pilot project for a new game called Kinzo and, at the conclusion of the test period, decided to pursue its marketing.

Playing Kinzo Kinzo is a game in which supervised electronic draws of 90 numbers are conducted simultaneously across the entire network of Kinzo halls established in several cities throughout the province. It is a unique entertainment concept. People come to have a good time, interact with others, have a snack or a drink and ... who knows? .. Maybe even win! To play Kinzo, participants purchase a $2 ticket on which 15 numbers are distributed over 3 lines.

Each ticket provides two ways to win.

The first player to mark five numbers on the same line and press the button in front of him wins the first game. The round then continues until a player marks all 15 30 | Winter 2012-13

numbers on his card for a chance to win up to $100,000! A new round begins about every 6 minutes, therefore producing approximately 20 winners an hour.

The dynamic aspect of the game, and its original way of declaring wins, attracts a younger clientele thank traditional bingo and therefore appeals to a wider range of customers. Welcoming halls, an exciting ambiance, as well as bar and light meal service are all features that enhance customer experience and meet expectations. The numbers say it all; a recent survey of Kinzo fans reported a 97% rate of satisfaction with regard to the overall Kinzo experience, while 44% of respondents said they were 'very satisfied'.

The Société des bingos du Québec (SBQ) is a Loto-Québec subsidiary dedicat ed to m a rk et i n g net work bingo products and the Kinzo game w it h a v ie w t o supp or t i n g nonprof it organizations (NPOs) that hold a bin g o licence in Québec.

Since the st a r t of it s operat ions, t he SB Q h a s t u r n e d o ver m o r e than $130 million to about 1,0 0 0 organizations whose main source of f inancing is bingo.

Julie Brunet is Communications Project Manager with Société des bingos du Québec. For more information on Kinzo, visit kinzo.ca.

June 17-19, 2013

Palais des congrès de Montréal Montréal, Québec

“Where the Canadian Gaming Industry Meets”

PL AN TO AT TEN C ANADA’S PREM D ANNUAL INDUS IER T CONFERENCE ANRY D EXHIBITION!

In 2013, the Summit says “Bonjour” to Montréal, Québec

If your company is interested in exhibit or sponsorship opportunities at the Canadian Gaming Summit, please contact Richard Swayze at 866-216-0860 ext. 246 or richards@mediaedge.ca

www.CanadianGamingSummit.com

igamingsupplement

iGaming Roundtable Insights from the frontlines of online gaming

Amanda Brewer, Canadian Spokesperson for Interactive Gaming Council (IGC) 32  |  Winter 2012-13

Troy Ross, Public Affairs, IGC

David Loveday, Chief Executive Officer, OpenBet

igamingsupplement

Ready or not, online g ambling is t a k ing t he industry by storm. But what does this mean for Canada?

We reached out to some of the leaders in iGaming to find out what they're predicting for the future of internet wagering, their role in its development, and their strategies for navigating this growing digital playground...

George Sweny, Senior Vice President, Lottery, Ontario Lottery and Gaming Corporation (OLG)

What role has your organization played in Canada's iGaming evolution?

AB : IGC is a non-prof it industr y association, and the members we represent in Canada have been in this space for 10-plus years. They're some of the biggest operators and very well versed in this industry; and many have been leading the charge in Europe in terms of licensing and regulation. For Canada, what we're t r y ing to do is play a n adv isor y role to lot ter y cor porat ions a nd provincial governments. We're really trying to get them to look to Europe, because you have countries there that are leap years ahead of where Canada is in terms of licensing and regulations of the internet gaming space. Several of them started with the monopoly model that currently exists in provinces here. We've seen a lot of these countries start to walk away from that model, and some of them have evolved into either a hybrid model or full-on regulation.

Based on this experience, we travel across the countr y and speak with different lotter y corporations and governments to tr y to bring some awareness to the options other than a pure monopoly model.

DL: The Canadian market has gone through a lot of change over the last few years and OpenBet has worked closely with a number of provinces on delivering a service that enables citizens access to a safe, secure, and legal gaming offering. Operators in the Canadian market have a ver y specific set of criteria for partnering companies and we were very pleased that OpenBet ticked all the boxes.

We have a f lex ible plat for m that allows operators to bring in various third-party providers to tailor their final offering. But more importantly, we have a proven track record in complia nce a nd t h at is essent ia l

when partnering with governments in newly regulating markets.

GS : OL G w ill of fer a full ra ng e o f pr o du c t s a n d s er v i c e s t o b e delivered on the internet, through an online site accessible via personal computers, laptops, a nd other internet-connected devices. This will include lottery ticket sales, casinostyle games, and peer-to-peer games like poker and bingo. This state-ofthe-art site will include responsible gambling tools to set spending and time limits and a secure sign-in and registration system to protect player data and transaction information.

Ont arians cur rently spend about $ 4 0 0 million a yea r on of fshore internet gaming sites. Within f ive years of operation, OLG’s iGaming program could potentially deliver $100 million or more in net profit to the Province of Ontario.

The iGa ming project is in the f i n a l st a g e of pro c u rement a nd once the vendor selection process is complete and a contract agreed to, an announcement will be made. The first phase of OLG’s iGaming program is an online educational presence to inform customers of its status, what Ontario’s iGaming program will include, and information about O L G ’s R e s p o n s i b l e G a m b l i n g program. This site will be available in December 2013 and online game play will begin in summer of 2013.

Is iGaming a trend on the rise?

What are the indicators?

TR : We have seen estimates that between $1.3 to $1.5 billion dollars a year is wagered through internet gaming in Canada, and the amount wagered on iGaming doubles every four or f ive years. It is also a pretty clear indicator that an activit y is p opu l a r a nd s o c i a l l y a c cept a ble when governments decide to engage a nd of fer t ho s e s er v ic e s. W hen Canadian Gaming Business | 33

igamingsupplement

governments are prepared to enter GS : Online gambling, globally, is the market, it's a strong sign that the a $2 0 billion a year industr y. A n estimated $400 million is estimated public is already supportive of it. to be played annually in Ontario.

DL: Two years ago we had no presence T h e m o m ent u m t o w a r d o n l i n e in Canada and now we provide the gaming is happening worldwide and underlying infrastructure to a number is similar to the movement toward of provincial lotteries with our player online retailing, online banking, and account management system, casino even online journalism. It is the way content offering, and sportsbook of the future in the gaming industry.

Today, Ontarians are estimated to software. There is no denying the demand for online gaming is on the have between 400,000 and 500,000 rise. If there is not a legal offering then a c c ou nt s w it h i nt er n e t g a m i n g punters will look to ‘grey’ operators providers that are not regulated in from offshore. Our partnership with Ontario. OLG’s research indicates Canadian lotteries is providing a legal that customers are more interested alternative that keeps revenue and tax in playing on sites with Responsible within a jurisdiction and protects the G a m bl i n g fe a t u r e s a s it b u i l d s best interest of the final customer. We t r ust a nd con f idence i n g a m i n g believe that this trend will been seen in online. Furthermore, the majority numerous new territories as the gaming of European Union states license and regulate online gaming. British market continues to develop globally.

Columbia, Quebec, and Atlantic Canada also have online gaming systems in their respective jurisdictions.

A bill has passed a committee of Cong ress requiring the Treasur y Department to license and regulate online gaming in U.S. states.

What are some of the challenges of conducting iGaming in Canada. How are these being addressed?

AB : The big gest challenge to iGaming in Canada can be summed

34 | Winter 2012-13

up in t wo words: C onduc t a nd Manage. When you talk to provincial organizations, everybody understands the international playing f ield, but 'conduct a nd ma na g e' ha s become almost like a set of handcuffs in terms of being able to adopt a regulator y model here. W hat you see, then, is when provinces launch, they launch w it h a m o no p ol y m o d el . A n d i n terms of offering casino and lotter y products they're doing quite well.

But for games that require liquidity like poker, that's proven to be a very signif icant challenge because we just don't have enough players to support that—especially when you have other online companies who have been at this for a decade. These are highly sophist icated compa nies, so when you look at a provincial organization that's just getting into it now, we're not saying you shouldn't have an online platform, but when it comes to games of liquidity—where you need to have access to tens of thousands of players on a daily basis—it just doesn't make sense to recreate the wheel when you could easily t ap into the ex per tise that's there already.

DL: All new jurisdictions have their challeng es, but our s ystems a re designed to overcome whatever hurdles are thrown up by any given regulating

igamingsupplement

process. In this sense, Canada was no different to any other jurisdiction.

Working with BCLC, and the other Canadian provincial lotteries, has taught us the lengths to which the regulators will go to ensure that the probity checks cover what they feel is needed. This is a lesson we have learned throughout our company’s 16-year history, and we are proud of our strong reputation as the leading spor tsbook and g aming soft ware supplier a nd tr usted pa r tner not just to the Canadian lotteries, but to some of the world’s biggest gaming operators, whether in North America or Europe.

Our business and platform is built to be f lexible in every aspect of its operations. At the very heart of our business is the necessity to be 'open'.

OpenBet Account (Player Account Management system) allows operators to integrate with many other products and services, while OpenBet Casino allows the lotteries to continuously add new content both from OpenBet Casino portfolio or integrate any other third-party games into the same system ensuring the overall casino offering is constantly refreshed and meeting the players' ever-evolving demands for new and engaging entertainment.

G S : O L G ’s m o v e i nt o i nt e r n e t g a m i n g i s a n o p p o r t u n it y ; ou r program will be fun, competitive and attractive in a crowded market. Plus, we will offer a secure environment with a trusted brand name in the lottery and gaming industry, along with a gold standard approach to responsible gambling in the online gaming market. Our gaming site will focus on customer service and maximum player enjoyment, while our products and games will be designed for to bring a new level of excitement and security to internet gaming in Ontario. At OLG, we encourage healthy player behaviour with a strong player education program. We will have tools for customers to manage their online play, such as time and money limits, and the option to take breaks. Players can learn about their own play habits with the use of our self-assessment test and personalized messaging based on data analytics. For customers who have concerns about their gambling, we will be offering access to free resources and the opportunity to exclude oneself from play.

Addressing securit y challenges, OLG’s site will offer the maximum securit y possible to protect player data and transactional information.

The sign-in process also conf irms one’s identity and age which protect against fraud and to prevent minors from accessing the site.

How, in general, can iGaming help and/or improve the Canadian gaming experience?

AB: When you look at the members who prov ide ser v ices globally in reg ulated env ironments, they do so under licenses. Those licenses have more stringent requirements attached to them than land-based casinos do, and because it's so reliant on technolog y, they can recreate everything. They can track financial keystrokes and recreate events. The technology can help identify problem gamblers, ensure fair play on behalf of the operator and players, and even help identif y and prevent money launder ing. W hat's more, player protections are built in in terms of time limits and spending limits, and

the background checks are very, very rigourous. From our point of view, we feel the security and the controls around online are much stronger than they are land-based.

DL: The evidence proves that if there is not a 'legal' offering for online gaming i n C a n a d a t hen p e ople w i l l lo ok elsewhere. They will use illegal sites and operators that are not governed by any set of regulation. In essence, you are leaving online gamers vulnerable to serious risk. A government-backed product ensures that g a mers have access to state of the art offering that is regulated, safe and secure.

In BCLC’s ow n words, the move online was designed to, “Respond to evolving player and online gaming m a rk et dem a nd a nd of fer Br it ish Columbia ns leg a l g a ming opt ions where revenue g enerat ed st ay s i n B r i t i s h C o lu m b i a t o b e n e f i t a l l residents.” With the help of OpenBet, the Canadian lotteries were keen on building both the liquidit y and the c r it ic a l m a ss needed to m a k e t he product attractive to the customer while also providing the safe playing environment inherent in trading under the state lottery banner.

GS : iGaming improves the gaming experience by making gaming more accessible. OLG will offer a full range of products and games, through an online site accessible v ia personal computers and other inter netconnected devices. This will include casino-style games and peer-to-peer games such as poker and bingo.

W h e n it c o m e s t o r e s p o n s i b l e gambling online, all play on OLG’s site will be identif ied and tracked— t here w i l l b e no a nony mou s pl ay o n l i n e . D a t a a n a l y t i c s w i l l h el p us f u r t her suppor t players at r isk w ith appropriate resources. OLG’s Responsible Gambling prog ram has already been recognized by the Wo r l d L o t t e r y A s s o c i a t i o n w i t h L evel 4 accredit at ion, t he h ig hest level possible. OLG approaches every aspect of responsible gambling online with the same commitment to excellence that it has demonstrated in its other lines of business.

Canadian Gaming Business | 35

igamingsupplement

What's next for iGaming? What will be the biggest "leaps and bounds" around the corner?

TR: What we're really going to see i s t he c o n ver g en c e o f i G a m i n g and iGambling. This generation of young adults has g row n up w ith personal computers, mobile phones, and constant access to the internet and console gaming; they've never k now n a world w ithout these dev ices. They are completely comfor t able w ith any number of activities using these technologies.

More and more, you can gamble on non-traditional forms of gambling on the internet. You can go online now and challenge somebody h a l f w a y a r ou n d t h e w o rl d t o a game on your Xbox 360 to a game of Halo, and you can place a wager on the outcome of that game. And the site that's hosting the activit y w ill take a cut of that wager, and they'll pay out the w inner. From my perspective, the convergence

36  |  Winter 2012-13

bet ween gaming and gambling is the next big development. More and more, that type of activity is going to become acceptable, and more and more the big game manufacturers will start to get involved.

DL : T h e o n l i n e g a m i n g m a r k e t is forever innovating—it is built i nt o t h e D N A o f t h e i n du s t r y.

I f w e r e v ie w t he l a s t c ouple of ye a r s , w e h a ve s e en a m et e or ic r i s e i n mobi le g a m i n g w it h t he introduction of smar t phones a nd t ablet s, a nd the inclusion of ser v ices such as 'in-play' bet ting that has immeasurably enhanced the product offered to customers.

R ight now, operators are focused on delivering on their investments in these areas. Social gaming a n d sm a r t t ele v i sio n s a r e a r e a s that could prov ide some exciting developments by bring ing online and off line products together in a fully integrated fashion.

G S : O u r g oa l is t o g o -l ive w it h gaming on our site in summer 2013.

We w i l l of fer e x c it i n g pro duc t s and ser vices that customers enjoy and to offer an online ser v ice in the most socially responsible and s e c u r e m a n n e r p o s s i bl e . A s a n OLG product, we can leverage our reputation as a socially responsible compa ny which cont r ibutes to the economy of Ont a r io. Our iGaming project is consistent with the overall modernization of OLG, as we transform the way we do business; this includes g reater involvement of the private sector, becoming a more customer focused org a n i z at ion , a nd renew i n g ou r focus on responsible gambling.

The prof its from iGaming w ill increase our annual contribution to the prov ince. The Ont a r io gover nment uses money from OLG for priority programs such as healthcare and education, and also for communities.

The Community Centre was the dream of Innisďƒžl.

Using funding they received from their local OLG Gaming Centre, the Since 1975, OLG has contributed over

$36 BILLION

to the province of Ontario.

town of Innisfil was able to build a state-of-the-art facility that has helped enrich their community. It has brought the entire community closer together. Last year alone, OLG Gaming Centres gave back over $110 million to their communities. This is just part of the over $36 billion OLG has contributed to Ontario since 1975.

Real stories like this are happening all over the province all the time.

To see more stories visit modernolg.ca.

marketing

Online Casinos Are Coming (And They're Going to Affect You)

By Jim Kabrajee

38 | Winter 2013 2012-13

marketing

Online casinos are coming to North America, a jurisdiction that historically prosecuted citizens for playing on these sites. Today, many well known casinos are developing online casinos under their established brand names, and state and provincial governments are already in the business or starting to develop their online plans. Canada is leading the way.

Your future competition won’t just be the casino 100 miles away; it may include online casinos located anywhere in the world and in a year or two, who knows, you might even be working for one. You can be sure you’ll be competing w ith several directly and indirectly and it’s going to affect your business.

The three historical issues that have held back online casino development in North America has been U.S. and Canadian law, the inabilit y to use credit or debit cards for transactions, and the trustworthiness of the sites.

P resu m ably, a l l t h is is ab out t o change; and when it does, ex pect to see a spike in new casino entries chasing the North American player.

You might feel that due to their age, most online players aren’t your core players—but that’s changing.

While today most North American o n l i n e pl a y e r s a r e y o u n g e r, i n Europe and Asia the age is higher and the proliferation of gambling on mobile devices means easy access for all ages.

Worldwide online casino revenue i s e s t i m a t e d a t $ 3 6 b i l l i o n fo r 2 012 , according to Statista 2 012 .

Predictions are for this to double within f ive years from the date the U.S. legalizes online casino gaming and online gaming could represent 12 to 15% of the total North American casino market by 2020.

The top 10 online casinos have f igured out that payouts and bonus cash are the two elements that truly

“You might feel that due to their age, most online players aren’t your core players—but that’s changing.” differentiate and position them in the online casino world. In fact, many sites give their slot payouts and hold percentages right on the website home page. As they compete for new North American players, it would be reasonable to expect aggressive moves in payouts and bonus cash by the online casinos.

W hen the big brand land-based casinos launch their online versions, they will have the added marketing tool of brand reputation as well as additional incentives like junkets t o t hei r pr em ier pr o p er t ie s , o r membership in their players club rewards program. But the big brand casinos could also compete directly on p ayout s a nd b onu s c a sh . A s competition in these areas heats up, it could impact land based casinos as players become aware of online casino payouts versus what they get from their land based casino.

You can expect to see signif icant investments in SEO (search engine opt i m i z at ion) a nd SE M (s e a rch engine marketing) by all competitors;

online casinos will dominate this space. This w ill drive online adver tising costs up sig nif icantly for everyone in the casino business and casinos that aren’t competing at a high level in this area will fall behind. This can become expensive and will require significant additional investment by the land based casinos.

So although you might have thought that the upcoming changes to online gaming aren’t going to affect you, you might want to reconsider.

Players are going to be more aware of payout rates, bonus cash is going to be a driver, and marketing and advertising costs are going to increase.

The legalization and proliferation of online casinos will have an impact on your casino in the future.

James ( Jim) K abrajee is the CEO of Marshall Fenn Communication, a full service marketing agency with 16 years experience in Nor th American casino marketing. Contact: jimk@marshallfenn.com Canadian Gaming Business | 39

legal

Redefining Poker US federal court judge declares poker as game of skill

By Javad Heydary

In a recent decision, a US federal court judge ruled that games of poker are not predominantly games of chance, but rather games of skill. Since the definition of the Illegal Gambling Business Act (IGBA) does not expressly include poker or other card games, and poker fails to satisfy the definition of 'a game of chance', the IGBA will therefore not apply to businesses which operate poker games.

The initial justif ication for the IG B A , w h e n it w a s e n a c t e d i n 1970, was to limit the f inancing of or g a n i z e d c r i m e o p er at ion s , w h ich t he g over n ment felt w a s sig nif icantly supported by illegal gambling operations. The judge was unpersuaded by the government’s argument that poker was not a large casino-type gambling operation in the 1970s; instead relying on the v isually stimulating metaphor of the 'elephant in the mousehole'. The argument went that card games and poker were well k nown gambling games, and yet the legislature did not include what might be considered a large and obvious area of gaming in its definition. Therefore, the court could reasonably infer that the exclusion of poker was an intentional decision.

A lthough some poker advocates contend that this decision marks the beginning of the decriminalization of poker in all its forms (including online poker) in the United States, others remain more hesitant of its impact. The IGBA was enacted with the purpose of granting federal jurisdiction to certain forms of illegal gambling operations, and a mandatory condition of the statute is that the gambling activity must first be in violation of the gaming laws of the 40 | Winter 2012-13

state. The non-application of the IGBA to poker has no effect on its illegality under state law, and the decision of this federal court judge is neither binding on state legislation or other federal laws, including the Unlawful Internet Gambling Enforcement Act, which was utilized in the highly publicized arrest of the founders and operators of PokerStars and Full Tilt Poker last year.

Nonetheless, many remain positive that this decision marks the first step in establishing that poker, as a 'game of skill', should not be regulated (or as regulated) in the manner that other, more traditional gambling activities are regulated. Even though the legal consequences of the decision are not w idespread, the potential for policy changes given the changing view of poker is clear. These kinds of justif ications may also be found convincing in other jurisdictions, such as Canada, where the legality of g ambling operations is highly regulated by the federal government, throug h the Cr iminal Code a nd other federal legislation.

Currently, the Criminal Code of Canada makes it unlawful to prof it from operat ing a g a ming house, where 'game' is def ined as a 'game of ch a nce or m i x e d ch a nce a nd

skill', and has repeatedly been used in response to poker operators who collect a 'rake' from the games. Though the US Federal Court decision has no leg al bea r ing on Ca nadia n law or its enforcement, interested poker advocates may rely on the detailed reasoning from this case to ef fect legislative change, or use it as grounds for the defence of a criminal charge.

A lthough the US Federal Cour t decision has not immediately made any drastic changes to the operation of gaming businesses in the United States, whether live or over the internet, there are distinct possibilities that such decisions are the start of a less regulated, and potentially decriminalized, poker industry. Online poker continues to be alive and well, notwithstanding the US government’s best efforts to keep such activity out of the United States. As PokerStars returns to its full operations after settling the civil action brought by the US Department of Justice, a further inf lux of poker businesses may be on the rise.

Javad Heydary is Managing Director of Heydary Hayes PC (www.ITlawyers.ca). He regularly advises clients on online gaming issues and complex regulatory and litigation matters.

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finance

Make Your Situation Less Taxing Getting the most out of tax credits for online game developers

By Alex Dhanjal and Lesley Luk G amification is t he pro cess of incorporating gaming elements into a mu c h w i d e r r a n g e o f o n l i n e activities, and it is rapidly changing the nature of the online experience for consumers. Gaming and lottery comp onent s a re p oppi n g up a l l over t he web on ent er t a i n ment sites, as st andalone mobile apps, within social media sites, and in the consumer space where companies look to increase user interaction and build customer prof iles. According to a 2011 Gartner Research Report, it is estimated that by 2015, more than 50 percent of organizations that manage innovation processes will gamify them.

Perhaps due to the speed with which this space is growing, companies that are starting to develop these types of games may not be aware of the signif icant ta x credits potentially available to them; that is, if their games and apps play within certain rules designed to promote the digital media industry through tax incentives.

In fact, there are many tax incentives available across Canada that are designed to encourage the growth of the digital media industry. Ontario, in particular, has the largest incentive program in Canada for game and app developers, as well as companies that create interactive digital media products such as online magazines, eLearning solutions, interactive websites, and kiosks. These incentives are also a promising way to attract established foreign game developers to the growing Canadian industry.

The gamif ication trend is likely to explode in the nex t few yea r s, 42 | Winter 2012-13

presenting developers with a range of g row th oppor tunities. Desig n and development require capital, however, and elig ible companies looking to sharpen their competitive edge can’t afford to leave cash on the table because they don’t know about the programs, aren’t sure whether t he y qu a l i f y, or si mpl y h a ven’t bothered to apply.

In 2011-2012, there were over 200 applications submitted for the Ontario Interactive Digital Media Tax Credit (OIDMTC). About 120 were approved, with an estimated tax credit value of $270 million.

Companies applying for this credit must develop an interactive digital media product, which can include interactive What are the rules?

The key provinces offering tax credits for websites, kiosks, handheld games or eligible digital media initiatives are British eLearning products. The rules for Columbia, Manitoba, Ontario, Quebec, qualifying and taking advantage of this and Nova Scotia. They offer a range of credit are: refundable tax credits for labour-based expenditures, often including 100 percent 1. The purpose of the product must be to educate, inform or entertain the end of salaries and wages paid to employees user. and contractors.

Importantly, these tax incentives are not 2. Ninety percent or more of the product has to be developed in the province of about actual gambling and the exchange Ontario. of real money, so lotteries and casinos, as well as any promotional games they create 3. It must be interactive. to actively promote gambling, are not 4. It must not be promotional in nature, i.e. intended to promote the products or eligible. Instead, these tax credits apply to services of the company. games, apps, and multi-media products and websites that educate, inform, and If your company specializes in entertain the end-users.

The Ontario Media Development development of games, apps or interactive Corporation (OMDC) offers numerous websites, make sure you’re not missing tax credits to incent film, animation, out on tax credits that could reduce your and interactive media developers based overall cost of development and make on labour expenditures incurred in the your product more competitive in the province of Ontario. The most relevant marketplace. to games and apps development being the Ontario Interactive Digital Media Tax Credit (OIDMTC), “a refundable Alex Dhanjal (adhanjal@kpmg.ca) is a tax credit of 35 or 40 percent of eligible tax partner with KPMG LLP, and Lesley Ontario expenditures for interactive Luk (lluk@kpmg.ca) is a Senior Manager digital media products created in in KPMG’s audit practice. KPMG can be Ontario.” found online at www.kpmg.com.

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