OLG report says modernize lottery and gaming: Additional $1.3 billion annually to government, creation of 2,300 jobs and 4,000 related jobs, $3 billion in private capital investment

TORONTO, March 12, 2012 /CNW/ - In a report delivered to the Minister of Finance, the Ontario Lottery and Gaming Corporation (OLG) outlined a proposal to modernize lottery and gaming in Ontario.

"Our plan will help create some 2,300 net new industry jobs and about 4,000 service sector jobs. It will improve how lottery and gaming are delivered in Ontario, and expand our gold standard approach to Responsible Gambling," said OLG Chair Paul Godfrey. "As our plan is implemented, it could help launch some $3 billion in new private capital investment in the Ontario economy."

"The OLG report has three key recommendations: become more customer-focused; expand the regulated private sector delivery of lottery and gaming; and renew OLG's role to concentrate on the oversight of lottery and gaming," said OLG President and CEO, Rod Phillips . "As these proposals are implemented over the next six years, the government could benefit from an additional $4.6 billion in revenue for key priorities.

The report to government, entitled, "Modernizing Lottery and Gaming in Ontario: Advice to Government" is the result of a strategic business review that took place over the course of 2011. At the request of the government, OLG conducted a review of lottery distribution and land-based gaming facilities in Ontario.  The review consisted of stakeholder consultations, research and extensive business analysis. A number of issues made a compelling case for change:

• Lottery and gaming are played by a majority of Ontarians (Last year, about 8 million Ontario adults played the lottery and 2.7 million visited an OLG gaming site.)
• OLG currently contributes just under $2.0 billion to the Ontario government to support key priorities like health care and education.
• The current model is unsustainable due to a number of factors including offshore gaming websites, declining border traffic and limited lottery purchasing options.
• Continued revenue to government is at risk without reform to the lottery and gaming industry.
• Revenues paid to the province are in decline.
• If no action is taken, OLG will need to spend $1 billion in public capital just to update its current service.
• An estimated $400 million is currently spent by Ontarians on offshore gambling websites.
• There is interest in improved or expanded sales options for lottery and gaming in urban Ontario markets.
• Some lottery terminals and gaming facilities are in locations that are not convenient to customers.
• Many Ontarians frequent retail locations like supermarkets, big box stores and large retail locations where lottery terminals are not conveniently located.
• Early expansion focused on properties near the U.S. but visits to Ontario from the U.S. have declined by 70 percent (23 million border crossings in 2002 to 7 million in 2011).
• Other provinces reduce their operational costs and improve efficiencies by allowing the private sector to operate sites (British Columbia, Atlantic Canada).
• Slot machine facilities are currently tied to racetracks, which limits options for gaming locations and costs the government $345 million annually
• Since lottery was introduced in 1975, technology has vastly improved and OLG has not kept pace. It's a paper-based system that could be more efficient.
• OLG has the opportunity to significantly improve its contribution to the government—by $1.3 billion annually in 2017.

Key Report Recommendations

The report recommends reforms to Ontario's gaming industry, all of which are subject to government approval. The report includes three recommendations:

1. Become More Customer-Focused
• Improve lottery offerings: allow for multi-lane sales at large retail outlets like supermarkets and big box stores.
• OLG would identify distinct zones where existing or new gaming sites (with municipal approval) would be permitted.
• In order to be able to change, move or create new sites, OLG should be able to expand slot facilities beyond horseracing racetracks. This would mean ending payments of approximately $345 million annually to racetracks. OLG does plan to continue offering slots at some racetracks where there is customer interest.
• Lottery terminals and gaming sites should be where customers are—the supply should be near the demand.
• Subject to municipal approval, allow new gaming sites in convenient locations where there is customer interest and, tourism potential.
• Close or relocate facilities that are underperforming. Some could move to locations within their regions that are closer to customers.
• Allow up to one new casino in the GTA, subject to an OLG business case and municipal approval.
• To improve the ability to offer a mix of games at sites, implement a consistent fee model for host municipalities to allow OLG to place gaming sites where there is customer interest.
2. Expand Regulated Private Sector Delivery of Lottery and Gaming
• To modernize both lottery and gaming options in Ontario, OLG would expand the engagement of the private sector to build and run the day-to-day operation of existing and new sites and to develop new technology and games for lottery terminals.
• This will mean some $3 billion in new private capital investment—a benefit to the Ontario economy.
• In addition to 2,300 net new jobs in the lottery and gaming industry, this initiative would help create an estimated 4,000 service sector jobs in the hospitality: hotel, restaurants, entertainment and retail industries.
• The moving of 6,000 gaming positions to private sector operators who will manage all OLG sites. Currently, 60% of gaming employees in Ontario work for private operators - the resort casinos which are owned and overseen by OLG.  In the next 12-18 months, we anticipate 100 % will be employed by the private sector.
• OLG would maintain strict control and oversight of the business—including maintaining the integrity of lottery games.
• Regulated private sector providers would be responsible for funding, building or improving new and existing sites (upon recommendation by OLG with approval by the Minister and the host municipality).
3. Renew OLG's Role In Oversight of Lottery and Gaming
• OLG would continue to maintain direct responsibility for all critical decisions related to the operation of lottery and gaming.
• OLG would continue to manage the lottery and gaming market and provide net profit to the government of Ontario—and if this proposal is accepted, increase that contribution.
• OLG will become a smaller organization focused on market management, the oversight of private operators and responsible gambling.
• Ontario will continue to be the North American leader in problem gambling programming. Ontario dedicates over $50 million dollars to the prevention and treatment of problem gambling - the highest funding level on the continent.
• OLG will ensure that responsible gambling resource centres and facial recognition technology are established at all gaming sites to mitigate the risk of problem gambling.
• OLG recommends the expansion of research and treatment support for problem gambling.
• OLG would also commit to increasing environmental practices in any modernization of lottery and gaming options.

Copies of "Modernizing Lottery and Gaming in Ontario" are available at www.olg.ca

OLG is a provincial agency responsible for province-wide lottery games and gaming facilities. Since 1975, OLG lotteries, Casinos, Slots, and Resort Casinos have generated more than $34 billion for the benefit of the Province of Ontario. Gaming proceeds support Ontario's hospitals, amateur sport, recreational and cultural activities, communities, provincial priority programs such as health care and education, and local and provincial charities and non-profit organizations through the Ontario Trillium Foundation.

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March 12^th, 2012

Backgrounder
Canadian Gaming

In "Modernizing Lottery and Gaming in Ontario", a report delivered to the Minister of Finance, OLG outlined a proposal to transform lottery and gaming in Ontario to modernize the system and create jobs. By modernizing lottery and gaming, in addition to initiatives currently underway, in 2017, OLG will contribute an additional $1.3 billion annually to key public priorities; usher in $3 billion in new private sector capital investment in the province; and help create some 2,300 net new jobs across Ontario and an estimated 4,000 service sector jobs in the hospitality, hotel, restaurant, entertainment and retail sectors.

Many other Canadian jurisdictions have also expanded the private sector engagement in lottery and gaming. For example:

British Columbia

Since 1998, private operators have owned and operated casinos in British Columbia. The British Columbia Lottery Corporation (BCLC) determines where gaming facilities go. BCLC owns the games and the game management system as well as the loyalty program. BCLC works with the private sector on where and how gambling opportunities will be made available. Private sector providers supply the facilities and operate casinos.

Alberta

Since 1980, private operators have owned and operated casinos in Alberta. Slot machines are purchased and owned by AGLC. The service provider owns all other assets. AGLC monitors the network of slot machines through a remote system.

Nova Scotia

Since 1995, private operators have owned and operated the two destination casinos in Nova Scotia. All assets (gaming and non-gaming) are purchased and owned by the service provider; however ownership of all assets reverts back to NSGC upon contract termination.

New Brunswick

The first destination casino in New Brunswick was opened in May 2010. All assets (gaming and non-gaming) are purchased and owned by the service provider.

Copies of the report are available at www.olg.ca

March 12^th, 2012

Backgrounder

OLG Customers: Who Are They?
Gaming Customers

• Customers made more than 39 million visits to OLG gaming sites last year (F2011)
• 64% of Ontarians 19 years of age and older have made at least one visit to an Ontario casino or slots facility.
• 2.7 million Ontarians (or 27% of the adult population) 19 years of age and older have visited a casino or slots facility in the past 12 months.
• This group tends to have higher rates of community college education, full-time employment and household income.
• 77% of Ontarians who visit casinos or slot facilities are 51 years of age or older.
• Men and women visit casino or slot facilities equally.
• The majority of casino/slot facility visitors, 89%, play slot machines; 24% play table games; 15% have placed a bet on horse races; and 3% have placed a sports bet.
• 47% of slot and casino players in Ontario have annual incomes higher than $75,000

Lottery Customers

• Last year, 80% (or eight million Ontarians) played the lottery at least once.
• 51% play lotteries on a regular basis.
• A Core lottery player is someone who buys lottery tickets once a week or more.  Approximately 21% of Ontario adults are Core lottery players.
• As a whole, lottery players tend to be aged 35-54, men and women playing equally, with higher rates of employment and a slightly higher household income than non- players.
• Lottery players tend to be older than non players. The largest group of players is between the ages of 35 and 54 with an average age of 48.
• The majority of lottery players (54%) purchases draw tickets only (e.g. LOTTO 6/49, LOTTO MAX). In comparison, only 4% of lottery players purchase Instant tickets exclusively.  Almost 40% of players purchase both instant and draw tickets.  Less than 6% of lottery players purchased a sports lottery ticket (PRO LINE, PRO PICKS or POINT SPREAD) in the past two months.

Copies of the report are available at www.olg.ca

March 12^th, 2012

Backgrounder
Land-Based Gaming Improvement

In "Modernizing Lottery and Gaming in Ontario", a report delivered to the Minister of Finance, OLG outlined a proposal to modernize gaming in Ontario to modernize the system and create jobs. By modernizing lottery and gaming and including initiatives already underway, in 2017 OLG will contribute an additional $1.3 billion annually to key public priorities; usher in

$3 billion in new private sector capital investment in the province; and help create some 2,300 net new jobs across Ontario and an estimated 4,000 service sector jobs in the hospitality, hotel, restaurant, entertainment and retail sectors.

The report makes three key recommendations to reform Ontario's lottery and gaming industry, all of which are subject to government approval:

• Become more customer-focused
• Expand regulated private sector delivery of lottery and gaming
• Renew OLG role in oversight of lottery and gaming

Ontarians enjoy gaming. Last year, more than 2.7 million customers visited OLG facilities. Our customers are interested in safe, fun gaming entertainment in convenient locations.

OLG focused its early land-based gaming expansion in properties near the U.S. border to attract U.S. customers. Since 2002, visits from the U.S. have declined dramatically from 23 million annually to seven million annually in 2011. At the same time, many U.S. border communities have opened their own gaming facilities.

One of the key recommendations of the report targets the improvement of OLG's land-based gaming business so that it better aligned to customer interests.

OLG's consultations with stakeholders in 2011 revealed that they felt that the future of gaming should be determined by customers and the market. Expansion or closure of sites should be decided based on the level of customer interest. Stakeholders also suggested that OLG take advantage of the expertise of the private sector particularly to reduce the burden of capital investment on the government and the taxpayer.

To transform OLG's business responsibly, OLG should expand the engagement of the private sector in order to modernize the lottery and gaming industry. OLG would allow private sector providers to run the day-to-day operation of sites, while increasing profit to the province, and maintaining responsible gaming standards as well as oversight of the business.

OLG facilities in need of capital improvements currently rely on public funds to do so. At the moment, existing OLG infrastructure is in need of $1 billion in capital investment to simply maintain current delivery.

Historically, location and size of all facilities has been determined based on priorities that are not always related to customer interest.

The report recommends that the private sector expand its role in the efficient, effective delivery of casino, gaming and lottery products while maintaining government control and OLG oversight of the business. This would be accomplished through the establishment of gaming zones. Through a fair and open competitive procurement process, the private sector could bid on the rights to operate in a zone.

As OLG moves toward shifting the daily operation of facilities to the private sector, OLG's current direct employees at gaming sites could have the opportunity to work at privately-operated facilities.

Once the zones for gaming are established, there will be a determination about what is the best combination of offerings for a region. Any new sites would require appropriate oversight and responsible gambling standards as well as OLG, Minister and municipal approval. The private sector could also purchase assets that are required to operate the business.

Any future capital investment would be made by the private sector. This could create the conditions for some $3 billion in private capital investment in communities in Ontario.

Copies of the report are available at www.olg.ca

March 12^th, 2012

Backgrounder
Lottery Business Improvement

In "Modernizing Lottery and Gaming in Ontario", a report delivered to the Minister of Finance, OLG outlined a proposal to transform lottery and gaming in Ontario to modernize the system and create jobs. By modernizing lottery and gaming, including initiatives already underway, in 2017, OLG will contribute an additional $1.3 billion annually to key public priorities; usher in $3 billion in new private sector capital investment in the province; and help create some 2,300 net new jobs across Ontario and an estimated 4,000 service sector jobs in the hospitality, hotel, restaurant, entertainment and retail sectors.

The report makes three key recommendations to reform Ontario's lottery and gaming industry, all of which are subject to government approval:

• Become more customer-focused
• Expand regulated private sector delivery of lottery and gaming
• Renew OLG role in oversight of lottery and gaming

Ontarians enjoy gaming. Last year, more than eight million Ontarians played the lottery.

Within the three recommendations of the report, there are several suggested lottery changes including:

• Lottery network operation: some of the day-to-day operation of the network to be provided by regulated private sector through a competitive procurement process
• Multi-lane sales in large retail stores: to be an option for retailers

The report recommends the improvement of OLG's lottery business so that it better corresponds to customer interests. Currently, OLG is responsible for provincial lotteries (PICK 3, PRO LINE and participates in national lotteries (eg. LOTTO MAX, LOTTO 6/49). Ontarians purchase lottery products at over 10,000 retailers through a paper-based lottery ticket system.

With private sector investment, the terminals could be used to sell additional products and services, while maintaining the integrity of the game. Lottery terminals have the potential to provide many more services such as the ability to sell phone cards, gift cards and iTunes® products.

Other jurisdictions have expanded lottery ticket sales by allowing for sales on the internet and across all lanes in grocery stores. The report recommends the expansion of lottery terminal locations to multi-lanes in major retail outlets such as supermarkets and big box stores. Convenience stores will continue to play an important role in the distribution of lottery in the province. OLG is committed to working with current lottery tickets sellers to assess opportunities and ensure continued strong performance.

The report recommends that the private sector be engaged in the creation of lottery solutions while meeting responsible gambling standards and maintaining the integrity of the game. OLG has approval to launch lottery tickets (as is the case in B.C., Quebec and Atlantic Canada) through internet gaming in 2012-13.

Copies of the report are available at www.olg.ca

March 12^th, 2012

Backgrounder
Municipal Stakeholders

In "Modernizing Lottery and Gaming in Ontario", a report delivered to the Minister of Finance, OLG outlined a proposal to transform lottery and gaming in Ontario to modernize the system and create jobs. By modernizing lottery and gaming, including initiatives already underway, in 2017, OLG will contribute an additional $1.3 billion annually to key public priorities; usher in $3 billion in private sector capital investment in the province; and help create approximately 2,300 net new jobs across Ontario and an estimated 4,000 service sector jobs in the hospitality, hotel, restaurant, entertainment and retail sectors.

The report makes three key recommendations to reform Ontario's lottery and gaming industry, all of which are subject to government approval:

• Become even more customer-focused
• Expand regulated private sector delivery of lottery and gaming
• Renew OLG role in oversight of lottery and gaming

Within the three recommendations of the report, there is a suggested municipal engagement change which states:

…Municipalities should continue to receive financial support from the gaming operations in their communities through a portion of gaming revenue for the benefit of the community. However, OLG should introduce a consistent fee model for host municipalities. This would facilitate the introduction, of a mix of games at sites. Funding levels should continue to be determined by customer volume.

Ontario's existing 23 host gaming communities have enjoyed a favourable and financially fruitful relationship with OLG having accumulated approximately $815 million since 1998, including approximately $92 million over the last year from a payment from a percentage of slot revenues. The revenues which municipalities have received from OLG have been utilized at their discretion and have funded a variety of worthwhile community projects that have in turn, created many secondary economic benefits for the taxpayers of Ontario.

The report recommends that, as is the current practice, municipalities should continue to receive financial support from the gaming operations in their communities through a portion of gaming revenue for the benefit of the community. However, OLG should introduce a consistent fee model for host municipalities. This would facilitate the introduction of a mix of games at sites. Funding levels should continue to be determined by customer volume and will likely reflect some components of the current arrangements with the levels of funding remaining relatively the same.

Copies of the report are available at www.olg.ca

March 12^th, 2012

Backgrounder
Slots-At-Racetrack Program

In "Modernizing Lottery and Gaming in Ontario", a report delivered to the Minister of Finance, OLG outlined a proposal to transform lottery and gaming in Ontario to modernize the system and create jobs. By modernizing lottery and gaming, in addition to initiatives currently underway, in 2017, OLG will contribute an additional $1.3 billion annually to key public priorities; usher in $3 billion in new private sector capital investment in the province; and help create some 2,300 net new jobs across Ontario and an estimated 4,000 service sector jobs in the hospitality, hotel, restaurant, entertainment and retail sectors.

The report makes three key recommendations to reform Ontario's gaming and lottery industry, all of which are subject to government approval:

• Become more customer-focused
• Expand regulated private sector delivery of lottery and gaming
• Renew OLG role in oversight of lottery and gaming

Within the three recommendations of the report, changes include allowing for slot facilities beyond horseracing tracks so that sites can be located where there is customer interest.

Since 1998, Slots at Racetracks have provided approximately $3.4 billion in slot revenue to the horseracing industry. As long as slots facilities are linked to individual racetracks, OLG is unable to consider alternate locations for gaming sites. Over time, this has resulted in the location of gaming facilities in places unrelated to customer interest.

The report recommends that this relationship be changed to allow for moving, changing or otherwise improving land-based gaming in the province. OLG recommends ending the Slots at Racetracks funding model though OLG does plan to continue offering slots at some racetracks where there is customer interest.

Copies of the report are available at www.olg.ca

March 12^th, 2012

Backgrounder
Why Gaming is Important to Ontario

• Since 1975, OLG has generated more than $34 billion for the benefit of the Province of Ontario.
• In fiscal 2011, OLG operations generated $3.7 billion in total economic activity in Ontario.

Contribution to the Province - just under $2.0 billion

• $1.8 billion - Funding for hospitals, health-related programs and other provincial priorities such as education.
• $120 million - Gaming proceeds for local and provincial charities.
• $10 million - Support for amateur athletes through the QUEST FOR GOLD program

Corporate Social Responsibility - $61 million

• $52.1 million - Partnering with government and independent agencies in the education, research, prevention and treatment of problem gambling.
• $1.9 million - Sponsorship of worthwhile community and local festivals and music events in support of community partners and the OLG brand.
• $7.1 million - Charitable gaming proceeds distributed to participating local charities.

Support for Local Economies - $1.7 billion

• $50.8 Million - Goods and services purchased from local Ontario businesses*.
• $946.6 Million - Payroll for 7,700 direct employees and more than 10,500 employees at the Resort Casinos.
• $223.6 Million - Lottery commissions are paid to OLG's 10,000 lottery retailers for sales, prize redemptions and for selling jackpot winning tickets.
• $92 Million - Municipal contributions in the amount of five per cent of slot machine revenues from the first 450 machines and two per cent from each additional machine are made to those municipalities that host OLG Slots and Casino**.
• $345 Million - Payments to Ontario's horse racing industry.

Lottery Prizes - $1.7 Billion

• OLG awarded more than $1.7 billion in lottery prizes to our players.

These figures are based on the period April 1, 2010 to March 31, 2011

*excludes Resort Casinos

**Does not include the Mississaugas of Scugog Island First Nation that hosts the slot machine facility at the Great Blue Heron Charity Casino

Copies of the report are available at www.olg.ca

Video with caption: "B-Roll: OLG REPORT SAYS MODERNIZE LOTTERY AND GAMING". Video available at: http://stream1.newswire.ca/cgi-bin/playback.cgi?file=20120312_C3585_VIDEO_EN_11012.mp4&posterurl=http://photos.newswire.ca/images/20120312_C3585_PHOTO_EN_11012.jpg&clientName=OLG%20Winners&caption=B%2DRoll%3A%20OLG%20REPORT%20SAYS%20MODERNIZE%20LOTTERY%20AND%20GAMING&title=OLG%20WINNERS%20%2D%20OLG%20report%20says%20modernize%20lottery%20and%20gaming%3A%20Additional%20%241%2E3%20billion%20annually%20to%20government%2C%20creation%20of%202%2C300%20jobs%20and%204%2C000%20related%20jobs%2C%20%243%20billion%20in%20private%20capital%20investment&headline=OLG%20report%20says%20modernize%20lottery%20and%20gaming%3A%20Additional%20%241%2E3%20billion%20annually%20to%20government%2C%20creation%20of%202%2C300%20jobs%20and%204%2C000%20related%20jobs%2C%20%243%20billion%20in%20private%20capital%20investment

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