Sky’s the limit for SMBs as legalized gambling gets green light

Local companies developing casino-type, Web-based games could cash in on a market worth more than $16 billion in expected revenues as provincial governments increasingly move towards regulating online gaming.

The gaming industry, also known as legalized gambling, has nearly tripled in size since 1995 and now exceeds the combined revenues generated by magazines and book sales, social establishments, spectator sports, movies theatres and the performing arts, according to Paul Burns, vice-president of the Canadian Gaming Association (CGA).

“Our industry supports more than 128,000 full-time jobs, 283,000 associated jobs and generates $12.5 billion in labour income and $8.7 billion in annual revenues remitted to the government,” he said.

Canadian firms that develop online betting games have had to ply their trade abroad because Canadian laws prohibited online gaming in the country. “All this is about to change. For instance, provincially regulated online gaming was officially launched last year in British Columbia,” said Burns.

Other provinces are following suit. For example, Quebec rolled out a new online gambling system that is expected to generate more than $50 million a year. Ontario is also set to launch a new online gambling system by 2012 that is expected to rake in $400 million in revenues each year, he said.

These developments are going to be a boon for many small and medium sized (SMB) technology firms in the country, according to Burns. “I would estimate that gaming companies in the field will be purchasing anywhere from $4 billion to $7 billion in products and services. That’s a lot of opportunity for Canadian SMBs.”

The opportunities are not limited to online game developers, according to Burns. “There will be a huge demand for HD technology experts for playing screens, IT security experts and IT administrators and service technicians.”

He also expects a demand for mobile app experts. “Increasingly there is a focus towards new game delivery technology. In B.C. Lottery is planning to offer games to mobile device users.”

Bonanza of tech opportunities

Michael Dominelli, vice-president of marketing for NRT Technology Corp. says the industry will soon be needing tech talents in finance and cash transaction software and hardware development.

NRT manufactures cash handling kiosks specially designed for casinos. The machines operated much like regular automated teller machines (ATM) but they have added features such as cashing in gaming machine tickets and dispensing player points. NRT provides machines to casinos in Las Vegas, Macau and Singapore.

“It’s interesting to find out if players will flock to online casino games,” Dominelli said. “But whichever way the tide goes I see a growing demand for companies that can provide cash handling transactions and securely handle gamer information.”

Opportunities for small players

Canadian laws require that provincial governments regulate and control legal gambling operations such as casinos. Because there was no regulatory system covering online gaming, Canadian firms could not offer their games in the country. “It would have been illegal for us, so we had to offer our games abroad,” said David Acorn, chief operating officer of Chartwell Technologies Inc. a Calgary-based company that develops casino-type games and video lottery games. The company was recently acquired by Montreal-based Amaya Gaming Group which specializes in developing online and mobile lottery games for governments.

“Since 1998 Europe comprised 80 per cent of our market and Asia made up the other 20 per cent,” Acorn said. “Now we’re looking forward to seeing some Canadian action.”

Where as Chartwell primarily focused on business-to-business game development, Acorn expects the company will see some business-to-government projects because in Canada provincial government run lottery operations.

Large outfits such as Chartwell and Cryptologic Ltd. ruled the Canadian gaming industry, according to Acorn but now he foresees smaller players jockeying for position. “Smaller companies based in Vancouver and Ontario will be getting in on the game soon,” he says.

Numerous hurdles to overcome

Both Dominelli of NRT and Chartwell’s Acorn caution that the gaming industry might not be for everyone because of the stringent regulations involved.

“There are a lot of hoops to jump through,” said Dominelli. “Before securing a contract, a business needs to go through intense security, finance and government checks.”

Acorn advises that companies looking to get a piece of the online gaming action check with the specific provincial gaming body of the specific jurisdiction they want to operate in.

“You need to get a handle on the specific provincial regulations and its different for every province,” he said.

Nestor ArellanoNestor Arellano is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and join the IT Business Facebook Page.

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