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A winning hand

By Nick Rockel | January 13, 2014
A winning hand
Jervis Rodriguez

When Jervis Rodrigues joined the British Columbia Lottery Corporation (BCLC) as Chief Financial Officer and Vice-President, Finance and Corporate Services this February, he was no stranger to the public agency. In his previous role as a partner at a major accounting firm, he did extensive work for BCLC, which runs casino, lottery and online gaming on behalf of the B.C. government.

Rodrigues has been both an accountant and a turnaround and restructuring consultant, a combination that meshes well with the changes underway at BCLC. “The whole BCLC organization is going through a transformation,” he says. “It’s an exciting opportunity for me to be involved on the inside with the transformation process.” 

As part of that process, Rodrigues is helping drive BCLC’s push into digital gaming. The corporation was an early Canadian adopter of e-gaming, an ever-evolving market that offers high growth potential through national and even international partnerships. As BCLC bets on those opportunities, it must compete with private players and manage the regulatory, security and other risks of a digital platform.

BCLC generates roughly $1.2-billion a year in net income, the most of any B.C. Crown corporation. The bulk of that money goes to the government, which allocates it to general operating costs, healthcare and charitable purposes. “It’s going to very, very good causes, going back into the community and also helping to defray costs to the province and to every taxpayer in the province of B.C.,” says Rodrigues.

BCLC first ventured into e-gaming in 2004. As Rodrigues points out, it was the first provincial lottery corporation to offer a full suite of digital games. On BCLC’s PlayNow.com website, which has some 190,000 registered users throughout the province, visitors can choose from more than 100 games, including bingo, blackjack and sports betting.

E-gaming accounted for $77-million or 7.2 per cent of total B.C. gaming revenue in the latest fiscal year, versus 2.9 per cent in Alberta and 0.4 per cent in Quebec. But several European countries are well ahead of B.C. In Finland, which has offered digital gaming for 16 years, the segment makes up almost 33 per cent of total revenue. After 15 years in the business, Austria derives 39 per cent of its gaming sales from online sources.

“In Canada, we’re still in our infancy. You have B.C. right at the forefront, you’ve got Loto-Québec in some e-gaming areas and you’ve got this big void,” says Rodrigues, a director of the Toronto-based Interprovincial Lottery Corporation, which manages Lotto 6/49 and other national games. Catching up to Europe will require all of the provinces to embrace digital gaming, he notes. “And if we get the U.S. [on board], which is now thinking about getting into the Internet gaming business, I think in a few years you’ll start to see significant growth in this area.”

Why was B.C. relatively early to the e-gaming table? The BCLC executive team has long regarded its operations as more of an entertainment business than a gaming enterprise, Rodrigues explains. “BCLC benchmarked itself against some of the European countries many, many years ago and decided that this was an opportunity it needed to explore, and BCLC needed to be front out of the gate to develop its e-gaming site.” 

But for a government agency, running what is effectively a technology business has its challenges. For starters, there’s the cost: BCLC spent between $50-million and $60-million to develop PlayNow.com, Rodrigues estimates. 

Internet gaming is also highly competitive. Although the provinces have a monopoly over casinos and major lottery games, the online space includes dominant brands like Bodog and PokerStars. “The pace of change is very significant,” Rodrigues admits. “Players get tired of certain games and tired of the same group of people they’re playing with, so they want to continuously have new products and services.”

BCLC’s solution: where it used to create most games in-house, over the past year it has accelerated the shift toward a hybrid model, through partnerships with developers such as the Las Vegas-based International Game Technology (IGT) and the London-based OpenBet Technologies Ltd. “We can get new games on PlayNow.com much more frequently,” Rodrigues says.

Another challenge is reaching the 20- to 35-year-old demographic, the age group most likely to gamble online. Besides using Twitter, BCLC is talking to Facebook about launching its lottery games and tickets on the popular social network. The corporation is also making PlayNow.com more easily accessible via mobile devices like smartphones and tablets.

Then there are the risks of digital gaming, which include cyber attacks and privacy concerns, given that BCLC handles credit card numbers and other personal information from PlayNow.com users. In addition to a corporate security department, the organization has a risk unit that sits under the CFO’s office. “Every business group is integrated, with the finance group leading the charge on risk overall,” Rodrigues says.

BCLC has big plans for e-gaming. It’s cautiously optimistic about hitting $100-million in annual revenue within one or two years, Rodrigues says. And if Europe is any indication, digital games could eventually account for as much as 25 per cent of its total business, he estimates.

The B.C. version of PlayNow.com is off limits to anyone who doesn’t reside in the province of 4.6 million people, so interprovincial partnerships are a key element of the growth strategy. BCLC already hosts Manitoba on PlayNow.com, and Rodrigues says it’s in discussions with other jurisdictions about similar business partnership. Meanwhile, the agency is seeking regulatory approval for Canadians visiting B.C. to use the provincial site.

BCLC has also been talking to U.S. and other foreign countries about options that include B.C. hosting its Internet gaming businesses. One potential barrier is the litigious environment stateside, Rodrigues concedes.

But PlayNow.com is built to handle a global clientele. “The capacity and the potential are there for anybody in the world to play on our regulated site,” says Rodrigues. “If we did get that approval, it would be quite significant. You could be in Macau or Singapore saying, ‘I’m tired of that site; I’m going to play on PlayNow.com.’”

 

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