The topic of "theoretical
payback" percentage on casino slot machines is a topic that this
column has addressed in the past, but every once in a while it's worth
revisiting. The following e-mail sent in by John C. is representative
of how the one statistic that casinos flaunt about slot machines is
as misunderstood as it is vague:
"I'm curious about
the so-called 'theoretical' percentages that a lot of casinos post
for their patrons and just how accurate they actually are. I've got
a rudimentary idea of what the percentages are for, but if you have
any information on this subject that you could share with me, I'd
appreciate it. Also, I'd like to know what is the point at which a
person should avoid a particular casino because its percentage is
too low."
First, a brief explanation:
Theoretical payback is the percentage of money wagered on slot machines
that is returned to players in the form of winnings. It is important
to know that the figures can vary from day-to-day, week-to-week and
month-to-month, but over the course of a year the advertised payback
is right on the money.
This is because even though
slot machines are delivered to casino floors from the manufacturers
with "made to order" computer programs set to pay back a
certain percentage of the money that people play, the mathematical
probability concept upon which the programs are based require a length
of time to average out.
If, for example, a machine
hits for a couple of top award jackpots in a relatively short period
of time, its individual payback percentage will be inflated during
that period. But stretch it out to a 12-month period of almost constant
play seven days a week and probability is going to kick in and reflect
the manufacturer's payback configuration almost precisely.
Casinos like to flaunt
their individual payback percentages because they are always in the
mid-90's. When people see that over ninety percent of the money that's
played in a casino's slots is returned to them as a collective group
in the form of winnings, it gives them a feeling of positive expectation.
To be perfectly fair, the
payback is indeed generous, especially when compared to other forms
of gambling, such as the Illinois State Lottery, which returns only
something like half of the money that's wagered on the games to the
people who play them (the remainder going to administrative expenses
and tax revenues).
It is upon sheer volume
that the casinos are still able to reap millions of dollars in adjusted
gross revenues from the machines each and every month. For example,
during the month of June 2004, $426,836,000 was wagered on the slots
at the Grand Victoria in Elgin. Of that amount, $401,342,000 was returned
in winnings, which still left $25,494,000 for the casino. That made
for a 94.03 percent theoretical payback and a 5.97 percent casino
"take" on Grand Victoria's 1,072 slot machines for June.
Don't forget that the Grand
Victoria is subject to a 70 percent Illinois state gaming tax on its
revenues in addition to its obligation to community taxes. It must
pay salaries and administrative expenses from what's left, so that
$25.4 million "profit" from the slots in June isn't all
gravy.
Now let's see how that
"take" varies when denomination is taken into account: During
June, the Grand Victoria's 101 nickel units netted a 13.33 percent
take, while the 360 quarter machines earned 7.82, the 71 half-dollars
6.80, the 440 dollars 5.25, the 77 five-dollars 3.38, the 11 ten dollars
1.92, the 10 twenty-five dollars 4.23 and the two one hundred dollar
machines 7.88.
It's readily apparent that
the average take on the denominations that most people play (nickels,
quarters, halves and dollars) came to something like 8.3 percent while
the average take on the more exclusive five, ten, twenty-five and
one hundred dollar games was 4.3 percent.
Therefore, the answer to
the first part of the question is "yes", theoretical payback
percentages are accurate. The trick for players is how to interpret
the figures and to determine how much they mean when it comes time
to decide where to play. That will be the subject of next week's column.
