Explaining Dead Chips Programs
March 21, 2017 3:11 AM
by The Analyst
Dead Chips, Rolling Program, Non-Negotiable Chip Program are but a few of the variant names given to a casino incentive program that rewards volume of play in lieu of discounts on losses and other material incentives. Popularized throughout Asian and Australian casinos back in the 80’s and 90’s, the programs had also seen heavy use on the Las Vegas Strip in the 90’s and again in downtown Las Vegas in the mid-2000’s.
Originally designed for junket groups and high-end players, the Dead Chip program’s structure is cash based and requires volume play for the customer to maximize benefits. Because of their popularity a number of casinos have tailored variations to accommodate players with buy-ins ranging from thousands to the multi-millions.
In general, Dead Chip program structures are simple, the player or junket group places money on deposit with the casino, the casino then issues non-negotiable chips up to the amount put on deposit that can only be played on certain agreed games, most usually baccarat.
When the player makes a winning wager they are paid in regular casino chips and when he/she makes a losing bet the non-negotiable chips are collected into the chip rack. When the customer goes through all their non-negotiable chips, they can then re-buy more non-negotiable chips up to the amount of their original buy-in and can repeat the cycle till they are done playing or have lost all their money.
The incentive to the customer to do this is that for each turnover of their original buy-in, they earn a commission. The commission is paid at the conclusion of play in place of discounts on losses or extraordinary comps or other incentives. There are usually other qualifying conditions such as the non-negotiable chips once issued must be played till lost, non-negotiable chips cannot be used for tips or to pay baccarat commissions (which must be paid in live chips) and their buy-in must be turned over at least four times to qualify for the program.
The most popular and profitable version that ran for years on the Strip back in the 90’s gave a 1.5% commission on the first four turnovers of the bankroll and 1% on each ensuing turnovers beyond the first four.
As an example, if a customer put $1 million on deposit for the program and turned it over ten times, the customer, regardless of if they were winning or losing at the end of their play, would receive $120,000 in commissions from the casino. The customer could have won a million or lost a million they would still get the $120,000 regardless, as they are rewarded on amount of play not the results of play.
On the other hand, if the same customer had played under traditional programs and lost $1 million, they would be looking to get a $150,000 discount on their loss and probably between $15,000 and $30,000 as an airfare reimbursement incentive.
Mathematically, depending on which gaming mathematician’s work you prefer, the program described in this example takes the casino’s per hand advantage from 1.267% to .5170% or in the most conservative calculations from 1.15% to .4%, either way a bit over 60% decrease in the house edge on baccarat.
With the thin edge though, casinos need to be wary, and mindful to watch for chip washers. Among sharp customers using these types of player programs, if a customer gets an early lead on the casino, they could easily take that advantage and partner with another player on a game and bet opposite each other to convert the chips faster and burn the casino for the commission. This only works if they get an early lead on the casino, for if they start washing from bet one, the casino will earn their mathematical advantage.
Smart operators will usually not let more than one program player on a particular table at a time. Casinos also need to be wary of loan sharks, as a lot of sharks are happy to loan players the cash to play on these types of programs, then take the player’s commission as their loan interest then aggressively chase the player for the face value of the cash loan or more.
As with all gambling, the secret of any casino’s success is in volume. As long as a casino has material volume they will make money, and if they are making it from customers they would not have normally attracted then they are just being smart. After all, winning half a percent on something is infinitely better than 100% on nothing.
The smart guys at the Lucky Dragon have come up with their own version of a non-negotiable chip program and I bet they will make money on it.
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