VIP & VIP+
Exclusive Content   Join Now

Payback on slots shrink to new low

Jun 24, 2008 7:05 PM

by David Stratton | Based on revenue reports from regulators, slot machines in Nevada are showing signs they’re losing some of their appeal to players.

Besides declining revenues in five of the past six months, slot machines are taking less of the gaming pie than they have in the past.

For instance, last year slots accounted for 65.7 percent of all of Nevada’s gaming revenue, down slightly from the 65.8 percent it garnered in 2006, but significantly lower than the 67.2 percent they took in 2003 and 2004, when slot machine popularity was at its peak.

One of the measures of a slot machine’s appeal is its payback percentage – the amount it returns to players – which is often characterized as a machine’s "tightness."

The tighter a machine, the stingier it is. And, collectively, slot machines in Nevada have been becoming increasingly tighter, especially over the past five years.

Before examining the slot statistics revealed in a study conducted by GamingToday, it would be helpful to elaborate on the concept of payback percentage.

Simply, a machine’s payback is the percentage a machine will return to the player over the life of the machine. The percentage is programmed into the machine’s computer chip and set by the manufacturer, according to the specifications demanded by the casino.

A common misconception of payback is that a player will win more when playing a machine with a higher percentage. This isn’t necessarily true because the payback percentage can vary wildly at any given point in time.

"You might play $100 through a slot machine with a 94 percent payback and win $5,000 and then sit down and play $100 through a machine with a 99 percent return and lose it all," said Bill Burton, author of "Your Guide to Casino Gambling."

Thus, Burton explains, the payback percentage during a playing session may vary from 5 percent to 500 percent – slot machines are often that volatile.


Slot Machine Payback Statistics*
Copyright 2008 GamingToday
25¢
$1
ALL
April
2008
Strip
87.9
87.8
90.4
92.8
92.7
Down.
88.4
90.8
94.3
94.9
93.1
Nev.
89.5
91.2
93.2
94.3
93.6
April
2007
Strip
88.6
88.4
91.2
93.3
93.1
Down.
89.2
91.2
94.4
95.2
93.5
Nev.
89.9
91.5
93.6
94.5
93.9
April
2006
Strip
89.1
89.2
91.5
93.8
93.2
Down.
89.2
91.5
94.6
95.3
93.7
Nev.
90.1
91.7
93.6
94.8
94.0
April
2005
Strip
89.6
89.6
91.9
94.3
93.5
Down.
89.3
91.0
94.5
95.4
94.0
Nev.
90.7
91.6
93.8
95.0
94.2
April
2004
Strip
90.1
89.9
92.2
94.4
93.5
Down.
90.2
91.3
94.6
95.2
94.2
Nev.
91.0
91.9
94.1
95.2
94.3
April
2000
Strip
NA
91.2
92.9
94.8
94.0
Down.
NA
92.2
95.0
95.5
94.7
Nev.
NA
92.8
94.6
95.6
94.8
April
1995
Strip
NA
89.5
93.8
95.2
94.5
Down.
NA
91.9
95.7
95.6
95.4
Nev.
NA
91.8
94.9
95.7
95.1
*Based on data from Gaming Control Board revenue reports

Nonetheless, collective payback percentages tracked over time can be revealing.

For instance, the overall payback percentage of slot machines in Nevada has slipped from 94.8 percent in 2000 to 93.9 percent last year (2007).

A single percentage point may not sound like much, but based on the $137 billion fed into Nevada machines last year, players took home over $1 billion less in 2007 than they would have in 2000.

It gets worse on the Las Vegas Strip, which accounts for nearly 55 percent of Nevada’s total gaming win. Slot players on the Strip saw their return dip from 94 percent in 2000 to 93.1 percent last year, although the most popular denomination machines took bigger hits.

For example, dollar slots paid back 1.5 percent less last year, while quarter and nickel slots returned 1.7 percent and 2.8 percent less, respectively (see accompanying chart).

Contributing significantly to the lower payback percentages has been the proliferation of penny slots.

Once viewed as a novelty by casinos and players alike (regulators didn’t begin tracking revenue from penny slots until 2004), penny denomination slots now account for nearly 25 percent of all slot revenue, double their share of two years ago.

"The penny slot machine has become a staple on our casino floor," said the casino manager of an off-Strip resort who asked for anonymity. "All the latest and popular games – the ones with the extra paylines, bonus rounds, high-tech graphics and sound effects – are penny denomination machines."

While penny slots have become popular with players, they are also the tightest of all the machines.

Throughout the state of Nevada, the payback on penny slots has slipped from 91 percent in 2004 to 89.9 percent last year.

The dropdown was even greater on the Las Vegas Strip, where their payback dipped from 90.1 percent four years ago to 88.6 percent last year.

And the "screws" appear to be tightening even further. In the Gaming Control Board’s latest revenue report (for April 2008), penny slots on the Strip now return 87.9 percent to players – the first time any machine has returned less than 88 percent to customers.

Other states catching up

Even though Nevada slots are paying back significantly less than they have in the past, they remain competitive with slots in other states.


2007 Slot Payback: Nevada vs. other states
Copyright 2008 GamingToday
25¢ $1 ALL
Nevada 89.9 91.5 93.6 94.5 93.9
Colorado 91.5 93.3 94.9 95.3 93.7
Connecticut 88.2 89.1 90.4 92.6 91.3
Illinois NA NA NA NA 92.7
Indiana NA NA NA NA 91.7
Iowa NA NA NA NA 91.9
Louisiana 89.4 90.6 92.8 93.7 92.0
Mississippi NA 91.7 93.8 95.1 93.2
New Jersey NA NA NA NA 91.6
South Dakota 90.8 90.9 90.8 92.0 91.3
*Based on data from AmericanCasinoGuide.com

For example, slots in Connecticut and Atlantic City, New Jersey, return a full 2 percentage points less than they do in Nevada.

The same can be said for slots in Indiana, Iowa and South Dakota.

Only Colorado and Mississippi offer slots with payback percentages comparable to Nevada’s.

California, which is perhaps Nevada’s biggest competitor in the slot race, doesn’t require a minimum return on slots, and the tribal casinos aren’t required to release information on their games.

For the time being, Nevada slots appear to have a competitive advantage, based on payback, over most other states.

But compared to the machines of the not-too-distant past, current slots are showing signs of weakening appeal.