Over the years, I’ve discovered that one of the most confusing concepts to everyone in the gaming industry seems to be progressives.
From what I know, once upon a time, the progressive jackpots on table games (and there weren’t so many) were essentially owned by the table game company and not the casino. I’m guessing the first time a casino manager heard about potentially paying out hundreds of thousands of dollars for a dealt Royal in Caribbean Stud Poker, he nearly had a stroke.
It didn’t really matter what the actual payback of the wager was. Casinos are very nervous about having one very bad day, even if at the end of the year, of giving up a small fortune.
The problem was not the concept of a progressive, because the casinos didn’t seem to have much of a problem handling video poker progressives on their own. However, these paid back a little over $1,000 for a quarter machine and maybe $5,000 for a $1 machine (on average).
I guess after enough time went by the casinos began to realize that in the long run they were basically handing over large amounts of profits to someone else. I guess this bothered them even more than the big payday. As far as I know, almost every progressive in a casino today is handled directly by the casino itself.
So, what is the allure for both the casino and the player about a progressive? For the casino, I think there are two aspects. The first is that the paybacks for progressives are frequently lower than non-progressive counterparts. The casino doesn’t really care about how large or small the jackpot is at any one point.
There are two factors of the jackpot that affect the payback from the casino’s perspective. The first is the seed, which is the amount the jackpot is reset to when it is hit. This is the true ‘payout’ to the casino for that hand.
The second is the contribution rate or what percentage of each wager is added to the jackpot. This percent is added to the bottom line of the payback because eventually this money goes to some player. The casino doesn’t care how many play over time, only that this money doesn’t belong to them.
So, to the casino, if a Royal Flush on average should come up 1 in 40,000 hands, it makes very little difference if the machine goes 400,000 hands until a Royal is hit, and that the progressive jackpot grows to some very large amount. The casino will save some seed money, but this is usually a small amount of the overall payback.
The other thing that the casinos like about progressives is that players like the idea of winning large sums of money on a single hand and this can make them a bit more popular. Winning $1,000 for a Royal is nice, but winning $1,090.47, somehow seems much better yet. Of course this item is also one of the things the players like about progressives.
In the case of video poker, the seed is usually the normal payout for a non-progressive version. If hitting the top hand, you’ll win even more.
The expert player, however, realizes that there is something more going on here. The player has a moving target where payback is concerned. He doesn’t care about the seed money or the contribution rate. To the player, what matters is the actual payout for each winning hand on this next deal.
So, if the Royal Flush is going to pay $1,000 he has one payback. If it has climbed to $1,600, the payback is that much higher. So, in the extreme case I mentioned earlier where a video poker machine hasn’t dealt a Royal in 400,000 hands and the jackpot has perhaps climbed to $2,000 or more, the payback of the machine may actually be over 100 percent.
The casino shouldn’t care one bit, except for the part where players should be swarming the machine and playing it non-stop – especially if the jackpot climbs to the point where the game may be well over 100 percent.
While there may be some casino managers who are reading this article, I’m guessing most of you are players. This means you should pay very close attention to the jackpot size. While it will still take some serious luck to hit one, you should be aware of when the jackpot causes the game to go positive and be prepared to try and take advantage of this situation.
Question? Comment? E-mail me at: Elliot Frome