This past week, a reader called to inquire about an article in which we noted that "slot machines were loosened by about 30 percent" in a location outside of Nevada. Specifically, he wanted to know what "loosened" meant.
He was told, very simply, that "loosened" meant the machines were retrofitted with new computer chips that paid back more money to the player.
Slot machine payback percentages have always intrigued players. So much so that in years past casinos have waged "Loose Slots" wars, hoping to lure players with a percentage point here and there.
But, like everything else that is based in statistics and probability, the value placed on slot payback is "highly overrated" if not totally meaningless to actual players, according to experts on the subject.
"Most slot customers don’t notice a difference," said Harvey Perkins, vice president of operations at the Sands in Atlantic City, in an interview with the Press of Atlantic City. "You would have to play a slot machine through its whole cycle, through millions of (handle pulls), then play exactly the same slot machine at another club, through another millions of decisions, to see a pricing difference."
Perkins added that, in Atlantic City, all the casinos have slot paybacks within a couple percentage points of each other, so gamblers aren’t likely to use those numbers as a criterion for selecting a casino.
"Customers are sensitive to the total value they receive from the property, including the payout on the games, the cash back (from slot club promotions) and other promotions the property has to offer," added Resorts president Audrey Oswell.
Robin Farley of UBS Warburg said slot payback percentage or claims of loosest slots are of less importance in tourist markets, compared to locals-oriented casinos.
"The payout rate matters more in regional or local markets," Farley said. "The Strip is more tourist driven and people are not as sensitive to looking for the best slot deal. That’s not why they’re going to Las Vegas."
Very simply, slot payback percentage is the total number of coins dumped out of the machine divided by the total number of coins played into it. For example, a machine that returns 94 percent of the amount played into it has a theoretical payback of 94 percent.
Conversely, the hold percentage of the machine is the number of coins retained divided by the total amount of coins bet. Thus, in the above example, the machine would have a hold of 6 percent.
Slot hold is similar to the hold percentage in table games, except that table game percentages are equal to the win divided by the handle. In Las Vegas, table hold percentages range from about 12 percent for blackjack and 13 percent for craps to 17 percent for baccarat and 24 percent for roulette.
A slot technician with a major slot manufacturer explained that the payback percentage is only one measure of a slot machine, and other factors need to be known to accurately gauge how the machine will perform. They include the hit frequency, its volatility index and its confidence values.
"You could have three slot machines with identical payback percentages, but one machine could pay out 60 times more often than another and only twice as frequently as the third," the technician said, asking that his name be withheld. "And on one machine, the top jackpot could hit three times in one month, while the top award on another machine with the same payback may hit once in three years."
There’s also a factor called the volatility index of a slot machine which affects its ability or "confidence value" to perform within the rated payback percentage, the technician said.
"The point is, the payback percentage can fluctuate," he said. "For instance, a machine with a 94.832 percent payback has a 90 percent confidence level that the actual payback will be between 94.25 and 95.42 percent after 10 million pulls. However, after only 1,000 pulls the payback percent can be as low as 36.53 or as high as 153.14. Likewise, after 100,000 pulls the return can fluctuate between 89 percent and 100.66 percent.
"Obviously, to compare machines by their theoretical, long term payback percentages is both risky and inaccurate," he continued. "Payback percentage is at best a volatile guide, and not something that should be taken as an absolute."
Ian Williams, a former slot technician and author of a book on slot machines, said the slot payback percentage is "strictly theoretical" and derived from mathematical models based on over 10 million spins or handle pulls.
"Go to any machine in the casino and you’ll find that the current or actual payback percentage could vary from —200 percent to +200 percent," Williams said. "It is only theory and the actual payback percentage changes every time a game is played.
"My advice is don’t even bother trying to figure it out," Williams said. "It won’t do you any good."
Even some of the top players refuse to be unduly influenced by payback percentages. GamingToday columnist Rob Singer, who writes about video poker, acknowledges the importance of the expected value (EV) return on a poker machine, but said he isn’t a slave to it.
"Sometimes you have to make a play or decision based on today’s results and not on what will happen tomorrow or in the so-called long term," Singer said. "It’s true, my decision may cost me the 52 cents an hour or whatever, but I don’t care about baloney like that ”” I don’t sit at a video poker machine expecting to earn an hourly wage. The bottom line is my short-term expected value and the ability to win money."
L.J. Zahm, a video keno expert who pens a GamingToday column called Cluster Keno, stressed that there are more important issues than the machine’s payback percentage.
"Virtually all of the keno machines I play, as well as the actual keno games, have payback percentages in the 92 percent range," said Zahm, whose book "Cluster Keno" has become the Bible of video keno. "For instance, the 7-spot keno returns 92.44 percent, while the 8-spot returns 92.31 percent, the 9-spot 92 percent and the 10-spot 92.55 percent.
"But these statistics aren’t important to what I’m doing," Zahm continued. "What I base my play on are these stats: The odds of hitting 7 out of 7 spots is actually less than the odds of hitting a royal flush, but the payoff (7000-1) is substantially higher then the royal’s award (800-1). Here’s another: for every royal flush you hit on a poker machine (with a payoff of $1,000 for five quarters bet), the video keno machine will hit at least six 7-out-of-8 jackpots (with a payoff of $1,652 for four quarters bet!).
"So you see, payback percentage isn’t the key number. What’s key are the odds of what you’re trying to win, and therefore your ability to win. This is what matters."