19 Facts About Gambling Machines That Will Surprise Your Friends
Published on January 19, 2017
Gambling machines account for most of the revenue in the American casino industry. The situation varies a little bit in other countries, but there’s no getting around the popularity of slot machines and video poker. This post looks at the facts about gambling machines.
I’ve listed 19 facts here, many of which will surprise your friends.
If you were to walk into a casino for the first time, no one could blame you for thinking that there’s little difference between slot machines and video poker games. From the outside, they’re practically identical.
And they do, in fact, have a lot in common:
The biggest most obvious difference between the games is that a slot machine has spinning reels with symbols on them. A video poker game, on the other hand, doesn’t have spinning reels. And the symbols on a video poker game are more or less the same on every game—they’re based on a deck of cards.
This is more than a cosmetic difference. Video poker machine games don’t just use playing cards as symbols. They use the probability of a deck of card to determine your outcomes.
Another, less obvious, difference is the level of decision-making involved. When you’re playing a slot machine, your decisions are limited to how many credits to bet on how many paylines. But when you’re playing a video poker game, you’re dealt a starting hand. You then get to decide which cards to keep and which ones to replace.
This decision-making aspect of video poker makes it a more mentally stimulating game than slots, which are essentially exercises in mindlessness.
When a casino or a gambling writer analyzes a bet on a table game like blackjack, craps, or roulette, they focus on a number called “the house edge”. That number is just an expected loss (expressed as a percentage) that the casino expects you to experience per bet over the long run.
In the short run, you won’t see this, and it’s obvious why. On a single hand in blackjack, you’ll either win or lose a single unit. About 5% of the time, you’ll win 1.5 units.
But if you’re looking at tens of thousands of hands, you can average the amount won or lost by the number of hands you’ve played. The more hands you’re looking at, the closer the results will be to the mathematically expected outcome.
Casino management looks at this number along with the popularity of a game to project how profitable the game will be. It’s a simple formula, too:
You multiply the average bet per hand by the house edge, and you multiply that by the number of bets per hour that are placed.
Suppose you’re running a casino, and you put a blackjack table in the corner. You have an average of 4 players there, and they each play about 60 hands per hour at an average of $25 per hand. The house edge, with the rules you’ve established, is 0.5%.
Your hourly expected action is equal to 60 X $25, or $1500, multiplied by the number of players (4), or $6000 per hour. You expect to win 0.5% of that, or $30 per hour. Over a 24-hour period, that’s $720 per day.
You can divide that number by the square footage that the game occupies to come up with an hourly projected revenue per square foot. You can then decide whether it’s more profitable to put another slot machine or two in that spot instead.
On the other hand, when casinos look at slot machines and video poker games, they talk about the game’s “payback percentage”. This can be thought of as the other side of the house edge coin. Instead of the amount that the casino expects to win per bet, this is the amount that the casino expects to pay back to the player.
A Vegas Strip casino might have slot machine games with a 95% payback percentage. (This is the equivalent of having a 5% house edge.) They expect to pay out, over time, 95 cents for every dollar you wager.
They can run the same kind of analysis on this game. But the numbers change dramatically because of a couple of factors, the more important being the number of bets per hour.
The average slot machine or video poker gambler places 600 bets per hour. If you’re wagering that same $25 per bet that we talked about in the blackjack example, you’re looking at $15,000 in hourly wagers instead of $1500.
Also, the house edge on this game is 5% instead of 0.5%, so the players’ expected losses on this game are $15,000 X 5%, or $300.
Even though you only have one player at a time on that slot machine game, you’re still bringing in an exponentially greater amount of hourly winnings with the slot machine than with the blackjack game.
Of course, these aren’t the only factors that the casino has to take into account when deciding which games to put on the floor. They also have to take into account that some players who love blackjack would never play a slot machine. They’d rather get smaller winnings per hour from those players than lose them entirely.
This is why casinos have a mix of games on the floor with a mix of denominations available. They offer penny slot machines to players who can’t afford $25 per spin, because they don’t want to lose their business.
I was pretty specific earlier when I pointed out that video poker games use the same probability as a deck of cards. That’s because it’s important. It determines the payback percentage for the game. It also determines the correct playing strategy for the game.
But in some states, you’ll find games that look like video poker games but are actually bingo games in disguise. These are called pull-tab machines. They look exactly like video poker games, but the trappings are literally just for show. (And “trappings” IS the appropriate word.)
These games have a payback percentage, just like a slot machine or a video poker game does, but there’s no way to know what that payback percentage is. That’s because the cards are just for show.
Here’s how you can tell a pull tab game from a real video poker game:
Look around on the screen for a tiny bingo card. If the game has a bingo card, that means it’s a class II game, and the outcome is determined by the bingo results. It’s still random. It just doesn’t duplicate the odds found with a deck of cards. The outcome is determined by the results of the bingo game.
These kinds of games are most often found in states with Native American casinos.
I ran into a situation with one of the writers who works for me the other day. He was convinced that when you got a blackjack at the blackjack table, your profit was only 50% of your initial bet. At first, I couldn’t understand how he’d gotten that idea.
But then I realized that most of his gambling experience had been with slot machines.
And the payouts on gambling machines aren’t quite the same.
When you bet $100 on a hand of blackjack, you lose that $100 if you lose the hand. But you get to keep it and your winnings if you win the hand. So you get $100 or $150 on a winning hand. That’s a 1 to 1 payout, or a 3 to 2 payout.
But when you bet $100 on a slot machine spin, the $100 disappears and isn’t considered part of your win. If you put $100 on a slot machine spin and win $50, you’ve actually experienced a net loss of $50. The game doesn’t give you back the initial bet—it’s gone from the time you spin the reels.
You could express either game’s payouts in the same way. A blackjack game pays off at 2 for 1 or at 1 to 1. A slot machine game might pay off at 2 for 1, but that’s the same thing as paying off at 1 to 1.
When you’re playing a gambling machine, you might occasionally have wins that are less than your initial bet. Even though you saw a “win”, you had a net loss on the bet.
A progressive slot machine game is one with a jackpot that continually grows as you play. These are sometimes standalone games, but more often, they’re networked with other games. Sometimes they’re networked with a handful of other games inside of a single casino, but other times they’re networked with thousands of other games in dozens or even hundreds of casinos.
What all these games have in common are huge jackpots—larger prizes than you’d find on a traditional slot machine with a flat top jackpot. (That’s why they’re called “flat top” machines—because the top prize is always a flat amount. It doesn’t go up over time.)
But the way the games pay for those every-increasing jackpots is what makes them so different in terms of payback percentage.
The jackpot grows because of a “tax” of sorts. A tiny percentage of each bet goes to “fuel” that ever-growing jackpot. That money has to come from somewhere. And that’s where it comes from—it’s a tiny percentage of each of your wagers.
The other thing to consider is that a game’s overall payback percentage takes into account that top prize. If you’re almost certainly never going to see that jackpot (which is the case with most progressive games), you can’t consider that a practical part of your payback percentage.
In other words, the payback percentage on such a game might be 95%, but if you never hit the progressive, your effective payback percentage on all the bets you place might be 90% or lower.
If you like going after a life-changing jackpot, progressive slots are a better bet than the lottery.
But if you want to minimize your hourly losses and make the most of your gambling dollar, stick with the flat top games instead.
For decades, slot machines all worked the same way. They had springs and gears which caused the metal reels inside the machine to start spinning. In a sense, these games worked more like a roulette wheel than anything else.
But modern slot machines use a computer program called a random number generator to create their results.
Here’s how a random number generator works:
It’s a simple computer program that generates thousands of numbers per second. When you hit the spin button on a slot machine game, the program stops at a number. That number corresponds to a combination of reel symbols.
The spinning reels are just for show, even on a game which looks like it has actual spinning reels. And let’s face it—most slot machine games these days just provide a video game type experience, where the spinning reels are animated.
This is good news and bad news for the player.
The good news is that the casino and slot machine manufacturer can program different probabilities for each symbol. This enables them to create larger jackpots and still make a profit, which makes these games more exciting ad fun.
But on an electronic slot machine game, the probability for each symbol is determined by the algorithm that runs the random number generator. You might have 12 symbols, but some of them might be programmed to come up with a 1/6 probability, while others might be programmed to come up with a 1/18 or 1/24 probability.
On the other hand, most of these games have lower payback percentages than they would have if they were powered mechanically.
I touched on this subject a little bit in my earlier bullet point about pull tab machines, but I want to get into a little more detail, here.
Gambling laws are needlessly complicated. In many states, Class II games are legal, even though Class III games are not. And even though these games might offer the same odds and payback percentages to the player, the law makes a distinction about how the game can generate its results.
In states where Class II gaming is the only legal option, the results have to be determined as part of a bingo algorithm. All the games tie into a central computer system which is constantly running electronic bingo games. You can see the bingo results on the screen of such games in a casino with Class II games.
A Class III slot machine game, on the other hand, has a random number generator inside the machine that runs independently of all the other machines in the casino.
The difference is almost invisible to the player, with one major exception:
Video poker games are supposed to duplicate the probability of a card game. This is impossible to do when the results are being determined by a nearly-invisible electronic bingo game in the back office.
You’ll see a percentage of 65% or 70% quoted on dozens of websites, but their information is old. The reality in today’s casinos—at least in the United States—is that gambling machines make up 85% of a casino’s revenue.
This wasn’t always the case.
Just a few decades ago, slot machines weren’t taken seriously by gamblers or by casino executives. They were placed in high traffic areas so that the women would have something to play while they left their husbands in the casinos to play the “real” gambling games like craps and roulette.
Changes in technology and the perceptiveness of casino executives are to blame for the ubiquity of slot machine games now. It didn’t take a rocket scientist to realize how popular these games could be, and they’ve gradually taken over the casino floors.
Modern slot machines are a lot more compelling than slot machines from previous generations, too. They have bonus games, sound effects, and themes that would be unimaginable to Charles Fey, the San Francisco engineer who invented the first slot machine at the turn of the century.
You can’t get an edge at every video poker game, but there are games where you can—if you play with perfect strategy.
Here’s the catch:
Playing that well is hard to do.
Here’s another catch:
Even if you can play that well, finding machines with the right pay tables is hard, too.
And that’s not all. Even if you do find a game with a pay table which can create a theoretically profitable game for you, your edge is tiny. And the stakes for that game are probably small, too.
In other words, even though you might be able to get an edge at video poker, you’ll almost certainly never be able to make a living at it.
Full pay Deuces Wild has a payback percentage of 100.76%, which means you have a 0.76% edge over the casino. You find a casino which offers the game with the right pay table, and you’ve studied and practiced, so your confident that you can get close to this edge.
But the game is only available for a quarter. Your bet is 5 coins, so you’re wagering $1.25 per hand. At 600 hands per hour, you’re putting $750 per hour into action. If you expect to win 0.76% of that, you’re looking at an hourly wage of $5.70.
That’s not even minimum wage.
Your friends might be surprised to learn that there’s no substantive difference between how a land-based slot machine game and an online game work. They both use a random number generator which is programmed to have certain symbols come up on a reel a certain percentage of the time.
In fact, a lot of online casinos offer slot machine games with higher payback percentages than their land-based casino cousins do. They’re able to do this because the overhead involved with running an online casino is much lower.
Yeah, you’ll probably need some customer service reps and some management. You’ll also need some servers and someone to admin those servers.
But compare that with the maintenance costs involved in running a land-based casino. You have to pay people to clean up. You have to pay people to carry drinks around to the customers. You have to replace physical machinery. You have to rent or buy property at a location where you can get a lot of customers.
Online casinos don’t have those costs, so they’re able to offer a better gamble to their players. Some online casinos are so proud of their payback percentages that they list the figures on their games. You won’t see that in a casino in Las Vegas, ever.
Most people already know that blackjack offers the player the best odds in the casino. But video poker games offer odds that are comparable to and sometimes better than blackjack.
The house edge on most blackjack games is between 0.5% and 1%. If you find video poker games with the right pay tables, you can face a house edge of between 0.1% and 0.5%.
Video poker games are usually more appropriate for low rollers, too. Blackjack tends to be aimed at gamblers with a little more money to play with.
Here’s the catch:
Not ALL video poker games offer better odds than blackjack.
This game, when played with perfect strategy, has a payback percentage of 99.54%. The house edge is only 0.46%, which makes this game comparable to blackjack.
But you can also find Jacks or Better games which offer lower payouts on those hands, and the lower payoffs create considerable worse odds for the player.
In fact, 8/5 Jacks or Better games are more common and easier to find. They still offer better odds than slot machines, but they don’t compare favorably to blackjack or full pay Jacks or Better at all. The payback percentage on an 8/5 JoB game is 97.3%.
When you’re talking about percentages, it’s easy to underestimate the differences. After all, 2.7% is a tiny percentage. In Texas, we pay sales tax of 8% or higher on every purchase we make in a store.
But let’s look at the effect on your bankroll over time.
If you’re playing a quarter Jacks or Better game, you’re putting $750 per hour into action. (I did the math for that in one of my earlier examples, so I won’t repeat that calculation here.)
0.46% of $750 is $3.45. I might argue that an hour’s worth of gambling for less than $4 is a bargain.
But 2.7% of $750 is something else entirely. That’s an expected hourly loss of $20.25.
What a difference a pay table makes.
It might seem like I’m overly critical of video poker games with less than optimal pay tables. The truth is just the opposite. I’d much rather see you play an 8/5 Job game than a slot machine.
Most slot machines have a payback percentage of 95% or less.
Put the same amount of money into action on a slot machine game, and you’re looking at an hourly expected loss of $37.50 or more.
And with a slot machine, you don’t even have a way of figuring out how much the payback percentage is. The casino doesn’t provide you with enough information to do the calculation.
You can find bad bets throughout the casino.
Here are some examples:
Keep in mind that this is the amount you can expect to lose on every bet you make over a long enough period of time.
This means that if you consistently bet $100 on a tie in baccarat, over time you’ll lose $14 every time you place that bet.
The house edge for a slot machine game is almost always at least 5%. But in can range from between 5% and 25%, Slot machine games in bars and airports have notoriously low payback percentages, too.
The scary thing is that slot machines combine that high house edge with a staggering number of bets per hour.
I’ll talk more about that in the next bullet point.
Here’s how the human brain works:
You do something. You see a result. Your brain releases chemicals.
In the case of gambling, when you make a bet and win, your brain releases dopamine. This is a hormone that signals pleasure.
This dopamine is released by your brain even when you win less than your initial bet on a slot machine.
Suppose you make a $20 spin, and you see only $15 in winnings. Your net loss is $5.
On some level, your mind recognizes that you actually lost a little money on this bet.
But on another level, your brain still gets those pleasure signals.
To make this even more insidious, you’re making a staggering number of bets per hour on a slot machine game. Depending on the game’s “hit rate”, you might be triggering tiny releases of dopamine into your brain 300 times per hour or more.
Sure, people get addicted to playing cards and to betting on sports. But no game has ever been created that compares with slot machines when it comes to the potential for addiction.
Slot machines were often found in bars and taverns during their early days. At one point, paying cash prizes for slot machine results became illegal. But the games were profitable for the bar owners, so what were they to do?
They actually came up with a clever workaround. (This is common in the gambling industry.) In order to keep that revenue flowing, they started making machines which had candy and chewing gum as prizes.
The fruit symbols (and the bar symbol) corresponded to the flavor of the candy you might win. The bar symbols look like sticks of gum. These are still the most traditional and common symbols you’ll see on a slot machine game in a modern casino.
As far as I know, there are no modern casinos which offer candy as prizes. I have read about at least one casino where you might occasionally get your winnings in diamonds, though.
I wrote earlier in this post about progressive jackpots. The biggest slot machine progressive jackpot of all time was won in Las Vegas at the Excalibur in 2003. The gambler put $100 into the MegaBucks game there and hit the jackpot.
It’s been 13 years since then, and the jackpot has consistently hit before it got that large again.
The odds of winning a huge lottery jackpot are about 1 in 50 million.
On the other hand, the odds of winning at the MegaBucks slot machine game are about 1 in 25 million.
Here’s the thing, though — once the odds get that large, they might as well be 0.
Practically speaking, there’s no difference between having a 1 in 25 million chance of winning something compared to having a 1 in 50 million chance of winning something.
Here are some probabilities of some other events for comparison’s sake:
Most of us aren’t worried about dying in a terrorist attack or being struck by lightning. That’s because we know how unlikely that kind of event is.
Why we’re willing to even spend a dollar on something that’s at least twice as unlikely is a fascinating piece of human psychology.
The most popular slot machine game in any casino is Wheel of Fortune. It’s based on the popular game show created by Merv Griffin. IGT, the creator of the slot machine, wanted to find out why it was so popular. So they surveyed players in casinos throughout Las Vegas.
They were surprised at the consistency of players’ answers to the question of why they liked this particular game so much.
The overwhelming response was that the game reminded them of watching Wheel of Fortune with their grandmother.
It’s hard to imagine that you could, at least not intentionally. This hasn’t stopped casinos and gambling game manufacturers from trying.
Slots based on game shows are everywhere.
You’ll find plenty of nonsense written about getting an edge over slots. Some of the more entertaining examples of this balderdash claim some kind of expertise because of the author’s status as a “slot machine technician”.
Here’s a piece of slot machine advice that’s worth a lot of money:
I went into a lot of detail earlier about how the random number generator works. The house edge is impregnable. You can’t beat these games with a strategy.
The best you can do is hope to get lucky once in a while.
Here’s an example of flawed thinking as it relates to slot machines:
I know a guy who’s convinced that because the random number generators aren’t truly random, you can predict when the next payout is going to be by timing the cycles.
What he doesn’t seem to understand is that the random number generator is cycling through those thousands of results every second. It keeps cycling numbers even when you’re not playing.
Slot machine games never become “due”. That’s just not how the math works.
Here’s another example of a foolhardy strategy for slot machines:
The zig-zag strategy claims that if you wander through a casino looking for games where the symbols are lined up in a combination that’s close to a win, you can get an edge by playing those games.
The theory is that such games are about to pay out, and that’s why the symbols are showing up on the screen (even though they’re not lined up in a winning combination).
The flaw behind this thinking is simple. The symbols bear no relation to the actual generation of the outcome. It’s all controlled by the random number generator.
Every spin of the reels is an independent event. The results of the previous spins have no effect on the outcome of the next spin.
There are legitimate reasons to not join the players’ club at a casino. For one thing, you might not want to receive advertising in the mail. I can respect that.
You also might not be crazy about the casino having that much access to your playing tendencies. Let’s face it. The reason the casinos offer the perks to their player club members is because the information they gather through doing so is worth more to them than the cost of the perks they’re paying out.
But one reason for refusing to play with the card inserted into the machine is the fear that it will somehow make it less likely for you to win.
That’s just now how these machines work. The random number generator runs completely independently of the software that tracks your play for the players club.
Also, the casinos have carefully calculated the value of the perks they’re giving out. They’ve already taken them into account when they’ve set the payback percentage for the machines.
They have no incentive to make you lose more often when you’re playing with the slots players’ card inserted.
Gambling machines are fascinating. They’re a relatively recent phenomenon in the world of gambling, both online and off. But most people know little about how they actually work.
Having read this post, you’re probably a little more educated than the average gambler. No one would blame you for using some of these facts about gambling machines to surprise your friends.