Slot machines are programmed for (their) profit

By Steve Siegel

Published:June 10, 2012

All but the most brazenly optimistic gamblers entertain the possibility that they may lose money at a casino. Therefore, gamblers usually approach the activity with a certain degree of optimism that “today might be my lucky day.” That attitude may be justified if you are engaging in games where skill is a factor — say black jack — but may be based upon false assumptions if you are playing a legally rigged game such as slots.

Slots machines are legally rigged in that the operator precisely sets the pay-out for the machines, guaranteeing that they keep a predictable portion of each dollar that a gambler wages. Looked at another way, the operators can guarantee that collectively their customers will lose a certain amount of money and that the casino will make a desired profit.

To illustrate this point, we need look no further than the more than 7,500 slot machines in the three casinos operated in Western New York by the Seneca Gaming Commission, and the New York State Lottery run casino in Hamburg.

Latest yearly data from both entities shows that approximately $7.16 billion of gamblers’ money passed through these slot machines. Of this amount, the two entities collectively kept $579.6 million. This means that the machines as a group were programmed to keep approximately 8 percent of the gamblers money played over a period of time.

The gaming industry has one of the simplest and most effective business plans imaginable. To illustrate utilizing the actual data above, if the commission and the lottery had forecasted that $7.16 billion would have been played at their slots during the yearly periods in question (which happened) and then proceeded to program the machines to collectively keep 8 percent (which they did), this guaranteed that their customers would collectively lose approximately $580 million (which happened) before any gambler even walked in the door for that fiscal year.

Under the above scenario, for every additional penny that the casinos might program the machines to keep, gambler losses for any given year would be guaranteed to go up by approximately $72 million. The commission has no legal requirement to report the odds of losing because it is no longer required to file a Securities and Exchange Commission report. The state lottery website has the information available, but only as part of complex reports.

Perhaps the Seneca Gaming Commission as well as the New York State Lottery, as a public service, should post a warning at the entrance of each casino and on each slot machine: “Warning, habitual long-term use of the slot machines will result in losses of approximately 8 percent of all money wagered.”

Don’t bet on it.

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