Casino Industry Makes a Bid for Millennial Attention – Vegas Seven

In this week’s Green Felt Journal, I take a look at the new machines at this year’s just-concluded Global Gaming Expo:

Some subtext of the 2016 show (if you haven’t been keeping up on recent gaming developments) is that the streak of expansion that drove the industry from the late 1980s is largely over; there are few jurisdictions without gambling that look to adopt it anytime soon. While there is some growth in national gaming win, many states have seen flat or even declining results

Read more: Casino Industry Makes a Bid for Millennial Attention – Vegas Seven

Casino gambling is at a transition point, and it is fascinating to watch it play out. The industry changed a great deal as it grew and matured. But is it still nimble enough to pivot and deal with the challenges of maturity and changing customer preferences? That’s the big, big question.

Author David G. Schwartz discusses Chapter 8, “Wise Guys…

Author David G. Schwartz discusses Chapter 8, “Wise Guys & One-Armed Bandits," of Roll the Bones: The History of Gambling (Casino Edition). 

This chapter covers the rise of Saratoga Springs as a racing and gambling center, the invention of slot machines, and the development of gambling syndicates throughout the nation. These groups dominated illegal gambling in the cities they controlled and were a precursor of the larger organized crime groups that took over during Prohibition.

Finally, it discusses the growth of illegal casinos throughout the United States, legal casinos in Cuba and Tijuana, and the Kefauver Committee, whose reforming zeal closed down illegal operations in many states.

If you don’t see the video, go here:

For more information about the book, including where to buy it, visit

From the book: The first poker machine

Lots of people have heard of San Francisco mechanic Charles Fey’s Liberty Bell, which was the first auto-pay reel slot to gain popularity. He unveiled it in 1899.

Fewer people know that the first coin-operated slot machine, a device that flipped through five decks of cards, with winners paid off in kind (not in cash) for “winning” hands.

It was an early, analog video poker machine. And it was invented in 1891, 8 years before Fey’s Liberty Bell, in Brooklyn, New York.

That’s just one of the many fascinating things you’ll read about in Roll the Bones: The History of Gambling.

G2E convergence in the LVBP

I wrote up some of my thoughts on the new tech stuff at G2E for the Las Vegas Business Press. Take a look:

The official theme of the Global Gaming Expo, held Oct. 3-6 at the Sands Expo and Convention Center, was “innovation,”; but it could have been, more specifically, “convergence.”

As always, there were plenty of new products on display on the exhibit floor. International Game Technology alone demonstrated 400 new games for potential casino clients (and the occasional industry rival), and the other large manufacturers boasted similarly large offerings. But the real story was how the casino industry is converging, on several axes, with popular culture the latest technology, and, in the end, itself.

via Las Vegas Business Press :: David G. Schwartz : Annual gaming expo all about convergence.

I’m mulling a piece right now that will consider the consequences of all that new tech. How will casinos use it, and how should they use it?

Behind the reels in Vegas Seven

There’s a Green Felt Journal in today’s Vegas Seven, focusing on what many slot players don’t see:

To most players, slot machines are only screen deep. The spinning reels are what’s important. But there’s a lot going on behind the scenes that makes the action possible. Without back-end systems to track play and account for payouts, those slot machines would be very expensive ornaments. Through fiber-optic cable and data drops, a series of networks connects slot machines to each other, to master systems, and even to software that lets managers analyze the casino in real time. Though invisible to the players, these systems are absolutely essential.

via Behind the reels | Vegas Seven.

I actually could write a book about all of the stuff that goes on at Bally’s–I toured their facility last week and was very impressed by both the sophistication of the technology and the scale of what they’re doing.

60 Minutes hits slots

The 60 Minutes hit piece on slot machines finally came out. I’ve been hearing about this for a while, and it was actually about what I expected:

We Americans spend more money on slots than on movies, baseball and theme parks combined.

But with the modern slot machines, there is a greater potential for a dangerous side effect: gambling addiction, as more people are addicted to slots than any other form of gambling.

via Slot Machines: The Big Gamble – 60 Minutes – CBS News.

The most disturbing thing about the piece, as journalism, is that it takes on faith the claim that “modern” slot machines are more addictive than older ones, but tries to run Dr. Shaffer through the wringer when he says that slot machines aren’t inherently addictive, and that its more a function of the personality than the machine.

And of course there’s the dig that “the gambling industry loves to quote” him, which might be because he’s a recognized expert on addictions. His is the Director of the Harvard Medical School’s Division on them, who I’m guessing has worked in greater breadth and depth with addictions and addicts than the anthropologist who seems to be the hero of the story.

Then you’ve got the selective use of statistics and cherry-picked personal stories that, while heart-breaking, don’t reflect the majority of slot players.

It’s just bad journalism.

As I’ve suggested before, the casino industry could be more proactive about getting better information into the public arena about slot machines. It has a goldmine of data about slot play: why not allow outside researchers to access a database that’s been stripped of all personally-identifying information? That would let them determine how long the average player plays for, and what the patterns of play over time are. The researchers could prove or disprove the hypothesis that “modern” machines cause more addictions quite easily.

There are some logistical challenges there, but it’s nothing that couldn’t be overcome. The more data that’s out in the public domain, the better idea everyone will have of the real nature and extent of problem gambling, and might lead to those who have problems getting diagnosed earlier.

Surprising AC slots in LVBP

Just to show you the kind of week I’m having, it’s Thursday and I’m just now getting around to posting a link to my bi-weekly LVBP column, which I should have done on Monday or Tuesday. I just got the beta version of the Macau gaming summary up, and I’ve jumped into a study of Nevada casino employment that’s getting more and more interesting. I’m tracking trends in payroll and productivity from 1990 to 2009, and everything I find opens up new questions.

Which is actually similar to what happened with an Atlantic City slot study that I did a few weeks ago. With the dramatic decline in the number of slots, win per slot has actually remained fairly robust. Here’s my column explaining it in the LVBP:

Atlantic City has had a rough few years. A partial smoking ban has hurt business and the debut of several competitors, particularly Pennsylvania slot machines, has reduced the city’s already-modest horizons. With the recent introduction of table games, it’;s a good time to look at how Atlantic City’s core business, slot machines, has fared over the years.

via Las Vegas Business Press :: David G. Schwartz : Slots keep Atlantic City’s hopes for future afloat.

Looking at this data got me thinking that the future might be a smaller industry, which is bad news for Atlantic City, but not such bad news for operators who can run a good casino.

There’s some goofy stuff going on with the formatting (a paragraph is repeated at the end), but hopefully that doesn’t detract too much from the column’s main point.

85% Buckeye slot payout

The rules for Ohio casinos are being codified. From the Columbus Dispatch:

Would-be Ohio gamblers can rest easy: The slot machines at the state’s four casinos will pay back, on average, at least 85 percent of the money people put into them.

Gamblers at new casinos in Columbus, Cleveland, Cincinnati and Toledo will be able to drink until 2:30 a.m., but none of the booze will be free. They won’t be able to smoke.

The state’s gambling industry will be overseen by a new commission whose seven members will be appointed by the governor to four-year terms and make $60,000 a year for part-time work.

Those are a few common provisions in bills introduced Monday and yesterday in the state Senate and House on how to govern casinos scheduled to open in 2012 and 2013. The governor must sign a final bill before the rules go into effect.

Casino slots to pay out 85% | The Columbus Dispatch.

The reporter later mentions that actual payouts are usually much higher than the state-mandated minimums. A few weeks ago I presented a paper at the Association of Private Enterprise Education about state-mandated minimum slot payouts, regulation, and actual payout percentages. The big thing I learned is that I get tired of typing “state-mandated minimum payout” pretty quickly. I was able to establish that there’s no real correlation between the SMMP and the actual payout percentage–a large base of repeat customers and competition seem to be the driving factors.

I’m revising that paper for publication right now, so hopefully it comes out somewhere soon.

NV February numbers good, not great

Las Vegas Strip casinos had a strong February. From the LVRJ:

When combining the first two months of 2010, gaming revenues are up 5 percent statewide and 13.4 percent on the Strip.

“February turned out to be the perfect storm,” Control Board Tax and License Division Chief Frank Streshley said. “It was a record for any Chinese New Year. There was a high volume of wagering on baccarat and the hold percentage was well above normal amounts.”

via Gaming revenues jump 13.9 percent – Business –

Let’s put the month into perspective. Here are the last 4 Februaries’ baccarat numbers for the Strip:

month——–# of games———-win———–% change*———hold %———-handle
Feb 2010_____290_____$205,035,000____255.28%____17.04%____$1,203,257,042
Feb 2009_____214______$57,710,000____-50.57%____11.12%_____$518,974,820
Feb 2008_____198_____$116,637,000_____-0.02%____11.18%____$1,043,264,758
Feb 2007_____171_____$116,384,000_____46.88%____11.36%____$1,024,507,042
* From previous February
Source: Nevada Gaming Revenue Reports for Feb 2010, Feb 2009, Feb 2008, Feb 2007

The increase in baccarat revenue is part of the larger trend that’s charted in the Evolution of Nevada Baccarat, 1992‐2009 report (pdf).

This February, baccarat accounted for 21.76% of all Nevada gaming revenues–an astronomically high number, when you consider that in 2005, baccarat accounted for only 5.71% of the states total gaming revenue. The 21.76% total is likely the highest in Nevada history.

This is the real story here. It’s fantastic that the casinos had a good month, but we should be mindful that there are hazards inherent in a bacc-heavy approach. As I said three weeks ago in Vegas Seven:

The increasing importance of baccarat marks a step back from the way the industry had been moving since the 1980s, relying heavily on a small pool of players instead of generating profits on volume. This may be a concern, since the universe of people who can bet $10,000 and up a hand is much smaller than those who play quarter slots. With competition intense for this small group, casinos may pay too much in comps and incentives to players.

Second, with fewer players betting more money per hand, casinos will face greater volatility. Some months, they’ll have record hauls; in others, the players might come out ahead. This can impact both the financial health of individual companies and the state’s tax collections.

In times like these, casinos are happy to get revenue wherever they can. But it’s worth considering that the high-end basket is a perilous place to store gaming revenue eggs.

This month’s results are a textbook case of volatility. If the casinos had only held 11.20%, closer to the usual bacc hold, they would have won $134,764,788–about $70 million less than they actually did. That would have dropped the total state gaming win to about $876 million–still better than the previous year’s total of about $830 million, but not the stuff of a turnaround.

To me the most interesting thing about the slot numbers is that the average hold fell from 6.13% to 5.84%, with just about every denomination reporting a decline in hold. A sign that machines are getting looser? Perhaps. But let’s look at the February slot hold numbers in perspective (average, statewide):

2010: 5.84%
2009: 6.13%
2008: 5.76%
2007: 5.79%

For further reference, check out the tables and data sets in my 1992-2009 slot hold study or the 2007-2009 short report.

As far as bacc play helping other games, I don’t see it. Slots won about $40 million less in Feb 2010 than in Feb 2009, blackjack won less, craps won slightly more, and roulette tables won about $18 million more–a big proportional increase from the previous February, but well below the 2008 and 2007 totals. Make no mistake–it was bacc play, not a broad-based boost in gambling–that is responsible for the gains.

In short, any gain is positive, but we’re not out of the woods yet. I agree with Frank Streshley that this isn’t a sign of the coming of another golden age of prosperity.

Family feud over jackpot

Often, gamblers decide to pool their resources and share both the costs and the gains from their gambling. Lottery clubs are the best example of this. Sometimes, though, it ends badly, as in this Connecticut case. From the Boston Globe:

For years, Theresa Sokaitis and Rose Bakaysa were the closest of siblings, whiling away long hours over card tables and slot machines, and sharing countless lottery tickets. They always played the same numbers. If one won, they both did. All pots were split 50-50.

Now, in a bitter family feud that seems ripped from a Hollywood script, the elderly widows are locked in a protracted legal battle over a $500,000 lottery jackpot, with Sokaitis saying she is rightfully owed a share of the winnings.Yesterday, the two faced off in New Britain Superior Court, with testimony focusing on whether a notarized, decade-old compact between the sisters to share any gambling proceeds was in effect when their longtime lottery numbers came in.

In 2005, Bakaysa, an 87-year-old from Plainville, Conn., won the Powerball prize with her brother, Joseph F. Troy Sr. Sokaitis, an 84-year-old from Middletown, quickly sued for breach of contract, saying her sister had violated their agreement to split all gambling proceeds equally.The contract, dated April 12, 1995, stated, “We are partners in any winning we shall receive. Such as slot machines, cards, at Foxwoods Casino, and tickets, etc..’’

The sisters, who had gambled together for years — going to Foxwoods as often as three times a week and buying a profusion of lottery tickets — drew up the deal after winning $165,000 at a casino. The printed, single-page document included their names, Social Security numbers, and signatures, and was notarized by an accountant.

But about a year before the winning lottery draw, the sisters had a fight over a loan of some $250 that one had made to the other. The fight became a bitter split. And Bakaysa’s lawyer, William Sweeney of Connecticut, contends the feuding sisters nullified their agreement to split winnings.

via Sisters feud over $500k lottery jackpot – The Boston Globe.

While gambling and losing is bad, gambling and winning can create its own problems.