A game called hope

There are certain things in life that appear to be contradictory but actually make sense.  Fans know, for example, that professional wrestling is “fake,” i.e., the results of the match are booked in advance, yet they still watch, which is a tribute to the athleticism and story-telling of the “sports entertainers.”  In some ways, this “fake” sport provides more real entertainment that actual athletic contests, which can sometimes be downright unexciting.  So it makes sense, in fact, that people looking to be entertained might choose an exciting “fake” over a boring “genuine” athletic contest.
 
I’ve written before on the parallels between professional wrestling and casino gaming; in both, the results are predetermined (statistically, in gaming’s case, but not in any individual instance), but both have become wildly popular after shucking any pretense at legitimate competition for “entertainment.” 
 
Here’s a news story from the Philadelphia Inquirer that might bolster my arguments about casino entertainment.  It asks the fundamental question of why slots players continue to fill the machines when they know, statistically, they are destined to lose over the long haul:

At the Borgata, slots chief Paul Tjoumakaris knows what he wants in a slot machine. Great math. Great hit frequency.

“It’s very important that the machine create a system where the customer doesn’t dry out quickly,” he says.

But the same math that doles out a bunch of hits also ensures that the customer will dry out eventually. Or at least come out behind. That’s the point. “Eventually the bankroll is going to deplete, but at least they had fun,” Tjoumakaris says.

In fact, slots players exhibit some of the most persistent positive thinking despite the near certainty that they will lose, say psychologists who study gambling behavior.

Tjoumakaris may chalk this up to entertainment – to machines that pay in little increments as they take your money, to machines with fun sounds, good graphics, complex bonus rounds, and video narratives and characters who talk and tease you.
But psychologists consider a slots player’s propensity for positive thinking, ordinarily a useful response to adversity, to be “maladaptive” – the kind of thing that leads to excessive gambling. Or to healthy slots revenue for the casino, depending on whom you’re asking.
 
New Jersey requires machines, over time, to return at least 83 percent of all wagers back to gamblers. (Pennsylvania’s new law requires 85 percent.) Payout percentages are reported monthly.

In Atlantic City, the average is about 92 percent, though the rate varies among machines, with higher-denomination ones returning a higher percentage. The Borgata, which claims the “loosest” slots in town, holds an average of 7.8 percent of all wagers.

That 92 percent doesn’t sound too bad, but the returns get smaller and smaller as your bankroll depletes.

Psychologists say slot machines are the crack cocaine of gambling. They promote a way of thinking known as the gambler’s fallacy, says Nancy Petry, a professor of psychiatry at the University of Connecticut Health Center.

“Cognitive illusions – there’s a whole series of them,” Petry says. “You think that past wins or losses are predictive of future wins or losses – ‘I’m bound to win next time’ – when every pull of the slot machine has an equal probability of payout. Everybody gets tricked into those illusions.”

Griffiths and colleague Jonathan Parke have studied “chasing” behavior, and they have written: “Gamblers report that they are reluctant to quit until they win. In essence, they believe that each loss brings them one step closer to winning. To some extent, this is necessarily true. If the gambler persists, they will eventually win. However, these individuals appear to ignore how these transactions balance out in the long run.”

New-generation slot machines, with video narratives, bonus rounds, and even trivia questions, give gamblers the notion that they are more involved in the outcome.

They get caught up with the themes, the humor, the choices, and the pop-culture references.

Psychologists say all the themes and interaction – some machines have animated characters that talk to, even taunt, the gamblers – can have powerful effects on some people.
 
The psychology of slots: Hooking players on hope

It is ironic, indeed, that something like perserverance, which in theory benefits people in a capitalist system, could actually hurt those having problems with slots. 
 
You’ve got to wonder if slots players are really as unsophisticated as these stories make them out to be.  For example, one of the few players quoted in this piece admits to being outsmarted by a “Cops and Donuts” machine:

Regulations prohibit casino operators from blatant “near-miss” manipulations, such as having the first two reels of a standard machine match more often to increase suspense. But newer machines have several ways of winning, including multiple pay lines and bonus rounds, so players feel as though they are always “almost winning.” And some bonus rounds present players with options, then show what a different choice would have yielded.
“They tease you,” says Joe Evers, 74, playing the “Cops and Donuts” game. That leads to regret, psychologists say, which can be most efficiently eliminated by playing another round.

I’ve often wondered why people play “Cops and Donuts.”  Now I know–because deep down inside, they want to be teased. 
 

 

Gambling and sports

I read an interesting piece in the Pittsburgh Post-Gazette about the links between gambling and sports.  Here’s the opening, but I really urge you to read the whole thing:

The relationship between sports and gambling, once at arm’s length and now almost hand in hand, is embodied by the brothers Maloof.
The family owns both the Palms Casino in Las Vegas and, since 1998, the Sacramento Kings. The National Basketball Association approved the family’s purchase of the team after they agreed to quit taking bets on NBA games in their casino’s legal sports-betting operation.
“As long as we don’t have the NBA in our sports book, everything is fine,” George Maloof said. “And we haven’t had one problem.
“They are two different businesses. We just have an interest in both. We like the gaming business, and we like the sports business. It’s a unique combination.
“I wouldn’t be surprised if you saw more sports owners get into gaming.”
The next sports team to do that could be the Penguins, who hope to use a slot machine parlor to finance construction of a new arena.
In addition to the Penguins’ plans, Steelers running back Jerome Bettis stirred a National Football League inquiry when he announced his limited partnership with Charles Betters’ proposal to build a horse track, casino, hotel and retail complex in Hays.
Both plans resulted from the slots law enacted in Pennsylvania two weeks ago and bring closer to the surface the often rocky relationship between sports and gambling.
Sometimes, the relationship is direct and ugly, as in the infamous cases of the Black Sox scandal (players fixing 1919 World Series games) and Pete Rose (betting on baseball and other sports) and numerous point-shaving incidents in college basketball over the past half-century.
In recent years, though, peaceful coexistence has been the rule. ITT Corp. set the precedent by becoming the first casino-owning corporation to buy major professional sports franchises, owning the New York Knicks basketball and New York Rangers hockey teams and their home, Madison Square Garden.
 
Pro sports and gambling interests get cozier

Actually, I think that Del Webb was the first corporation to own both casinos and a sports team.  It owned the Sahara and Mint in Las Vegas and also owned the New York Yankees, though I’m not 100% that the ownerships overlapped.  This was when the 10% bookmakers tax pretty much put casinos out of the sportsbetting industry, so there was no conflict in that area.
 
It’s interesting to see newspapers in areas that hadn’t previously been hotbeds of gambling–like Pennsylvania and California–suddenly begin running pieces on the subject.  I think that the result has been some great stories.
 
 

Some questions worth asking

Why is it illegal to pump your own gas in New Jersey?
 
What is the name of the little man with the suit and top hat from the game Monopoly?
 
Who invented the deck of playing cards and when?
 
In poker, what beats what?
 
When playing cards, why are a pair of aces and a pair of eights sometimes called a “Dead Man’s Hand”?
 
What exactly is numbers running?
 
Why is a rabbit’s foot considered lucky?
 
Just some food for thought…and maybe material for the next quiz.  At the very least, you have some nice conversation starters here.

Misguided loyalty?

As I reported earlier, the Venetian was rather quietly fined a while back for several violations, including the rigging of a contest–a game of chance.  I would think this would tend to discredit the legal casino industry in Nevada and would provoke a few license revocations, but it actually only garnered a million-dollar fine. 
 
Well, one employee responsible has been lectured by the Gaming Control Board.  From the LV Sun:

Roger Chuen Po Mok, formerly the senior vice president of Asian marketing for The Venetian, acknowledged that what he did was wrong in an emotional appearance before the state Gaming Control Board. Flanked by attorney Bill Curran, Mok — identified publicly for his role in the incident for the first time — said he schemed to rig drawings for prizes out of loyalty to his employer and his desire to please a good customer.
Mok and three others were fired after the scheme was uncovered in 2002. Earlier this year, The Venetian was ordered to pay a $1 million fine after a 12-count complaint against the resort was settled.
“Some poor choices were made in being loyal to my employer,” Mok read from a prepared statement.
Regulators never named the employees who were responsible for the rigging of the drawings for a Mercedes-Benz sports utility vehicle and two gambling chips, valued at $20,000 and $10,000, during a 2002 Chinese New Year celebration.
Mok said he rigged the drawing because a high-roller he was hosting lost $5 million gambling and the employee “didn’t want to see him go home empty-handed.”

But that’s not all.  Mok was also rapped for trying to cover up:

“What you did not only discredited you, but it discredited the state of Nevada,” said board Chairman Dennis Neilander.
Board member Bobby Siller said while the scheme to rig the drawing was a major judgment error, Mok worsened it by lying to state gaming investigators summoned by The Venetian. Siller compared the additional damage inflicted by attempting to cover up the scheme with the trouble former President Richard Nixon brought upon himself during the Watergate burglary investigation.
“You are now living with the consequences of your actions,” Siller said. “There were consequences to your employer, which had to pay a severe fine, and there were consequences to your co-workers, who were fired along with you.”

 
Venetian contest rigger lectured by regulatorsLet me put this into personal perspective.  When I worked in a casino doing security, I was in mortal dread of having my license revoked, which could have happened for virutally anything, it seemed.  To this day, if I am walking in a casino and I see a quarter on the ground, I will not pick it up, because if I had been seen doing so as an employee I would have been immediately fired and had my license yanked.
 
Gaming violations are very serious, because they threaten the integrity of the business.  If the games of chance aren’t really run by chance, why bother playing? 
 
I didn’t read anywhere in the article that investigators had conclusively proved that Mok was alone planning and executing the contest-rigging scheme.  The phrase that bothers me is: “he schemed to rig drawings for prizes out of loyalty to his employer.”  Does that mean that someone higher up asked him to do so?
 
We may never know the complete story, but this telling of it seems a bit…incomplete.

Merger update

Here’s a great capsule summary of the Harrah’s/Caesars merger proposal, and a breakdown of Harrah’s Caesars, MGM MIRAGE, and Mandalay Resort group, from Yahoo Finance:

Casino operator Harrah’s Entertainment is close to buying bigger rival Caesars Entertainment in a $10 billion deal that would form the world’s largest casino empire with $8.8 billion in annual revenue and as many as 54 casinos.

The merger would be the gambling industry’s second major takeover in a month – MGM Mirage last month agreed to buy Mandalay Resort Group for $4.8 billion plus debt.

A list of properties owned by and select financial information on all four companies follows:

PROPERTIES AND BRANDS:

CAESARS ENTERTAINMENT INC.: Operates 28 properties in five countries and 26,000 hotel rooms. Brands include Caesars, Bally’s, Paris, Hilton, Flamingo and Grand Casinos. Properties include Bally’s, Caesar’s Palace, Flamingo and Paris Las Vegas in Las Vegas.

Atlantic City properties include Atlantic City Hilton, Bally’s Atlantic City and Caesar’s Atlantic City. Also operates properties in New Orleans, Mississippi, Indiana.

International locations include South Africa, Australia, Uruguay and Canada.

HARRAH’S ENTERTAINNMENT INC.: Operates 26 casinos in 13 states. Brands include Harrah’s, Harveys, Rio and Showboat. Properties include Harrah’s Lake Tahoe, Harveys Lake Tahoe, Harrah’s Reno, Harrah’s Las Vegas, Rio All-Suite Hotel & Casino and Harrah’s Laughlin in Nevada.

Also operates properties in California, Iowa, Kansas, Louisiana, Missouri, Illinois, Mississippi, North Carolina and New Jersey.

MANDALAY RESORT GROUP: Owns and operates Mandalay Bay, Luxor, Excalibur, Circus Circus and Slots-A-Fun in Las Vegas. Other Nevada properties include Circus Circus in Reno, Colorado Belle and Edgewater in Laughlin, Gold Strike and Nevada Landing in Jean and Railroad Pass in Henderson.

— Owns and operates Gold Strike, a casino in Tunica County, Mississippi.

— Owns 50 percent stakes in Silver Legacy in Reno, and Grand Victoria, a riverboat in Elgin, Illinois, and Monte Carlo in Las Vegas. Monte Carlo is jointly owned with MGM Mirage.

— Owns 53.5 percent stake in MotorCity casino in Detroit.

MGM MIRAGE: Owns and operates 12 casinos in Nevada, Mississippi, Michigan and Australia, and has stakes in two other casino resorts in Nevada and New Jersey.

— Owns the Bellagio, MGM Grand Las Vegas, Mirage, Treasure Island, New York-New York and Boardwalk casinos as well as 50 percent of the Monte Carlo on the Las Vegas Strip.

— Owns three golf courses as well as Whiskey Pete’s, Buffalo Bill’s and Primm Valley Resort in Nevada, Beau Rivage in Mississippi, and MGM Grand Detroit casinos.

— Owns a 50 percent stake in the Borgata casino in Atlantic City, New Jersey and a 25 percent stake in Triangle Casino, a local casino in Bristol, United Kingdom.

EMPLOYEES:

CAESARS ENTERTAINMENT has 52,000 employees.

HARRAHS ENTERTAINMENT has nearly 48,000 employees.

MANDALAY RESORT and its consolidated subsidiaries together employed about 28,000 people as of January 31.

MGM MIRAGE has more than 45,000 employees.

REVENUES, NET INCOME:

CAESARS ENTERTAINMENT: For the year ended Dec. 31, 2003, it reported revenue of $4.46 billion and net income of $46 million.

HARRAH’S ENTERTAINMENT: For the year ended Dec. 31, 2003, it reported revenue of $4.32 billion and net income of $292.6 million.

MANDALAY RESORT: For the year ended Jan. 31, it reported revenue of $2.49 billion and net income of $149.8 million.

MGM MIRAGE: For the year ending Dec. 31, 2003, it reported net revenue of $3.91 billion and net income of $243.7 million.

FACTBOX-Harrah’s, Caesars may merge to form No. 1

There are the numbers. Both boards have approved the merger.

This deal was not unforeseen, and I think that the only place where there will be real issues will be in New Jersey, and Harrah’s can probably avoid undue concentration there by selling the Hilton. After all, Donald Trump briefly owned four casinos, so there is a precedent for it.

For more information, see the New York Times or Bloomberg.com.

Indian gaming revenue

The National Indian Gaming Commission has released its figures for 2003 casino revenues:

National Indian Gaming Commission Chairman Phil Hogen announced today that national 2003 gross gaming revenues for Indian gaming facilities topped $16.7 billion, an increase of $2 billion or 13.7 percent over 2002 gross gaming revenues.

“The Indian gaming industry has grown significantly and steadily throughout the past decade,” said Chairman Hogen. “This growth has allowed tribes to create jobs, develop economically, build infrastructure within their communities and provide services for tribal members.”

The $16.7 billion figure is based on audited financial statements received by the National Indian Gaming Commission (NIGC) for gaming operations with fiscal years ending in 2003. The figure is based on statements received by June 30, 2004.

Additionally, the NIGC has broken-down the $16.7 billion by the agency’s six regions.
Region III, which includes California, accounted for approximately 50 percent of the total increase in revenues. Region III revenues increased by almost 28 percent for the year compared to 9 percent for the other regions.

NIGC Announces Indian Gaming Revenue for 2003

If you’re interested in more Indian gaming news, check pechanga.net, the top online source for Indian gaming news and information.

This is a big deal for the commerical casino industry too, because even though California revenues have exploded, Nevada gaming has not suffered too much. Certain markets have been harder hit than others, but on the whole the state’s gaming revenues are growing. I imagine that destination-type markets throughout the country would find the same pattern.

Bill and Jay’s Excellent Adventure

Metaphorically, of course. Since both Bill Harrah and Jay Sarno are deceased, I’m talking about the companies that claim them as founders: Harrah’s Entertainment and Caesars Entertainment. According to the Wall Street Journal, quoted here by Reuters, Bill’s company is going to acquire Jay’s, the second major gaming merger in a month:

Harrah’s Entertainment Inc.is near a deal to buy rival Caesars Entertainment Inc, in what would be the gambling industry’s second major takeover in a month, The Wall Street Journal reported on Wednesday.
The terms of the proposed transaction were not immediately clear, the newspaper said. If consummated, the deal would make Harrah’s the biggest gambling company in the world with $8.8 billion in revenue and as many as 54 casinos, according to the Journal.

Based on Caesars’ closing stock price of $13.92 on Tuesday, the company has a market value of about $4.3 billion, not counting about $4.5 billion in debt, the Journal said.

Last month, MGM Mirage agreed to buy Mandalay Resort Group for $4.8 billion plus debt.

Harrah’s and Caesars, which owns Caesars Palace, Paris Las Vegas, Bally’s and other casinos, began talking after the MGM Mirage-Mandalay deal was reached, the Journal said, citing unnamed people familiar with the situation.

Buying Caesars Entertainment would give Harrah’s a stronger foothold on the Las Vegas strip, where the Harrah’s casino is not one of the top attractions, the Journal reported.

The Harrah’s acquisition plan, like MGM Mirage’s, was likely to attract scrutiny from antitrust regulators at the U.S. Federal Trade Commission or Justice Department, as well as at several states, the Journal said.

Harrah’s Said Near Deal to Buy Caesars

Of course, this is less about Bill Harrah and Jay Sarno than it is about Gary Loveman and Wally Barr, respective leaders of HET and CZR.

Is this deal a surprise? Not really. The media reported on rumors of it a month ago, as you can see right here.

What does this deal mean? For the Las Vegas Strip (unless HET sells off some properties), the company would own:

Harrah’s Las Vegas
Rio
Caesars Palace
Flamingo
O’Shea’s
Bally’s
Paris
The Horseshoe brand, which HET has wanted to put on a new property

This is a lot of casinos; you would now have the entire Strip south of the Venetian controlled by two companies, with two exceptions: the Tropicana and Aladdin/Planet Hollywood. And, of course, the Hawaiian Marketplace.

The comapnies also overlap in most of the other major American gaming markets: Reno, Tahoe, Tunica, the Gulf Coast, New Orleans, and of course Atlantic City.

In AC, HET would own between 5 and 7 casinos, depending on how you consider Bally’s Atlantic City:

Harrah’s Atlantic City
Showboat
Bally’s Atlantic City
–Claridge
–Wild Wild West
Caesars Atlantic City
Atlantic City Hilton

When you consider that the city has 12 or 14 casinos, this means about as big a concentration as MGM MIRAGE will have on the Strip, but with less room for growth.

Look for more on this news story. Like I said with the MGM/Mandalay merger, even if this one doesn’t go through right now, look for future consolidation to be the trend.

UPDATE: A new article from Reuters tagged the deal at close to $10 billion:

UPDATE 1-Harrah’s near $10 bln deal to buy Caesars

Breathe easy, Anaheim

Particularly if you own a pinball machine. From the LA Times:

Anaheim officials are doing a little housekeeping and whittling down the city’s bulky municipal code. Tonight, the City Council is scheduled to consider repealing or modifying several ordinances that officials call outdated, redundant or just plain silly.

The unlucky task of poring through decades of laws and thousands of ordinances fell to City Atty. Jack White, who said he had collected arcane gems that may come in handy only at cocktail parties or if he became a “Jeopardy!” contestant.

He knows, for example, that in the 1940s and ’50s, pinball was considered gambling.

The change in the law is welcome news for Terry McIntire, an owner of Orange County Game Distributors Inc., who said that if authorities cited him for all his pinball machines, “we would be old and gray by the time we got out” of jail.

In most cases, authorities realized the absurdities of these ordinances and stopped enforcing them years ago.

Pinball Desperados in Anaheim Will Be Allowed to Play at Full Tilt

During my research for Uneasy Convictions, I learned that many slot manufacturers evaded the Johnson Act, the 1950 law that halted the interstate shipment of slots, by switching to “amusement” devices whose “free games” could be redeemed for cash. In 1961, when RFK pushed for new anti-gambling laws (including the Wire Act), he also spoke out against pinball machines. So this was actually a pretty common theme of anti-gamblers in the 1950s and 1960s.

Even now, the line between “amusement” and gambling is thinner than we think. Is there that much difference between a slot machine and redemption games? Some would argue no.

Electronic scratchers

Scratch-off cards have become a huge money-maker for lotteries. It’s only natural that they will continue to evolve. From KCRG-TV9 in Cedar Rapids, Iowa:

This fall Iowa will become the first state to test an electronic version of a scratch-off lottery game.

A market trial for “Quarter Play” will start in October.

The game is a battery-powered card costing 20 dollars that will offer 80 plays of instant-type games.

Gambling critics say it’s just another expansion of the state’s one-billion-dollar a year gaming industry.
Electronic Lottery Game Planned for Iowa

Though the article was telegraphically short, I think this is a significant story. Like Cyber Slingo, New Jersey’s try at an “online” lottery that is not online, it pushes the boundaries of lottery-dom.

VLT easter eggs

Everyone likes easter eggs, hidden features in video games, DVDs, etc. Usually they are not that impressive–you can unlock hidden commentary or an alternate costume in fighting games. But an article in Canada’s National Post says that video lottery terminals also have easter eggs that can be exploited:

As the middle-aged mother from Illinois plunked away at buttons on the electronic poker machine, something unusual happened. The machine, usually so adept at parting gamblers from their money, fell under the spell of the player.

The woman had manipulated the video lottery terminal at an Edmonton casino into letting her win on command, recalls Zues Yaghi, a computer programmer and gaming machine expert who watched the scene.

“She had been doing it for four years and had put her kids through university, was driving a Mercedes 500. She was all decked out,” Mr. Yaghi recalled.

“She thought she was the queen of the underground…. It’s so easy, so easy to run 10 grand from these machines.”

Mr. Yaghi says the woman was tapping into what he and some other experts call an “easter egg”: a line of digital code allegedly embedded on to the machine’s computer chip by rogue programmers, allowing informed players to cheat the games out of their booty.

Mr. Yaghi reported the problem to gaming authorities after discovering it himself. But four years later, rather than being hailed a hero, he is living a legal nightmare over the issue, facing a $10-million libel suit filed by the American maker of the machine on which he first found an easter egg.

Meanwhile, he and other experts allege that some compromised machines are still out there today, raising questions about the fairness of a diversion on which Canadians spend billions of dollars a year.

‘Easter egg’ cheats cracking casinos?

In the old days of mechanical slots, owners had to worry about mechanics or locksmiths making a duplicate key; today, they have to consider the possibility that programmers have inserted easter eggs.
___________________________________
Yesterday, the Pittsburgh Post-Gazette published an opinion piece I wrote about Pennsylvania’s recent slot machine bill’s approval:

Forum: Greetings from Slotsylvania

Obviously, this bill marks a historic milestone, and I think that we’re going to be seeing much more gaming expansion in the next few years.