CEM’s Inner Circle

What is your view of the effect tightening hold percentage has on
slot play and player behavior?

Editor’s Note: This month Casino Enterprise Management debuts Inner Circle, a new feature in which gaming industry executives and observers weigh in on important issues affecting our industry. In this first installment, we tackle the topic of increasingly tight slot hold percentages.

Buddy Frank
Vice President of Slot Operations
Pechanga Resort and Casino

I’ve wanted a Porsche 911S since my first driver’s license. The reason there will never be one in my driveway is that I can’t afford it. The product is fantastic, but the price isn’t. I’ve read numerous articles, including some in these pages, showing math and computer simulations that prove that slot players cannot detect even major changes in the hold percentage of today’s machines. With potential game outcomes numbering millions and millions, it’s just logical that no one can play deep enough into a pay table to know if any game is tight or loose.

But in the real world we’re dealing with humans. They aren’t computers, and they are seldom logical. But they are better at some things, including an intuitive sense about odds. Author Malcolm Gladwell calls it “Blink: The Power of Thinking Without Thinking.” That may be a better title for manufacturers and operators who’ve been inching hold percentages higher and higher, egged on by better technology and the seductive lure of short-term gain without considering the consequences.

And there’s the undeniable fact that these strategies work… for a while. When pennies hit the scene with high-credit bets, it was amazing to see players actually celebrate a 25-cent win, even though they’d made a 45-cent bet. It was a beautiful thing.

Now we’ve combined addictive high-hit frequencies with gorgeous HDTV video, rainbow LEDs and more bonus rounds than a Wall Street banker receives. Throw in outstanding volatility that excites everyone nearby and you’ve hooked players for almost a decade. Check the published stats. Nationwide, slots have gotten tighter and tighter. What was a 4 percent to 6 percent overall hold in Nevada has swelled over 10 years to 7 percent to 9 percent. However, very few tightened their $1 or 25-cent games; they just added more and more tight pennies. There may have been solid justification at the beginning because bets were in the skimpy 1-cent to 30-cent range. But today that has swelled to popular penny games with bets of $3 or more. In other words, we’ve nearly doubled the hold on a similar bet over the last 10 years. Doesn’t sound too bad considering gas prices were $1.85 in 2005. But don’t forget that today’s games also play two to three times faster as TITO replaced slow coins, tokens and hoppers.

So players are beginning to slowly understand that their gaming experience is getting shorter and shorter. It appears that many may think the only alternative is to slow down. Or not play at all. The product is fantastic, but the price isn’t.

Jim Kilby
Casino Gaming Consultant and
Former University of Nevada, Las Vegas professor

When a slot department manager chooses a machine to offer the public, the manager will have the game’s theme and par sheet (PC sheet) to guide a decision. In addition to the game’s configuration and pay table, the PC sheet lists the game’s payback percentage and hit frequency. One hundred percent minus the payback equals the house advantage and the hit frequency represents the percentage of time something drops from the machine.

When managers view slot statistics, they are seeing the play of only one player, that is, the public. It has long been argued that high payback machines stimulate play. Casinos even use payback percentages as a marketing tool with ads such as “Our machines pay up to 98 percent.”

However, what management considers a loose machine and what the individual player perceives as a loose machine may not be the same. For example, assume a 32 stop 3-reel game. There are 32,768 pulls in a cycle (32x32x32). What if each reel had only one winning symbol and this winning combination would hit only one time per cycle? But, when hit, it returns 110 percent. Looking at the PC sheet, management would classify this machine as super loose. So loose the player has the advantage. Again, this “player” is the public. Unfortunately, only one player, the player who hit the jackpot, would call this game loose.

Slot players rarely win. Therefore management must focus their attention on satisfying the experience of the losing players. A winning player is satisfied because they won but the losing player is satisfied by time on device (TOD). A little-used metric on many PC sheets is the game’s volatility index. If management chooses games that increase time on device, that will result in the best of both worlds—increasing game profitability while maximizing player satisfaction.

It was long thought that a high hit frequency increases TOD. Not so; the volatility index is the driver. Managing a casino is a science, not an art. We have objective data that should dictate objective decisions.

Marcus Prater
Executive Director
Association of Gaming Equipment Manufacturers

The Association of Gaming Equipment Manufacturers (AGEM) and its 150 members from around the world are indeed concerned about the effect that tightening hold percentages has on slot play and player behavior.

Certainly the slot suppliers want players to have a fair and entertaining experience playing their games. And certainly the slot suppliers want their customers—the casino operators—to benefit financially from all of the great content created and presented to their players. That delicate balance can be tipped the wrong way when operators tighten machines in a misguided attempt to increase revenue over the long term.

It’s not a secret that slot revenues throughout the U.S. have been on the decline for a variety of reasons. In an attempt to understand the impact of tightening hold percentages and other factors, AGEM has embarked on a large-scale slot assessment study that will hopefully shed additional light on this subject. We look forward to sharing the results of the study because it is in the best interests of everyone on both sides of this discussion to understand more so that slot machines remain a key form of gaming entertainment going forward.

Charlie Lombardo
Slot Consultant and longtime gaming industry executive

As slot operators, we have two primary responsibilities—to provide maximum entertainment value to the players and to provide maximum revenue profitability to the owners. How to make this happen is like balancing yourself on a ball while juggling six more.

The biggest ally in providing maximum entertainment value is hold percentage. The problem is everyone wants a piece of it.

CFOs want us to hold more because they believe that everything falls directly to the bottom line. They don’t completely understand how hold percentage affects coin-in; their only concern is the budget, no matter how tight the slot hold percentage is. If win is down, it is not hold percentage; it is poor operations.

The marketing department wants to give more of the hold percentage away through free play, comps, promotions, special events and trinkets. Marketing executives also don’t understand how these things affect coin-in and hold percentage. If play is down, they believe the culprits are the wrong games and poor customer service. After all, they are bringing in plenty of players, and it is not their fault if we don’t have the games that they want to play.

The game providers and designers want more of the base game percentage so that they can add more to convoluted bonuses and too many losing free play games. Theoretical game cycles have gotten too big with too many of the win amounts smaller than the wager. Then there are licensed entertainment games and the wide area progressives that also require tighter hold percentages to help the game manufacturers pay for the games’ enormous cost.

The player wants entertainment for dollar investment, time on device and to occasionally leave as a winner. That doesn’t seem like too much to ask, but the slot operator has very little flexibility to give players what they want because everyone else has taken a piece of the win before the players get theirs. That’s unfortunate, because casinos compete with many other forms of entertainment for the player’s dollar. The couple who comes to the casino with $200 for playing slots must receive the same amount of playing time as they do going to a movie and dinner, a sporting event, play, concert or myriad other activities.

Slot win across the country has been slowly decreasing over the past few years, and analysts have all kinds of reasons to explain why… the economy, cost of living, lack of pay raises, etc. I believe that parallels can be drawn to the tightening of hold percentages across all games to the decline in slot revenues. The fix is simple. To provide maximum entertainment value to the players and maximum revenue profitability to the owners, do the following. Loosen the games. Give more time on device. Let players win.

Bruce Rowe
Renaissance Casino Solutions

The dramatic increase in hold over a short time in the history of gaming has had a negative effect on the player experience, and I believe we are killing the business one customer at a time. That said, the issue is not as simple as just the overall increase in hold. Rather this is an issue with at least three elements to be considered—the utilization of virtually unlimited amounts of stops, the addition of bonus games and the increase of top awards. The increase in stops has created more ways for the customer to “win” and helped create amazing games, but most often this means a return of credits less than the bet. Then a percentage of coin-in goes to the bonus, and the more that is contributed the less to give on the base game. Further top awards increase the overall hold and the frequency of wins must change. We only need to look at wide area progressive to see this example. The odds of having a good time are getting more like the lottery than the slot machine that made the industry what it was.

There are yet more things to be considered regarding denomination, line and credit configuration that impact the way customers manage their gaming budget. So by giving customers more choices than they understand and giving game designers more complexity than can be easily mapped to a customer experience we are at risk each time a casino performs human trials with their customers with products that have not been through clinical trials. There was a time when bloodletting was a standard medical practice and in fact is still used for certain conditions, but too much, or too much too fast, and we know what happens. And there are things we have done to the casino experience that impact the player experience in a very negative way… But that is for another article.

What was a 4 percent to 6 percent overall hold in Nevada has swelled over 10 years to 7 percent to 9 percent.

The odds of having a good time are getting more like the lottery than the slot machine that made the industry what it was.

Leave a Comment