There’s a big piece in today’s USA Today about penny slots:
The penny slot machine, once a joke among serious gamblers, is the hottest form of betting during this recession.
Even casinos that cater to wealthy gamblers are replacing $1 machines with video slots that accept bets one cent at a time. “You can play longer with less money on penny slots,” says Ed Feigenbaum, editor of Indiana Gaming Insight, a newsletter.
The penny machines accounted for 36% of bets at Indiana casinos in July, up from 8% in 2005.
USA TODAY examined gambling data in seven states and found penny slot revenue soaring everywhere. National numbers are not available.
Las Vegas was slow to pick up on the trend to penny slots, but it has jumped on board, too. In the past two years, Nevada casinos have added more than 7,000 penny slot machines and removed 12,000 machines that require bigger bets.
As far as playing longer with less money goes, I don’t think so. I’ve already broken this down, but apparently it hasn’t bubbled up into the public consciousness yet. Here goes:
In 2008, the average Nevada penny slot machine had a hold percentage of 10.22%
The top bet on penny machines usually runs between 100 and 500 credits, though it can go even higher.
For the sake of argument, let’s take a conservative 200 credits as the max bet. This is what most players will play, since it gives them the greatest chance of unlocking the bonus rounds.
200 credits means $2.00 bet per spin. The average slot players spins the reels ten times in a minute. That means $20 a minute is being played through.
At 10.22% hold percentage, this means that after a minute of play the casino will hold (on average) $2.04.
That’s $122.64 over an hour of continuous play. One hundred dollars–my arbitrary benchmark buy-in–will last about 48 minutes and 50 seconds.
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In 2008, the average Nevada quarter machine had a hold percentage of 6.11%
The top bet on most quarter games is 3 credits, or 75 cents per spin. The average slot players spins the reels ten times in a minute. That means $7.50 a minute is being played through.
At 6.11% hold percentage, this means that after a minute of play the casino will hold (on average) 46 cents.
That’s $27.60over an hour of continuous play. One hundred dollars–my arbitrary benchmark buy-in–will last about 3 hours, 47 minutes and 20 seconds
Clearly, it “costs” substantially more to play penny slots with max credits than it does to play quarters. And this was with a conservative 200 max bet plugged in. If you’re playing a 500 credit machine, you’ll be “paying” on average $306.60 for an hour’s play. Yes, if you’re dribbling in the credits and playing very slowly you could milk a penny machine for a few hours. But if you’re playing with any intent to get a jackpot that actually matters, you would be better off (from a bankroll perspective) playing a quarter or even dollar machine. From an entertainment perspective, you may do better with the pennies.
By not disclosing that penny slots typically have far worse hold percentages than higher denominations, this article suggests that the player is better off playing them. As I said, this may be true from an entertainment perspective, but it certainly isn’t if you’re using time on device as your yardstick for value. I would think that this was an important part of the equation.
And as far as penny slots being the new thing in Las Vegas, they aren’t. Here’s the breakdown of Nevada’s statewide slot mix for 2008:
Denom # of machines percentage of market
1 cent 35,842 20.87%
5 cent 10,973 6.39%
25 cent 21,633 12.59%
1 dollar 14,411 8.39%
M-Deno 83,245 48.48%
Other 5,589 3.25%
As you can see, multi-denomination machines are what’s big now. They’ve gone from about 11% market share in 2002 to nearly 50% in 2008. Penny slots have increased impressively, but according to the numbers there are more than twice as many multi-denoms out there. Granted, these machines can act as penny slots, but they are clearly the dominant presence.
My final critique involves the idea that penny slot revenue has increased despite the recession. Here’s the pith of that point from the USA Today article:
Revenue from every form of gambling has fallen in Nevada during the recession — except penny slots. Penny slot revenue was up 3% in the year ending June 30. The 32 other types of gambling tracked by Nevada regulators — from sports betting to roulette — plummeted 19%.
It is true that penny slot revenues have increased, but that’s because the installed base has increased. For example, in June 2009, for all Nevada casinos:
39,089 penny slots, winning $155,209,000 for the month, an increase of 0.51% over the previous June. However, from June to June Nevada added 3,797 penny slots, an increase of 10.53%.
When you add 10 percent more product but do a half-percent more sales, you are becoming less profitable per unit. Indeed, revenue per unit for the month of June 2008 was $4,365. In June 2009, it was $3,970. So revenue per penny slot actually fell by 9%.
That’s not as bad as some other games (craps, which had the same number of games, saw its revenue decline by 15 percent). But it’s hardly the out-of-the-park home run that is suggested by the rather narrow reading of the Nevada revenue numbers by the author. At best, you could say that the penny slots out-performed the gaming revenues at large, which lost 13.86%, though that number is tempered by fewer games and slots. All in all, “same position sales” indicate that penny slots did slightly better than all other forms of gambling in Nevada.