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How Does It Pay? Payback percentage

Understanding payback percentages

By Frank Legato


“Payback percentage” is one of the most misunderstood terms in the casino industry. Many players think it means how much of the money they put in a game that will come back to them in jackpots. Others think that the casino has a switch somewhere that officials can throw to lower the payback percentage on the machine they are playing, to cut down on winnings.


Every spring, players eagerly pour over the annual “Loosest Slots” issue of our sister publication, Casino Player. They are looking for the casinos that offer the “loosest” slots in the nation.

“Loosest,” a designation created by Player and its readers, means the slot machines offering the highest payback percentage over the year. But what does that mean?

Payback percentage

“Payback percentage” is one of the most misunderstood terms in the casino industry. Many players think it means how much of the money they put in a game that will come back to them in jackpots. Others think that the casino has a switch somewhere that officials can throw to lower the payback percentage on the machine they are playing, to cut down on winnings.

Both of these assumptions are incorrect, and both are part of the circle of myth and misinformation that surrounds the slot machine.

For the record, “payback percentage” refers to the portion of all wagers placed into a slot machine or group of slot machines that is returned to any and all players—not just you—who enter money into the machine or machines.

In the case of the “Loosest Slots” issue, the payback percentages are based on actual statistics reported to regulatory agencies by the casinos. They represent the total amount of wagers placed in slot machines over a year that was returned to the players in the form of jackpots, segmented into various denominations.

There is nothing theoretical about these payback percentages. They are legally recorded statistics; they are known fact. The same goes for the payback percentages we present in our charts every month, in the back of this magazine and Casino Player. Casinos report their “hold” percentages to the regulatory agencies every month. That’s the percentage of wagers the casinos keep—in other words, the players’ losses. We get our mitts on those publicly reported statistics and flip-flop them to show the portion of all players’ wagers paid out in jackpots.

Of course, looking at these statistics for any single month can be deceiving. If a lot of players won jackpots on high-denomination machines—$25, $50 machines and higher—within a month, it can skew the numbers for a denomination, causing a report of payback percentages higher than 100 percent. It happens, and it means the casino lost money in that slot denomination for that particular month.

Over a few months of play, that will even out to reflect the true percentage, and you guessed it—the house will make money. A percentage point or two under 100 percent translates into serious money to the house in those denominations.

Theoretical Payback

As you probably know, we list payback percentages for individual machines when we tell you about new games. Actually, we list a payback percentage “range”—which reflects the range of payback percentages available to casinos when they buy a given slot game from the manufacturer.

Unlike the numbers in our payback charts, the statistics for individual games reflect what is known as “theoretical payback percentages.” Readers often ask us how a payback percentage can be given for a game in which the results are supposed to be random. To understand the answer, you must have a rudimentary understanding of how the modern slot machine works.

It’s easiest to explain using a traditional three-reel slot. There are usually 22 physical “stops” on the reel—a stop is the space where either a symbol or a blank occupies the reel, a spot that can register on the payline. However, the modern slot machine is governed by a computer system known as the “virtual reel.” Each of the 22 stops on a reel is given a number. Call them stops 1 through 22. Then, the programmer assigns numbers 23 and up to those same 22 symbols.

The computer program ends up with a set of numbers—from hundreds in a traditional slot to tens of thousands in a multi-line video slot. Each number represents one of those 22 stops. Jackpot symbols only have one or a few numbers assigned to them. Lower-paying symbols and blanks have many more. A software device known as a random number generator is activated when the machine is powered up. The RNG then does what its name says—it generates those numbers placed into the program, at a rate of hundreds or even thousands per second.

When you press the spin button, the computer freezes the set of numbers generated at that instant, and translates the numbers into their corresponding reel stops, telling the reels where to stop. In the case of a video slot, the computer tells the video screen what to display. The system works the same whether it’s reels or video—modern reels are simply mechanisms used to display a computer result.

The reason a theoretical payback percentage can be computed for a game is that the RNG, although it is generating numbers at random, it generating only the numbers that have been entered into the program. Thus, the programmer can manipulate the payback percentage according to how many numbers he assigns to particular symbols or blanks.

After that, the law of averages takes over. More numbers assigned to higher-paying symbols and fewer numbers assigned to blanks will cause the payback percentage to be higher. More numbers assigned to blanks and cherries means the RNG is more likely to generate those in its random sequence, translating into a lower percentage.

The programmers are mathematicians; they can compute the proper mix of numbers to achieve a desired percentage. They then simulate millions of spins—the equivalent of years of play—to verify their computations. The number they arrive at is the theoretical payback percentage.

For each slot machine produced, the manufacturer offers the casinos several theoretical payback percentage programs. The casino chooses the program for each game according to that particular house’s policy for each denomination. We can go back to our charts—the actual payback numbers—to get an idea of the theoretical payback programs each casino is likely to order in each given denomination.

On the Las Vegas Strip, pennies will pay around 88 percent overall; nickels will pay around 90 percent; quarters around 92 percent; dollars perhaps 94 percent. Numbers off the Strip in the locals casinos will generally be much higher—into the high 90s for dollar and higher denominations.

Knocking Down Myths

The concept of payback percentages, as we said before, is shrouded in myth, assumption and misinformation. Here are some of the most common misconceptions, and why they are wrong.

Percentages are not changed on the fly. Casinos buy payback percentage programs according to company policy. They buy the program for a given game that fits their particular policy. Once in place, the chip that governs the percentage is sealed inside the machine. To change it requires opening the machine, in the presence of a regulatory official. Sure, it’s possible. It’s just not at all common.

Once a slot machine is in place on the floor, the casino does not change the payback percentage. If the game under-performs, the casino will change the game, not the percentage.

Payback percentage is long-term. If you see a sign on a machine that advertises a 98 percent payback, it doesn’t necessarily mean you’re going to win. In the parlance of the table games, a 98 percent payback percentage is the same as a 2 percent house edge. Blackjack has a payback percentage similar to a slot with 98 percent payback. Do you always win at blackjack? Didn’t think so.

Even 100 percent payback doesn’t mean you’ll win. One hundred percent payback simply means there is no inherent house edge. In the case of a slot machine, it means that over time, the amount wagered on a machine will equal the amount distributed in jackpots. The theoretical payback is computed through simulations over the life of a machine—several years. Anything can happen in the short term.

The flip of a coin has a 100 percent payback. Over time, you’ll land on heads as many times as tails. But in the meantime, you may have eight tails results in a row. Again, anything can happen in the short term.

Payback percentage is not hit frequency. A high payback percentage does not mean you’ll win, but neither does it mean you’ll hit a lot of jackpots. The highest-returning slot machines, percentage-wise, often have the lowest hit frequency. That’s why you need a big bankroll on those games—you may lose a lot before you win big.

Penny and nickel multi-line video slots have the highest hit frequency in the casino, often turning in a hit of some kind every other spin. They have the lowest payback percentage in the business.

You can’t tell by looking. On a video poker machine, you can tell the payback percentage by looking at the pay schedule. (And reading this magazine!) That’s because video poker games are restricted, by law, to one number for each possible result in a poker hand. There is no computer trickery; what you see is what you get. In a slot machine, there is no way of knowing how many simulated reel stops have been placed into the program.

So, then, what to do to ensure the best payback percentage? Your best bet is to keep track of the charts—the actual statistics—to see who consistently offers their players good returns. Then, play there.

The rest is up to luck. Here’s hoping yours is good!

Payback percentage.

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