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The Penny Conundrum

Why do we flock to the games with the lowest return in the house? And why can’t the pennies return more?

by Frank Legato


Shortly after this magazine was founded in 1988, one of its cornerstones became its status as one of the only places to identify where to find the best payback percentages on slot machines.

And, make no mistake—overall payback percentage is an important gauge of a casino’s generosity, if only because the number reflects all types of gaming machines, including, importantly, video poker. However, that overall payback number on the slot side is now a bit skewed. The reason is the penny slot.

We’ve reported time and again that slot machines in the penny denomination offer the absolute lowest payback percentage on the slot floor. These days, many of the penny slots are returning overall numbers as low as 87 percent, and most of them are under 90 percent. By comparison, it’s not hard to find classic quarter slots returning upwards of 95 percent, and in the case of dollars, even more.

Yet, look at the most popular slot games. From Wolf Run to Hot Shot to The Wizard of Oz, they are found in pennies more than any other denomination.

We keep flocking to these games for a couple of fairly obvious reasons: They are a lot of fun, and they don’t cost a lot of money. People can bankroll $100 or less for an evening, and still get a lot of entertainment for their money.

But you can do that at the arcade. Does the popularity of penny slot games mean casino slot floors are becoming more like amusement arcades and less like gambling houses? What happened to placing a wager for a crack at winning big money?

Well, that’s one of the other reasons people like the pennies. Since payback percentage is a long-term number, it’s not unusual to win money on the pennies. Precisely because of the low denomination, the games can offer the occasional large jackpot without breaking the casino’s bank. The manufacturers make the programs more volatile than the old nickel multi-line games, so you can weather more dry spells waiting for big payoffs—without breaking your bank. You need a big bankroll for dollars, and even for quarters, to weather those dry spells between big payoffs. With pennies, you don’t.

And, the people who like traditional slots don’t need all the arcade-like entertainment features. They’re in it for the gamble, and they don’t mind bankrolling more in exchange for a larger long-term return.

That’s the way things are, but it’s not necessarily the way things have to be. Looking at things from a player’s perspective, why can’t penny slots return more in the long term? Would it kill them to keep only 7 cents or 8 cents from every dollar put into these games instead of 12 cents or 13 cents?

Of course it wouldn’t. However, unless players stop playing these games, the casinos are going to take as much as they can get. The manufacturers offer many of the penny games in higher payback-percentage programs, but ultimately, the casino officials who buy the games are the ones who dictate the percentages that are going on the floor. If a manufacturer offers a game that players find fun—indeed, that players can’t get enough of—and that fun is not diminished by the house keeping 13 percent of the overall wagers, that’s what they’re going to keep.

If fairness is the gauge, then penny slots should pay back more. This argument becomes stronger when you look at how much players bet on these games. No one is betting a penny on a penny game. The minimum wager per spin (a forced minimum on many new games) is typically at least 50 cents, and the average is more often in the hundreds of credits per spin—in other words, more wagered per spin than a traditional quarter or even 50-cent game. Why can’t the overall return reflect the size of the wager?

The answer is that fairness is not the gauge for casinos in the games they offer; profit is. As long as they can maximize profits with popular games at 87 percent returns, they’ll do it.

Some casinos—notably, the Station casinos and other locals-oriented houses—are offering penny slots at 91 percent, 92 percent or more. They should be applauded for this, and more casinos should do this… in all fairness.

We love the pennies. We should love the payback too. •


Quick Tip

 Finders is not keepers. In the old days, credits inadvertently left on a slot machine—or, for that matter, money on the floor—was fair game. Find a game with credits on it, or a $20 bill on the floor, and it was finders keepers. It’s not like that anymore. In the age of the cash-out ticket—as ridiculous as it is—people are actually getting arrested for cashing out found tickets. There are increasingly stories where people cash out abandoned credits on a machine, or find a cash-out ticket left in a game, and if they cash it out themselves, they are tracked down through surveillance and punished for it. Best advice if you find a cash-out ticket: Give it to an attendant. Finders is no longer keepers.


This Just In…

 Caesars Entertainment has revealed its plans for Harrah’s Baltimore, a proposed $310 million slot casino next to the Baltimore Ravens’ M&T Bank Stadium. Caesars, the only bidder for the Baltimore casino license, is proposing a two-story casino with 3,750 slot machines, which would make it Maryland’s second-largest casino behind Maryland Live!, Cordish Companies’ casino under construction in Anne Arundel County. The casino also would include a 125-seat steakhouse and a Baltimore-themed sports bar. The project also would include an eight-story, 4,000-car parking garage with a second-floor skyway leading to the casino.

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