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Do you understand how slot payback percentages really work?

By John Grochowski

It was a quiet Monday morning and I was strolling down the aisle of a casino, dollar slots to my left, video poker to my right. A voice rose over the background hum — not that difficult in this relatively quiet corner, away from the clamor of the penny video slots and their bonus events.

“Ninety-five percent! Hah!”

A middle-aged gentleman with white hair, glasses and a Milwaukee Brewers T-shirt looked right at me a said, “Do you buy that baloney?”

It was nearly lunch time, but I had roast turkey from the buffet carver my mind. I asked, “What baloney?”

“They say these slot machines pay 95 percent. Do you believe that?”

Sounded about right to me, for dollar games. “Well, I just ran a hundred dollars through there and got nothing.

Sounds more like zero percent to me.”

I shrugged and told him I was sorry to hear that. Anything can happen in a short time, from losing it all to winning a big jackpot and anything in between. The average return will be about 95 percent.

I started to walk away. The fellow turned to walk with me. “You think you know something about these machines, huh?” Well yeah, a little.

“So tell me how a 95-percent game can give me absolutely nothing.”

“Absolutely nothing?” I asked him. “Not even a cherry, or three mixed bars?

“Well yeah, I got a few of those. Lot of good it did me…”

“So the amount you won wasn’t zero—it was the value of the mixed bars and the cherries and any other winning combinations you hit.”

“But in the end, it took all my money! I didn’t have 95 percent. I had zero percent.”

“That’s because you chose not to cash out your winnings,” I calmly answered. “You chose to bet until you lost them.”

“OK, so how do they figure those percentages? Can you explain that to me?”

I told him that if he really wanted to talk about this, we should have a seat. This was going to be easier with a pen and paper. He suggested the bar, and when we sat down, he ordered a beer, and I had a diet cola.

“So tell me, when I read that the dollar slots here pay 95 percent, what does that mean?”

I explained that it means of all the money wagered on dollar slots in the last reporting period, 95 percent was paid back to players, and the casino kept five percent. Some players won money, and the majority lost more than five percent. In a given month, if $100 million was wagered on dollar slots and the casino kept $5 million, then $95 million, or 95 percent, was returned to players.

“Well, they kept 100 percent of my $100.”

“That’s not quite the way it works,” I corrected him. “You actually made more than $100 in wagers.”

“Go on.”

“How many mixed bars or cherries or other winners do you suppose you had?”

“Let’s see…I got a cherry four or five times, but those only paid two coins each. About the same for the mixed bars, and they paid 10. I had three single bars once for 20, and my ‘big win’—hah!—was three double bars for 40.”

So I estimated his returns. 40 for the double bars, 20 for the single bars. Let’s use the low estimate of four mixed bars—that’s another 40—and four cherries for eight more. That means his total winnings were 108 credits. Since this was a dollar machine, that’s $108.

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“You’re not going to tell me I actually won money, are you? Because there’s a $100 hole in my wallet that says I didn’t.”

“Of course not,” I said. “You lost your money, but you didn’t get zero return. You just chose to re-wager all those returns. You didn’t make $100 worth of wagers; you wagered $208.

I continued. “For you, we’d calculate your payback percentage by dividing $108 in winnings by $208 in wagers, then multiplying by 100 to convert to percent. My scribbled figures show that as 51.9 percent. Your return wasn’t zero percent; it was 51.9 percent. You just kept playing until that 51.9 percent was gone.”

He looked exasperated. “They can call it 51.9 percent or zero percent, but I still lost the $100 I started with!”

I wasn’t going to be able to get through to him. Players should understand that on a table game, the casino would look at it as keeping 100 percent of your original $100. The hold percentage on table games is the percentage of the buy-ins kept by the house, while the hold percentage on slot machines is the percentage of wagers kept by the house.

This difference has fooled a lot of people over the years. A casino marketing exec once tried to argue with me that slots paid much more than tables, but he was just drawing a false conclusion from statistics that don’t mean the same thing.

When equipment becomes common to track every table wager, we may well see a change in metrics to track table games the same way slots are tracked. For one thing, casinos like to have an accurate measure of just how much a customer is wagering for player rewards purposes.

“OK, let me make sure I have all this straight,” he continued, not ready to let this go. “That 95 percent doesn’t mean everybody’s getting back 95 percent of the cash money they’re putting into the games. It means they’re getting back 95 percent when you also include the credits they’re getting while they play, even if they never cash out those credits.”

Now he was getting it. Finally.

“Either way, I’m out a hundred bucks,” he declared, standing up and heading back toward the machines. “Guess I’ll go try again.”

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