April 25th, 2019
Via The Economist, a look at casinos’ plans to add skill to slot machines in an effort to appeal to younger generations:
One-arm bandits make a killing for gambling dens. In America and Europe slot machines usually account for two-thirds of the house’s takings. Their relative unpopularity among younger punters is therefore a worry for casino operators keen to preserve gaming revenues, which exceeded $40bn in 2017 in America alone. Surveys in Las Vegas find that the typical player of slots is around 58, compared with 36 for all casino-goers. To make the machines more attractive to a new generation of gamblers—who are also cooler towards table games, where they fear looking gauche in front of a supercilious croupier—casinos are looking at machines that resemble video games millennials favour.
Many gambling authorities require each slot machine to offer all bettors an equal probability of winning. They fear that skill-based contraptions feed the “illusion of control”, which in turn fuels gambling addiction (Japan’s ubiquitous pinball-like Pachinko machines, which are played for prizes rather than cash, are a long-standing exception). But several are reconsidering their skill-aversion—possibly fearful of losing sin-tax revenues, which generate $9bn annually for American states. In 2016 Nevada permitted slots that award greater winnings to players who demonstrate aptitude. New Jersey, home to Atlantic City, followed suit later that year.
Combining slots, which rely on dumb luck, and video games, which require skill, presents a number of challenges for their makers, and for casinos. Algorithms embedded in such hybrids must generate a mix of wins and losses which ensures that the house always wins in the end, but which lets punters succeed often enough that they do not take their dimes elsewhere. This is straightforward for purely probabilistic slots. It is considerably harder for those where skill improves the likelihood of winning. Mike Tomasello, operations chief at American Gaming and Electronics, a firm based in New Jersey that installs and repairs slots, says that casinos send skill-based slots back to the lab for tinkering more often than traditional ones.On top of that, authorities in many places dictate that the odds of winning cannot be worse than a certain level. This “return to player” tends to be set at around 75% of whatever has been wagered over many bets. The complicated mathematics involved in squaring all these factors has turned the area into a minefield of overlapping patents, says Georg Washington, boss of Synergy Blue, one of half a dozen firms which develop hybrid machines.
Get it right, though, and it pays off. Cocktail waitresses struggle to get the attention of players on hybrid machines built by Gamblit Gaming, crows the company’s boss, Eric Meyerhofer. Gamblit leases them to casinos for about $60 a day. He says the average player is 15-20 years younger than for traditional slots. Pascal Camia, in charge of gaming at Société des Bains de Mer, which runs four casinos in Monaco, reports that its handful of skill-based slots rake in as much as traditional ones. Fruttis, a matching game akin to Candy Crush, has done reasonably well on the roughly 18,500 multi-game cabinets to which Veikkaus, Finland’s state-owned gambling monopoly, has uploaded the title since September 2017. Last year Synergy Blue’s puzzle-slot hybrid called Safari Match generated 10% more revenue than one-arm bandits at Augustine Casino in Coachella, California (takings have subsequently reverted to the average for traditional machines, possibly because the novelty is wearing off).
Because skill-based games require concentration, players take longer than the six or seven seconds typical of traditional one-arm bandits to place successive bets. Stable revenues from newfangled slots suggest that either punters are wagering higher sums, or occupying the machines for longer. Either way, it is good news for casinos.
Sina Hentunen, Veikkaus’s head of slots, reckons that punters may ultimately prefer the mindless distraction of traditional slots to brain-racking video games. Messrs Meyerhofer and Washington will take the other side of that bet.
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