Casinos generate GGR (Gross Gambling Revenue) through bets placed by players, resort fees, shows, hotel and accommodation charges, food and beverage, promotional offers, et al. The lion's share of their revenues is derived from gambling take on games.
Like any for-profit business, casinos rely on the patronage of their customers to generate positive returns. Players are willing to risk money in exchange for the prospect of winning a much greater amount, while enjoying an entertainment experience par excellence. With that in mind, we turn our attention to the most popular casino games of them all – slot machine games.
Consider that the Nevada Gaming Control Board Gaming Revenue Reports routinely indicate that the total gaming win of Las Vegas, Reno and other casinos in the Silver State is largely the result of slot machine games.
As a case in point, in 2017, the Las Vegas Review Journal indicated that the Las Vegas Strip paid out 8.04% slot win, meaning that players receive 91.96% of what they wagered, on average. These figures can be a little confusing to casino players. We're going to take you deep into the inner mechanics of RNGs (Random Number Generators), odds and probabilities, to evaluate the credibility, transparency, and reliability of slot machine mechanics. Can they be trusted? Let's find out!
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Complex Computerized Consoles
Imagine the shock and horror if players found out that slot machines were rigged? Slot games are designed to be as random as possible. It is somewhat of a paradox that anything which is programmed by humans can truly have random outcomes, given that the program itself operates within a predefined set of parameters.
The objective is not true randomness, it is as random as is humanly possible. That's our starting point. All slot machine games are designed with a specific payback percentage. This is known as the house edge. For example, a slot game with a 97.5% payback percentage invariably has a 2.5% house edge. The higher the house edge, the lower the payback percentage, and the lower the house edge, the higher the payback percentage. An example will clarify house edge and payback percentage for players:
97% RTP – SLOT MACHINE A – This slot machine game pays back $97 on every $100 that is wagered over the long term. The casino has a 3% house edge, indicating that it generates $3 for every $100 bet over the long term.
98.5% RTP – SLOT MACHINE B - This slot machine game pays back $98.50 on every $100 that is wagered over the long-term. The casino has a 1.5% house edge, indicating that it generates $1.50 for every $100 bet over the long term.
It's important to emphasize that the figures are based on long-term projections. Over the short term, it is entirely possible for players to lose their entire bankroll, or even win a life-changing jackpot with a $100 bet.
When random number generators (the computer programs that calculate payback percentages) and payback percentages are determined, they are done over millions of spins. The preprogrammed percentages will not necessarily hold true for small bet amounts over the short term, but they might. The short and sweet of it is that slot machine games can certainly have a fixed payback percentage and provide randomness of outcomes. We are about to show you how this is possible, so sit back, relax and get spinning!
The Randomness of Slots: Preprogrammed RTPs
Every time you spin the reels on a slot machine game, you can expect random outcomes. Over the long term – that means thousands or millions of spins – the payback percentage will tend towards the preprogrammed RTP. When you take all the winnings and all the losses into consideration over a long time, then the payouts become evident. This is neatly represented by a RTP (Return to Player) percentage. Casinos make money by paying less than true odds on winning bets. If you are curious what that statement means, consider the following:
• Let's assume you're playing American Roulette and you place a bet on number 7. On an American Roulette wheel, there are 38 numbers. There are odds of 1/38 that you will win your bet, indicating that there are 37/38 odds of your losing the bet. However, the casino only pays 35:1 if you win, and the true odds are actually 37:1. To put things into perspective, if you bet 38 times, you would lose 37 of those bets, and win just 1 time in 38 bets.
Your payout would be $35 from the casino and your losses would be $37, indicating a net loss of $2. Now let's calculate how these odds differ from what they’re ‘supposed’ to be under different circumstances. Your losses of $2 out of $38 bet amount to 5.26%. You’re supposed to be paid 37:1 on winning bets in this game which means that your losses should only be 2.63%. This is what it means when the casino pays less than the true odds on winning bets!
• Craps is another fantastic casino game with a high RTP. With Craps, players must roll a pair of dice and bet on the outcomes. An interesting case emerges with a bet on 12 in Craps. A pair of dice has 36 potential combinations of numbers that can come up, but only one of those combinations yields 12 – 2 x 6s. Given the odds of a dice roll resulting in 12, the actual odds are 1/36 that a player will roll 12. And the odds of not rolling 12 are 35/36.
But here's the clincher: The casino only pays 30:1 when you roll 12. Similar to the roulette example above, you can see that if you bet $10 on each of the 36 dice rolls, you would win on one of them ($10 x 30:1 = $300), and you would lose on 35 of them ($10 x 35 = $350) indicating a net loss of $50. That is the pure profit for the house and it indicates why casinos make money by paying less than true odds on winning bets. Viewed in perspective, that $50 of $360 bet amounts to 13.89%. That's the house edge. The return to player in this case is 86.11%.
The mechanics of slots work in much the same way. Your odds of winning are always better than the payout odds you received from the casino. It's the same principle as Roulette and Craps. Remember, complicated computer programs known as algorithms perform these complex calculations to determine payback percentages. The house edge is precisely that – it gives the casino an advantage over the player. The house edge is the price you pay for the entertainment experience, and the prospect of winning substantially more than you bet.
FUN FACT: Over the short term, you can expect any result. The RTPs really don't factor into the equation during individual playing sessions – they are long-term payback percentages. This is great news for slots players because you can win big on any spin.
What Does the Casino Do If Players are Winning Too Much?
You've probably seen your fair share of Hollywood movies where pit bosses and dealers start getting nervous when players are winning too much at the baccarat tables, the blackjack tables, or the craps tables.
Casinos routinely take big hits from players on a hot streak, but they have many Aces up their sleeve to mitigate the effects of player winnings. For starters, there's the built-in house edge which always works in the casino's favor over the long term. Players tend to focus on the short-term, while strategic managers focus on the long-term. It's precisely the latter which matters when the profitability of the casino is at stake.
When high-rollers are on a hot streak, casinos will offer them all sorts of benefits to keep them playing as much as possible. Sometimes they'll let them leave the casino, fly them back home, and invite them back to the casino at a later stage with an all-expenses paid vacation.
Why would they do this? Because over the long term the house always wins. Slots players are no different to card players, or table game players. Statistics show that on average, the more you win, the more likely you are to keep playing. Even if you never come back again, your positive winning experience will likely generate tremendous hype for the casino about the big win that you recently hit. People will hear about it and want to come to the casino to try their luck. Casinos aren't worried about winners – they need them to stay profitable in the long term.
For every winner, there are scores of losers. Have you ever noticed that casinos never publicize a losers list? They always publicize winners because they are so few and far between. The long-term statistical significance of a big win is negligible.
An important statistical term known as reversion to the mean – in this case the RTP – always takes place. Over millions of spins, the casino take (winnings) always exceeds what the casino is paying out to players. A slot machine game with a 95% RTP will pay back $0.95 on every $1.00 that is wagered over the long term.
If somebody wins $10,000 and then other players spend $1 million on the same slot machine game and win and lose a little along the way, the casino still comes out ahead. The house edge is the single biggest factor working in favor of the casino. There is no need to rig slot machine games, change settings, or prevent players on a hot streak from playing any further. The timeline is what makes all the difference. In order to understand how a casino is profitable, you have to move from a short-term focus to a long-term focus.
What Impact Do Bonuses Have on RTPs for Slot Machine Games?
Video slot games are peppered with an array of in-game features, notably bonus rounds, free spins, random prizes and so forth. Surely, you muse, these must impact the RTPs of slot machine games. Before we examine the impact of bonuses, it's worth explaining how they work.
With slots, a screen may come up where you are required to select icons to reveal prizes. Your choices determine your prizes. In all regulated jurisdictions, casinos are required to reveal all hidden prizes that are being advertised and they must be available. If you pick a box and you don't win, at the end of the round all the boxes must be revealed to show you where the hidden prizes were.
Bonuses are by their very nature based on luck. It depends on what options you select, and those are also based on probabilities. If there is a $1000 prize hidden among 15 icons (on a 5 x 3-reel slot machine game), the chances of correctly choosing that $1000 prize are 1/15. That means there are 14/15 chances that you will not pick it. Again, the odds are against you and these work in favor of the casino.
Since we are working with long-term paybacks, the bonus rounds are factored into the equation. That means that all of the information is assessed, evaluated, and computed before the overall RTP of the slot machine game is generated. The bonus round wasn't created after the RTP; it was always there. Simple probability analysis can easily reveal the odds of certain prizes being hit given a fixed number of potential options. All of these elements are considered when determining the overall RTP and house edge of a slot machine game.
Sure, your choices while playing slot machine games can make a difference. In the short term anything is possible and that's the beauty of playing slot machine games. There are many stories of players winning life-changing jackpots during their first slots session, sometimes even of the first spin. From the casino's perspective, the short term really doesn't matter because they're in it for the long haul.