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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Gambling: A Penny for Your Slots

13 June 2005

More and more, slot players are putting in their 2 cents, or more.

Once relegated to gambling-equipment museums, the penny is back with a vengeance, and slot machine floors -- from those in the smallest casinos to those in billion-dollar Strip resorts -- are making space for them.

"Pennies are the rage, and they're growing," said Jefferies & Co. gaming analyst Aimee Marcel, who follows the industry's primary equipment manufacturers and suppliers. "Most of the regional gaming markets are full of penny games. In Kansas City, (Mo.), for example, about 45 percent of the games are penny-based. The casinos on the Las Vegas Strip were the last places to convert to pennies, and they're starting to catch on."

Again.

Video-based gaming machines began to permeate casino floors in the 1980s, with color graphics, unique themes and large cash jackpots. Penny slots, with their mechanical reels and relatively minuscule payouts, all but disappeared.

But technological advances, which let slot machines increase the number of ways to win and ushered in cashless gambling, better known as ticket in-ticket out, made penny slots more practical. Pennies are also an option on multidenomination slot machines, which let players select and change a game's wagering value.

Nevada gaming regulators have tracked the expanding use of multidenomination slot machines and penny-only games. Statewide, there were 176,589 slot machines being played in 341 nonrestricted locations (not including bars, convenience stores and smaller taverns) during March. Of those games, 56,657 were multidenomination; 17,499 were of the penny variety.

Multidenomination machines won $233.9 million from gamblers in March, accounting for more than 32 percent of the month's $719.6 million statewide slot win. The gaming win from penny slots in March was $73.7 million, a 117.5 percent increase from March 2004.

In first three months of 2005, the casino win from penny slots was $191.2 million, a jump of 114.4 percent from the same time period in 2004. Multidenomination games won $630.9 million from gamblers in the first quarter, a 71.8 percent increase from a year earlier.

"Pretty much all the games we're purchasing for our casino floor now are multidenomination games," said Steven Zanella, vice president of slots for the MGM Grand, which operates 2,400 slot machines. "We don't have a lot of pure penny games, but people are playing pennies on the multidenomination games. Seeing penny slot machines on the Strip does surprise me. It's taken a while for this change to happen."

Dan Roy, senior vice president of operations for Station Casinos, which operates almost 20,000 slot machines in its Las Vegas Valley casinos, said the bulk of the slot floors are occupied by multidenomination machines. He said players like being able to name their wagers.

"We give customers a choice in both games and denominations," Roy said. "A lot of customers will play pennies for a while, and maybe they'll get lucky and then move up to nickels. What's nice is they don't feel like they have to change machines if they want to jump up in denomination."

Ed Rogich, vice president of sales and marketing for International Game Technology, said the Reno-based company provides multidenomination games to the casinos.

It's up to the operators to set the wagering amounts for the games.

Lower-denomination settings are 1 cent, 2 cents, 5 cents, 10 cents and 25 cents. Many times, Rogich said, casinos will leave a game at a single denomination.

Gaming Control Board statistics show that dollar and quarter slots have been the most popular with gamblers over the past 20 years or so.

Therefore, it seems strange that slots with lower-denomination wagers would take hold.

Some might conclude that people playing more lower-denomination machines would bet less money, and generate less revenue, for casinos.

However, statistics show players are still gambling as much money, or even more.

Kent Young, vice president of marketing for Australia-based Aristocrat Technologies, said the average wager on a penny game is about 70 cents per spin. Most players, he said, make a wager that covers all their chances to win.

"There was a lot of resistance initially because a lot of casinos just looked at pennies as being pennies," Young said. "They didn't see the entertainment value at first until we started being able to show performance and the players' acceptance."

Low-denomination games may also keep customers playing longer by heightening the gambling experience, observers said.

"What the penny machines and lower-denomination machines have done is expand the entertainment value of the game," Zanella said. "When you have more lines, it gives the players more chances to hit something. I think that's why the penny games are more entertaining, because you have so many different combinations to get into the bonus rounds, where all the fun happens."

Computer chips and video-based gambling allowed manufacturers to increase both the number of lines (ways to win) and the number of credits (amount wagered) on a particular machine.

In years past, the average slot machine offered three to five reels with nine possible payouts. At one credit -- or coin wagered -- per line, the machine would be a 45-coin game.

Now most penny slots average 25 lines and up to 10 credits per line -- 250 coins, or $2.50 per play, based on the maximum possible wager. With secondary bonuses and enhanced jackpots, players can win several hundred dollars on a single pull.

The manufacturers have also kicked up the jackpots substantially. The Millioni$er game, produced by Aristocrat, has paid several $1 million prizes. In the past year, a Boulder City woman won million-dollar jackpots on two similar machines at two different casinos.

To qualify for the top prize, a player must wager $2, or 200 credits, on the penny game.

IGT recently rolled out in Nevada a penny version of its popular Megabucks jackpot system, with the top prize starting at $10 million. The game, which has 60 different pay lines and a maximum wager of five credits per line, requires a 300-credit -- or $3 -- wager to collect Megabucks.

Companies are rolling out games with more lines and credits. Aristocrat is placing 50-line penny games in casinos; IGT displayed a 100-line penny game during last year's Global Gaming Expo.

"It all about length of time at the device," Marcel said. "The gamblers in the regional markets have gotten used to penny games. Because of the volatility and the frequency of hits, a player always feels like they're winning something. Aristocrat is definitely the powerhouse of penny games. Pennies are what's driving the manufacturing side of the industry right now."

Marcel said that while players may not win as much per line on a lower-denomination game as they would on a higher-denomination game, jackpots on lower-denomination games can still be sizable.

Ticket in-ticket out systems took the work out of paying jackpots for lower-denomination slots. The systems let players cash out of a game and receive a coupon redeemable for money at a kiosk or cashier's cage, or usable at another slot machine.

Without tickets, a casino would need more people and more equipment to deliver winnings.

"Ticketing allowed this to happen," Young said. "If you tried to pay out a jackpot on a penny game in pennies, you would need a hopper (the part of the machine that stores coins) that was massive. Once ticketing came into place, that opened up a whole new segment."

Added IGT's Rogich, "Without ticket in-ticket out, penny slot machines make absolutely no sense."

Penny and multidenomination games are shifting players' and casino managers' focus to credits played. If a player puts $20 in a multidenomation slot machine, it would be worth 80 credits if he were playing quarters, but 2,000 credits if he were playing pennies.

Roy said Station Casinos' customers are averaging between 75 cents and $1.25 per spin on the multidenomination games, regardless of the game's wagering value. He said the average play is two or three coins per line on a penny or 2-cent game.

"Consistently, they're covering the lines," Roy said. "On a 20-line penny game and covering the lines with three coins each, that's a 60-cent bet. That's nearly the same wager as a three-coin, quarter reel game and it's twice what you would get from a nickel poker, five-coin game. Denominations are starting to go away in favor of credits."

Added Young: "It used to be one line, one dollar, and that's all a player could play. But not anymore. Now players have a range of choices."