Slot machine payback ranges and money management

18 August 2013

By John Grochowski

QUESTION: A follow-up question to your answer that advantage players don’t need to follow the same kind of win/loss limit money management as average players. Is there any fear that even on a game where you have an edge, that you might run into a string of bad luck which could offset your edge and take away your profits? Do you not protect any of your profits even if you have an edge at the game?

ANSWER: Yes, I think there's value in a casual player, even one who has an advantage over the casino, in locking up a percentage of profits.

It's a matter of bankroll. A pro who is sufficiently bankrolled, with tens of thousands of dollars in reserve, probably is just going to play on when he draws a $1,000 royal flush. He has an edge, and continuing to play is pursuit of profit.

But if I go into the casino with $500 and win a $1,000 royal, leaving me with a bankroll of $1,500 minus whatever I'd already invested, I have to be aware that a long losing streak -- which happens to everyone -- can wipe me out. In that situation, I'm probably going to lock up my original $500 plus $500 more.

One advantage casinos have even over players who have an edge on the game is that the casino has more money than you do. They can withstand longer losing streaks than you can. So yes, unless players have very deep pockets, locking up some winnings in any session is a smart way to go.


QUESTION: Please explain something to me about slot machine paybacks. I was looking at an old issue of Strictly Slots magazine, and it listed “payback percent range” for a number of slots. It listed The Amazing Race, In It to Win It as 89.50 percent up to 93.48 percent, and Superman The Movie at 87.38 percent to 91.97 percent.

Does that mean each game is guaranteed to pay no less than its bottom figure and no more than its top figure? How do they do that? Is there some kind of regulator that stops the machine from paying when it hits its top, and starts a pay cycle when it hits its bottom?

ANSWER: No, what those numbers mean is that the game manufacturers produce machines with a range of theoretical payback percentages. International Game Technology makes a 89.50 percent version of The Amazing Race, it makes a 93.48 percent version, and it makes several versions with paybacks in between. Aristocrat Technologies makes an 87.38 percent version of Superman The Movie, it makes a 91.97 percent version, and it makes versions in between.

It’s up to the casino operator to choose which version it wants to install. The different versions will look the same, but have different game chips yielding the different percentages.

There is no regulator as such. Nothing is needed to tell a machine it’s time to start or stop paying out. The regulator really is just the odds of the game. The game designer and programmer set the math of the game so that the odds naturally lead to the targeted payback percentage over a very long time. It’s the same effect as in table games. In double-zero roulette the odds of the game lead to a 94.74 percent payback -- the same as saying a 5.26 percent house edge. In the short term, you can have big wins and you can have fast losses, but in the long run the odds of the game will return 94.74 percent of money wagered to players.

It’s the same thing on slot machines, only with more possibilities and more complex math. You can win big, you can lose fast, but eventually the odds of the game lead to the targeted payback percentage.