SLOT MACHINE MATH

Slot machines earned their name because they have a slot that accepts coins or tokens for play
from players. Most slot machines today are equipped with a currency acceptor box, or bill
validator, that allows the slot machine to accept currency. A player will insert coins or currency
into the machine to begin play. Most slots have two types of meters: hard meters and soft meters.
The two hard meters, which resemble the odometers in cars before the 1990s, track “coin-in” and
“coin-out,” respectively. Coin-in is the money inserted by the player into the slot machine. Coin-
out is the money that is paid by the slot machine to the player. Coin-in typically goes to the slot
machine hopper, a coin storage bank inside the machine through which all payouts are made. If
the hopper is full, the machine will divert additional coins to the drop bucket stored in a locked
cabinet beneath a slot machine. If the hopper becomes empty, a casino employee will undertake
a “fill” by adding coins or tokens. Slot meters record (1) total credits by coin-in and coin-out, (2)
total credit through the bill validator, (3) total credits, total credits played, total credits won, and
total credits paid, and (4) total games played, and total games won.
Pace refers to the speed of the game in decisions per hour in terms of hands dealt, wheel spins,
dice rolls, etc. Average bet refers to the average amount of money wagered per decision.
Duration is the length of time a player plays, in hours (a unit of time other than hours can be used
if the pace is also expressed in this unit). Slot machine meters and tracking systems allow for
easy determination of an individual player’s slot handle. For table games, however, it is
impractical to monitor every bet a player makes, or how long he plays, and the speed of the
game.
Theo is in play. Although technology may change this is the future, player table game handle is
currently estimated using reasonable values established through occasional observation of the
player’s average bet and duration of play. Although the speed of a table game is affected by
several factors, including the dealer and the number of players at the table, an average value is
often used for game pace.
Drop is the total amount of the contents in a game’s drop box (or drop bucket and currency
acceptor box in the case of slots). For table games, drop consists of the currency and foreign
chips in the drop box plus the value of credit instruments (markers) issued or redeemed at the
table. That is, drop = (cash + markers + chips) contained in the drop box.
For slots, the drop is the total amount of currency and coin in the slot machine currency acceptor
box and drop bucket. That is, drop = (coins + currency) contained in the drop bucket and
currency acceptor box. The slot drop does not include coins or tokens in the slot machine’s
hopper.
As with the above description of win, this refers to the actual win percentage, and not theoretical
or expected win percentage. Actual win percentage represents the fraction of money wagered
that is retained by the casino over a given period or number of trials. The theoretical win
percentage is the house advantage, or the long-run average percentage of money wagered that is
retained by the casino. For many trials, the actual win percentage should approximate the
theoretical win percentage. For slots and other gaming devices, the actual win percentage is
known. For table games, however, win percentage is difficult to measure since handle is usually
unknown. For further discussion on these and other related issues, see the section later in this
chapter on different ways to express win rate.
The percentage of money wagered that the casino could expect to win eventually is the
theoretical, or expected, win percentage. This value is just the house advantage:
Theoretical Win % = Theoretic Win/Handle = House Advantage
For many trials, the actual win percentage should be close to the theoretical win percentage.
Hold, or more specifically hold percentage, is the percentage of the drop that is.
won by the casino. That is, Hold % = Win/Drop.
Slots and other gaming devices, the hold percentage is equivalent to the win percentage since
drop is the same (in principle) as handle. Slot hold represents the percentage of all money
wagered by players that the machine retains.
Four types of slot machines are most popular.42 The traditional spinning reel machines occupy
57% of the slot market, compared to video poker with 25%, followed by multi-line, multi-play
video devices with 14%, and wide area progressives with 4%. Most video games are either poker
games or electronic versions of the traditional spinning reel machines. Other less popular video
games are electronic versions of other casino games such as keno and blackjack. Video “reel”
machines often are themed and can be based on board games (Monopoly, Battleship), television
shows (Wheel of Fortune), and rock and roll icons (Elvis). The differences between traditional
spinning reel machines and video “reel” machines are only in the way that the results are
displayed to the player.
Since traditional spinning reel machines are no longer mechanical but controlled by computer
microchips like video “reel” machines, they also can be programmed for virtually any number of
“stops,” any hit frequency, and any house advantage within the limits of applicable regulations.
In other words, the symbols on each reel do not have an equal chance of appearing on the pay
line. Instead, the computer in the slot machine produces a random number, each of which
corresponds to a particular combination of symbols on the pay line of the slot machine. Once the
random number is generated, the computer instructs the slot machine to stop the reels so that
they display the combination of symbols that corresponds to the random number.
Multi-line, multi-play video devices are clearly becoming more popular, taking shares from the
traditional spinning reel. These machines come in a wide variety of types depending on how the
games pay winning players. Line games allow the player to activate additional pay lines by
playing more coins. In a typical reel slot, for example, three horizontal lines and the diagonals
might be activated to pay back with winning combinations. With today’s video slots, many more
pay lines can be activated. Multipliers pay for winning combinations on a single line only –
usually the center horizontal line. Payback for additional coins is simply a multiple of the
payback for a single coin. Multi-line, multi-play video games combine both multipliers and line
games. Buy-a-Pay games allow the player to “buy” additional winning symbols with extra coins.
For example, one coin inserted may only pay out for three cherry symbols, two coins will pay for
three cherries or three bars, and three coins will pay for three cherries, three bars, or three 7’s.
House advantage for slot machines is oftentimes referred to as the theoretical win percentage or
theoretical hold. This value represents the long-term percentage of money wagered that the
casino retains (wins). The other side of the house advantage, the proportion of wagered money
returned to the player, is the payback percentage. For example, if a machine holds 5% (about
average for Nevada slot machines) the payback percentage is 95%.
Hold percentage is a theoretical amount that can be set to any value with the computer program
that controls the machine. Whatever this theoretical hold, the actual percentage will vary but will
be close to the theoretical amount after many plays. Assessing the likelihood of a certain
difference between actual and theoretical win is possible because of the random selection of
outcomes.
One property of randomness that is particularly important for casino games is unpredictability.
Random does not mean totally 43 Since the computer must be programmed to select the
combination, the RNG (Random Number Generator) produces pseudo-random numbers that act
like random numbers. To determine whether a series of numbers possesses random properties,
mathematicians apply numerous statistical tests for randomness Some of these tests include the
runs, goodness-of-fit, and various other chi-squared tests. Because of the law of large numbers, it
is possible to make predictions about what will happen overall in a completely random game –
this is, in fact, an appealing feature of certain types of random phenomenon.
The theoretical hold percentage varies across slot machines quite widely, as much as between
0.5% and 30% (some video poker machines if played with expert strategy will even pay back
over 100% – a negative house advantage), and depends on the type of machine, denomination,
and even the authority. The higher denomination machines have lower house advantages.
Hit frequency is the percentage of time the machine pays something to the player. Hit frequency
is important in assessing whether a particular slot machine will appeal to a particular audience.
There is, however, a tradeoff between hit frequency and the amount of the payout. For a given
payback percentage, hit frequency and average payout amount per hit are inversely related. One
machine can pay out lesser amounts quite frequently while another with the same theoretical
payback percentage may pay out substantial amounts very infrequently. From the casino’s
perspective, these two machines will generate the same amount of revenue eventually, but to the
player they will behave quite differently. Casino management must decide what balance they
need to strike between hit frequency and payout amounts, and the mix of types of machines to
offer to the playing public.
A par sheet is a document prepared by a slot machine manufacturer that shows the possible
outcomes from the play of a slot machine, the probability of occurrence of each, and the
contribution of each winning outcome to the payback percentage. It also includes other statistical
information such as the hit frequency, volatility index, and confidence limits for actual payback
percentage. Par sheets are sometimes referred to as PC sheets, game sheets, specification sheets,
or theoretical hold worksheets.
The volatility index is the basis for calculating how much variation can be expected and for
determining whether an observed hold percentage on a given machine is normal or unusual for a
given number of plays. In general, the larger the volatility index, the greater fluctuations will be
in actual hold percentage. This section examines the derivation and use of this index. Volatility
index can be calculated by multiplying the slot wager standard deviation times the appropriate z
score, where the z score is the standard normal probability value corresponding to the desired
confidence level.
Volatility Index: V.I. = zσ
Where z equals the z score for the desired confidence level, and σ is the slot machines per coin
standard deviation. For a slot machine, the per-coin standard deviation can be computed by: The
volatility index and the derivation of the confidence limits are covered on Slot Volatility. A 90%
confidence level is commonly used for the slot volatility index, with z score equal to 1.65. Net
Payi = the net payoff per coin wagered = (payout minus number of coins wagered) divided by
coins wagered, EV = house expected value (theoretical edge) for number of coins wagered, Pi =
probability of each Net Pay.
Casinos can increase the theoretical paybacks on slots by either increasing the number of
winning combinations or increasing the amounts of paybacks on winning combinations. A casino
can do the former on many slot machines by modifying the computer chip that operates the game
to produce more or higher paying winning combinations. A casino can do the latter by increasing
the paybacks on combinations. For example, the payout on lining up four bars may be increased
from 100 coins to 200 coins. In either case, over time, the casino decreases the theoretical win,
pays out more in winnings and retains less revenue as a percentage of handle.
Slot machines with progressive meters do not have a set theoretical win in the same sense as
other slot machines. On non-progressive slot machines, the theoretical payout to players is the
same on every play because the opportunity to win, the winning combinations, and the amounts
of the payouts on winning combinations remain constant. On progressive machines, the
progressive meter increases with each pull of the handle. For example, on a dollar progressive
machine, a nickel of every dollar played may be added to the progressive jackpot. Therefore, on
any pull of the handle, the theoretical pay back will increase as the progressive meter increases.
If no player wins the progressive jackpot, at some point, the increasing size of the jackpot
creates a theoretical payback that will result in a statistical advantage to the players. From this
point to the time a player wins the jackpot, the total amount of the paybacks to the players
including the progressive jackpot should exceed the total amount of money played by the
players.
This slight statistical advantage is what attracts the slot teams. They find progressive jackpots
that have arisen to a level that favors the players. Only certain progressive slot machines will
meet the slot team’s criteria. First, the number of slot machines that are linked to the progressive
jackpot must be manageable. The team needs to monopolize all the slot machines to avoid the
risk that a non-member will win the jackpot. Second, the statistical frequency of hitting the
jackpot must be consistent with the slot team’s bankroll. No slot team has an unlimited bankroll.
Based on probabilities, the team needs to have enough cash on hand to play all the machines on
the carousel until one hit the progressive jackpot. For example, the previous chart shows a
progressive slot machine that has a cycle of 884,736 (and a probability of a little better than one
in one million of hitting the progressive jackpot). The Poisson probability distribution can be
used to determine the probability of hitting the jackpot over the course of a specified number of
plays.
The probability of hitting the progressive jackpot is one in ten million, the slot team would need
an astronomical bankroll to have reasonable assurances that it would hit the jackpot before
running out of money. Therefore, slot teams avoid the “mega” jackpot progressive that have very
infrequent hits or winners. To minimize their potential exposure, they concentrate on progressive
carousels that feature lower jackpots with a higher frequency of payouts.
Early slot machines were mechanical and the odds of winning depended on the number of reels,
number of stops on each reel, and payouts for the winning combinations. For example, if a slot
machine had 3 reels with 20 stops each, and each stop had a different symbol, there would be (20
x 20 x 20) = 8,000 combinations. If 30% of these combinations were winners with a combined
total payout of 7,500 coins, the hold percentage (house advantage) would be (8,000 –
7,500)/8,000 or 6.25%. The average price of playing this machine would be $6.25 for every $100
bet. Casino operators could adjust this price by changing the number of winning combinations,
changing the symbol configurations on the reels, or changing the payout for winning
combinations. With today’s microchip-controlled slots, the odds of winning can be adjusted
merely by altering the computer program that runs the gaming device.
A factor that is not in the casino’s control that affects game price is player skill in those games
involving both chance and skill. In a typical six-deck game, for example, the average blackjack
player gives about a 2% edge to the house, but a basic strategy player is at a 0.5% disadvantage.
Game speed, or number of decisions per hour, affects the cost per hour to the player (and the
expected casino win per hour), although it does not alter the basic price per unit wagered (i.e.,
the house advantage). In roulette, for example, a $5-per-spin player betting at a double-zero table
making 40 spins per hour can expect to pay ($5 x 40 x .0526) = $10.52 per hour. At a table
completing 60 spins each hour, the same player would spend an average of $15.78 per hour. The
basic price in both cases is 5.26% of the amount wagered. Similarly, at a base price of 1.15%, a
$100-per-hand baccarat player will pay, on average, about $92 per hour if playing 80 hands per
hour, but it will cost this same player $161 per hour if dealt 140 hands per hour.
For slot machines, tracking the exact earning potential of players is easy with the player tracking
systems in use at most casinos because all factors needed to make the determination are
available. Slot machine manufacturers state the house advantage of the machines in the “par”
sheets. The meters on the machine record the denominations, number and total of all coins
played.
Determination of player value is more difficult for table games. Unlike slots, where each coin or
credit played can be recorded, a player’s table game betting handle, betting pattern (the bets
placed) and, in cases where relevant, the skill of the player, are not precisely known and must be
estimated through observation.
Video poker as played in casinos is a game of mixed skill and chance. In a typical video poker
game, the player randomly draws five cards from a deck of 52 cards and has the option of
keeping or discarding up to all those cards. For each card discarded, the player will randomly
draw an additional card from the cards remaining in the original 52 card deck. The combination
of cards remaining in the player’s hand is compared to a pay chart. If the player has any of the
required combinations, he is paid according to the pay chart. The skill element involved in video
poker is the determination of which cards to hold or discard. Some casinos offer video poker
machines that when played at optimum skill pay back more on average than they would collect.
The casinos rely on players not being able to play at optimum skill to insure a profit. Despite
this, some players can play at optimum skill and have an advantage albeit slight (about .5%) over
the casino.
Progressive slots are slot machines in which one or more of the payouts increase by a set amount
for each coin or credit played that does not result in the player winning that payout. For example,
suppose a progressive slot machine has a top payout of $100 and 5 cents of every dollar bet
increases the progressive jackpot. If the player plays the machine for $1 and does not win, the
progressive jackpot will increase to $100.05. The progressive jackpot will increase in this way
until it is won, and it will then be reset to its original starting point. If the progressive jackpot
increases to a certain point without being won, then the theoretical payout results in a positive
player advantage.
This slight statistical advantage is what attracts the professional slot teams. These are organized
and financed teams of professional slot players that attempt to exploit those progressive slots that
have a positive player expectation. Only certain progressive slot machines will meet the slot
team’s criteria. First, the number of slot machines that are linked to the progressive jackpot must
be manageable. The team needs to monopolize all the slot machines to avoid the risk that a non-
member will win the jackpot. Second, the statistical frequency of hitting the jackpot must be
consistent with the slot team’s bankroll. No slot team has an unlimited bankroll. Based on
probabilities, the team needs to have enough cash on hand to play all the linked machines with
the progressive jackpot until one team member hits the progressive jackpot. The slot team can
use the Poisson probability distribution to determine the probability of hitting the jackpot over
the course of a specified number of plays. The Poisson distribution (named after the 19th century
French mathematician Simeon Poisson) is commonly used to calculate the probability of rare
events.