What does a slot's 'payback' really mean?

A friend of mine was cashing a slot ticket at the cage in one of the local casinos the other night. He noticed a sign on the back wall that read, "Last month, our slots payback rate was 92 percent."

Although he thought that sounded like a pretty good deal, he complained that he seldom seems to end up keeping anywhere near 92 percent of the money he starts his day with. Because of that, he wonders whether percentage statements published by the casinos are "baloney."

So how about you? Do you feel like you're getting back 92 percent of the money you brought along to gamble on the slots? Of course you don't -- and actually, you're right! Let me explain why and how.

Suppose you walk into the casino with $100 bill in your pocket. You stuff it into a "92 percent" machine and play $1 at a time until you've done 100 plays. Now, anything could happen, but on average, $92 worth of credits will still be on the machine at that point in time. The casino didn't lie.

That will take you about 10 minutes. So what do you do now? You keep on playing of course -- you didn't come to gamble for 10 minutes and quit. So you play the remainder of your credits back through the machine, a buck at a time -- 92 more times. About nine more minutes will go by and on average, you'll have $85 left.

Push that button 85 more times and you're supposed to have around $78 still on the machine. Another 78 plays after that, and you'll be down to 71 bucks, on average. Are you beginning to get the idea?

Let me spell it out for you. After one hour's worth of $1 plays, you'll have pushed that button (or pulled the arm) about 600 times and have an average of $48 left. The house will have paid you back only 48 percent of your original $100 -- but a full 92 percent of your $600 in "action."

If you stay at that machine for two full hours, by all rights, you should be practically busted! That's because by then, you'll have put $1,200 worth of total "action" through the machine, $1 at a time -- and the house will have taken 8 percent of the $1,200! That's how it works.

In the casinos' defense, this is not false advertising. It's the only sensible way to calculate slot profits. After all, the house has no idea how much money you may have brought with you to that machine. It could've been $100, or it could've been a thousand. They only know how much "action" you put through, and it's this total "action" that they earn their percentage on.

On top of that, the rapid-fire pace of slot play actually allows you to put through as much total "action" in an hour of $2 slots as an hour of $15 blackjack! Difference is, the average house profit on blackjack is roughly 1½ percent of your total action. But a $1 slot earns around 5 percent, while the 25-centers make 6 percent, and the nickel machines pound away at about an 11 percent clip.

Meanwhile, the accounting at table games works very differently. The two main stats they track are how many dollars you buy in for and how many dollars you leave the table with. The difference between the two is called their "hold." These hold figures average about 13 percent at blackjack, 20 percent at craps and 27 percent at roulette. Compare that to the percentage the house ended up holding after one hour in the above slot scenario.

This is why the Illinois Gaming Revenue report shows that 86 percent of its gross receipts in dollars come from slots. A payback of 92 percent sounds much bigger than it really is when you're making a bet every 10 seconds, and it's figured on how many dollars you bet -- not how many dollars you brought.