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Abstract
Price in commercial gambling is effectively the house edge of the game. For electronic gaming machines (EGMs), house edge is the hold percentage. The paper tracks changes in hold percentage for club and hotel EGM gambling in Australia. We use real gambling turnover and revenue data to show that hold generally falls over time, save for the State of Victoria between 1993 and 2009. In Victoria, hold fell during the roll-out phase of the sector, before rising steadily. We examine local level data, finding that hold varied considerably by gaming operator across the period, before converging. The unique owner/operator corporate duopoly that existed in Victoria is posed as a potential explanation for aggregate price changes. We then calculate estimates of the monetary value of changes in hold percentage. We find increased hold can lead to substantial monetary redistributions of gamblers' stakes toward the house and away from gamblers. Policy options to protect gamblers from the unfairness of undetectable price rises are discussed, including the possibility of a more tightly regulated hold percentage, a tax on windfall profits derived from raising hold, and tying game identities to particular hold percentages.
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Acknowledgements
Collaboration between the authors, including some work on this paper, was supported by a National and International Engagement Grant awarded to Kevin Harrigan by the Ontario Problem Gambling Research Centre. The authors would like to thank three anonymous reviewers for their constructive comments and suggestions.
Notes
1. Commercial house edge can be adjusted to ensure profitable margins. For example, in the Australian State of Victoria, the rules governing the table game blackjack in Crown Casino were adjusted in 2007 so that dealers draw another card when sitting on a ‘soft’ 17 (Warner, Citation2008), rather than paying out on gamblers sitting on cards valued from 18 to 21. This effectively gave the house a final shot at winning the hand, a measure perceived as being designed to tilt blackjack outcomes in favour of the house. In 2012, low stakes Crown Blackjack tables at Crown Casino were converted to Blackjack Plus. In this version of the game, if the house draws 22 it is a stalemate with gamblers who draw 21 and no bets are paid. The statistical return to player for Blackjack Plus is reportedly around 97.2% compared to 99.7% for Crown Blackjack (Dowling, Citation2012).
2. All monetary values in this article are in Australian Dollars.
3. A search of the Journal of Gambling Studies and International Gambling Studies archives found no articles focussed on the price of slots/poker machine/EGM gambling.
4. Now Gaming Technologies Association (GTA), www.gamingta.com.
5. It should be noted, however, that because of the higher volatility there will also be more people who lose. Thus the game with the higher price extracts more money from gamblers than the game with the lower price in a given period of continuous play.
6. Gamblers in some jurisdictions can rely on the provision of specific price information for different games to enable basic cost comparisons. In Victoria, for example, some machines have an information button which gives access to a screen that includes the return to play (RTP) in operation on that game. However, a survey of gamblers undertaken after these displays had become available indicated that a very modest 0.6% of those responding were aware that this information could be accessed (Caraniche Pty Ltd [Caraniche], Citation2005, n.p., Table 5.28). This awareness may have increased over time.
7. Cabot (Citation1996, pp. 430–432) argues that regulating the hold percentage of EGMs may even have the perverse outcome of reducing the numbers of low credit value low volatility machines, forcing gamblers to gamble at a higher intensity overall.
8. There is also an 80-20 split between metropolitan and regional venues, whilst from January 2003 caps on EGM numbers were introduced in several urban areas of Melbourne where EGM density and expenditure levels were highest. The number of capped areas was doubled in 2006.
9. The regressions are based on a small number of observations. Ongoing monitoring of these relationships would provide additional data points that may improve the estimation of the effect of hold on turnover and NGR.
Additional information
Notes on contributors
Richard Woolley
Dr. Richard Woolley works at INGENIO (CSIC-UPV), a joint Spanish national research council centre for knowledge and innovation research at the Universitat Politècnica de València. His primary interest in gambling research is in the use of scientific and technological knowledge in the design and operation of electronic gambling machines.
Charles Livingstone
Dr. Charles Livingstone works in the School of Public Health and Preventive Medicine at Monash University, Australia. His principal research interest is in the health and social effects of electronic gambling machine gambling and in regulatory reform aimed at ameliorating these effects. Recent research includes analysis of the geographic and socio-economic distribution of EGMs and revenue, and social theory of gambling dependency as a form of ‘addictive’ consumer behaviour.
Kevin Harrigan
Kevin Harrigan PhD is Head of the University of Waterloo's Gambling Research Team (http://gamblingresearch.uwaterloo.ca/) in Canada. His primary research interest is in gambling addictions with a focus on why so many slot machine gamblers become addicted. Kevin's area of expertise is computer science and math/statistics as it relates to the design and implementation of slot machine games. Topics he has researched include: gambling regulations, limitations of random number generators, PAR sheets, near misses, losses disguised as wins, and computer algorithms used to misrepresent slot machine game outcomes.
Angela Rintoul
Angela Rintoul is a Doctor of Public Health candidate with the Global Health and Society Unit in the School of Public Health and Preventive Medicine at Monash University. Angela's doctoral research is focused on reducing health inequalities and improving the health of disadvantaged populations. Her research interests include: social determinants of health and health inequities; public policy; gambling; preventive health; harm reduction and substance abuse. She is a member of the Public Health Association of Australia.