Gamblers and governments drawn to the sweet music of slots

Sunday, August 10, 2003

By Gary Rotstein, Post-Gazette Staff Writer

A constant other-worldly din cloaks the occasional "ca-ching" of coins as Saturday night players work the 2,200 slot machines at the Wheeling Island Racetrack & Gaming Center.

	She'd prefer to gamble in Pennsylvania, says Theresa Sabina, 43, of Pittsburgh's Brookline neighborhood, as she plays the nickel slots in West Virginia at Wheeling Island Racetrack & Gaming Center. Her mother-in-law Audrey Sabina, 66, also of Brookline, is at the machine behind her. (Bill Wade, Post-Gazette) Click photo for larger image. Online graphic: States and Slots

The cacophony of whirs and beeps at the weekly slots-playing peak may not sound pretty, but it's sweet music to operators of racetracks and casinos across the country. Their slot machines now raise far more revenue than horses, greyhounds or table games.

Some state and local governments also like the sound of slots at work. It means new tax dollars for coffers that have lost more traditional revenue during the economic downturn.

And for players from states that ban slot machines, the noise, lights, spinning reels and occasional reward on their gamble add up to an entertaining combination that many want to experience closer to home.

"I'd rather do it in Pennsylvania, but if they don't want it, we'll come to West Virginia," said Theresa Sabina, 43, of Brookline, whose button-pushing kept repeating 27 simultaneous nickel bets on a machine called Little Green Men.

Pennsylvania's politicians are wrestling mightily with the slots question at a time when some states, including Ohio and Maryland, have postponed or rejected their legalization. Whatever the financial temptation, gambling expansion remains controversial on both moral and economic grounds.

Yet other states and a growing number of players have embraced the machines, which, thanks to new technology, can be more entertaining, alluring and interactive than in the past, when the machines simply lined up a row of lemons or 7's. Their bottom-line purpose, however, remains the same: keeping 5 percent to 15 percent of the money customers put in them.

These one-armed bandits (the pull-down handles remain on the push-button machines, but aren't used often) generated $23.3 billion for operators and governments in 2002, compared with $9.2 billion in 1994, according to Christiansen Capital Advisors LLC.

The firm, which analyzes gambling industry trends, also showed that Nevada and New Jersey casinos earned more than twice as much money last year from slots as table games, $9.5 billion to $4.1 billion. Slots revenue in the two gambling centers surged 64 percent in a decade, while income from table games grew by half that amount.

The four racinos in West Virginia produced $596 million in slots income last year, up from $191 million three years earlier. Thirty cents of each dollar shifted from the player's wallet to the track goes to the state.

In recent slots discussion in Harrisburg, proponents have touted the potential for about $3 billion in slots revenue, with $1 billion to be retained by the state each year.

Not everyone buys the numbers, but no one disputes that budget shortfalls have heightened interest in the idea. Legislative leaders and the governor's office are expected to resume discussions next month on a possible compromise that would legalize the games in Pennsylvania.

"When times were better, it was easier for those who don't want the gaming element in their states to say, 'We don't want it here,' " said Ed Rogich, vice president of marketing for International Gaming Technology, the nation's leading slot machine manufacturer.

"Now people are saying, 'Why are we letting [the revenue] go across the border to that state?' "

Who plays the slots?

West Virginia legalized slot machines in 1994, hoping to revive its racing industry. About 10,000 slot and video poker machines are in place at Wheeling Island, Mountaineer Racetrack and Gaming Resort in Chester, Charles Town Races & Slots near Maryland, and Tri-State Racetrack & Gaming in Nitro.

	Helen Cappel, 86, of Columbus, Ohio, and her friend Westley Clemens, 79, of Mansfield, Ohio, play the 25-cent slots at Wheeling Island Racetrack. (Bill Wade, Post-Gazette) Click photo for larger image.

The other racino states are Delaware, Iowa, Louisiana, New Mexico, New York, Oregon and Rhode Island. Iowa and Louisiana also have slot machines in casinos.

Nine other states have legalized slot machines in land-based or riverboat casinos. Additional slot gambling takes place in Indian reservation casinos across the country, which are not subject to state legislation.

No other states have versions of what has been proposed in legislation passed by the Pennsylvania House -- two additional slots-only parlors that could have thousands of machines but no connection to either a racetrack or broader casino.

Proponents of racetrack slots suggest it's sensible and practical to expand gambling in locations where it already exists. In doing so, the tracks know they can reach new customers, especially women.

Research by Harrah's Entertainment Inc. suggests that 80 percent of female gamblers in casinos prefer slot or video poker machines to table games such as blackjack, roulette and craps. By comparison, 66 percent of men prefer slots.

Industry representatives say women didn't grow up exposed to other forms of gambling to the same extent as men. With slots, there's no need to interpret the mysteries of a racing form or make quick, correct decisions among other players at the blackjack table.

Bruce Rowe, Harrah's vice president of slots and research and development, said younger men also might gravitate toward the machines, which increasingly resemble the video games they played as kids.

"Some ... traditional games on casino floors are complicated to learn, and were learned through either family or society or transferred in ways that are not necessarily done today," Rowe said. "Craps was a game learned on troop ships in the military, and so craps play is of a generation where it's not typically learned today. And card games are not played at home as much."

Yet the Harrah's research indicates that all age groups of gamblers prefer slots, and it even increases with age, ranging from 69 percent for 21- to35-year-olds to 78 percent for those over 65.

The Harrah's profile of casino gamblers portrays the typical player with better education and higher income than the average American. Some of that could be tied to the resources required to travel to the most popular casinos in the country, in Las Vegas and Atlantic City, N.J.

At Wheeling Island, there were plenty of women and middle-age people carrying buckets of coins to machines or cashiers. A cleaner, easier-to-maintain ticket system is increasingly used at Nevada and Atlantic City casinos to replace coins, but that trend has been slower to come to West Virginia.

Many Wheeling players carried cards they inserted into the machines in addition to coins. They're members of the "preferred players club," who amass points that entitle them to prizes such as free meals. In return, they provide personal information that helps Wheeling Island track their gambling interests.

"There's a core customer that we call Mary and Joe Midway," said Jim Rafferty, marketing vice president. "They're an older American who's between 45 and 65 who are empty nesters out enjoying themselves. ... They're the people who make casinos around the country go."

He said at least 30 percent of Wheeling Island customers were from Pennsylvania, and Mountaineer officials said their percentage was at or near that.

Edson "Ted" Arneault, Mountaineer president, said the potential impact of Pennsylvania slots legalization on the West Virginia tracks is hard to assess. He is assured a form of protection, however, from obtaining a Pennsylvania license to develop a new thoroughbred track in Erie, which could also have slots.

"I don't think [players] will switch just because it's Pennsylvania or West Virginia," Arneault said. "It's going to be whichever place entertains them the most. ... My opinion is you will create a bigger market than exists now because of marketing and awareness, not just of the machines, but the complete entertainment product."

The 'gambler's fallacy'

The modern slot machine is typically traced to 1890s San Francisco, where a pull-handle invention by immigrant Charles Fey lined up liberty bells for winners on the three side-by-side-by-side reels. It was played in saloons.

The recent playing boom has been fueled by nonhard-core gamblers who favor glitzy casinos as much for entertainment as for the big score. The transition pleases most centers. The $10,000 to $15,000 cost per machine is pocket change compared with the costs and headaches of running table games.

"A machine doesn't need a break, it doesn't need health care," noted IGT's Rogich. "It makes sense from a lot of standpoints. ... The machines tend over time to be more predictable, with a more consistent revenue flow."

The newest versions of the machines talk back to the player with familiar lines from the likes of Rodney Dangerfield or Vanna White.

Designers at IGT and elsewhere seek to lure baby boomers by incorporating themes and characters of their childhood TV shows such as "That Girl" and "I Dream of Jeannie." For the younger set -- though not too young since either 18 or 21 is the minimum playing age, depending on the state -- the sights and sounds of "Austin Powers" command the screen and sound system.

"We're much more a mirror of popular culture today," said Joe Kaminkow, IGT's vice president of game design. "Players are no longer looking for just the experience of a spinning reel and having a transaction occur. They're looking for more time on the device, for much higher return in entertainment value."

Today's machines can generate 500 sounds, compared with 15 a few years ago, Kaminkow said. Computer chips provide bonus round options and long-shot jackpots that older reel machines could not accommodate.

Betting options have increased, too. Instead of just a single line on which to match three items, players can try to match multiple lines simultaneously by pushing a button for additional wagers on each spin.

They also can bet a higher multiple than the machine's standard denomination, a decision that ups their financial stake with each spin.

But little of that, or anything else a slot player can do, will ultimately affect his or her chances of coming out ahead. The games are pre-set by manufacturers, according to specifications from the casinos or state regulatory agencies, to pay out a certain percentage of the amount wagered.

No one knows exactly when the payouts will come, only the long-term likelihood over thousands upon thousands of plays. That's determined by a random number generator constantly active inside the machine, which stops on a certain sequence that matches up with symbols when the button is pushed or handle pulled.

Winning and losing on a slot machine is blind, unpredictable luck, although some people mistakenly believe their chances of winning are affected by what has occurred on the machine previously, said Robert Hannum, an associate professor of statistics and operations technology at the University of Denver.

"That kind of reasoning is called the gambler's fallacy," said Hannum, who studies probability. "What it amounts to is mistaking the short term for the long term."

In a few games such as video poker and blackjack, players can make decisions that influence the outcome. Those games, however, also are rigged to assure the house edge in the long run.

At West Virginia's tracks, the machines returned to players 91.4 percent of the $7 billion they wagered last year, some in small amounts and some in multithousand-dollar jackpots.

That rate of return is about the industry norm. It's higher in Las Vegas, where more competition exists. The odds for players' success is much better than playing state lotteries, which often return 50 percent in prizes, but lower than casino table games, where knowledgeable players can reduce the house advantage to 1 or 2 percent.

To many players, the slots' rate of return seems much lower than advertised. That could be because many don't quit when ahead.

It's easy to simply recycle their money in the machine, through electronic credits, until it dwindles to nothing. Some gambling treatment counselors believe that's exactly what the casinos, racinos and manufacturers want, encouraging addictive behavior.

"The sounds, the lights, the near-misses -- it all acts to sort of hypnotize the player or get them to escape or feel no pain or just stay in that zone," said Bob Breen, chief psychologist at Rhode Island Hospital's gambling treatment program.

His research on compulsive gamblers suggests players favoring slots and video poker developed addictions in a year's time, instead of the three to four years typical of other gambling types.

"People have been saying for a long time that these machines are to gambling what crack cocaine is to drugs, and it seems to be true," Breen said. "Some of the reasons are obvious -- the repetitiveness and speed of these games are unmatched. There's never been a type of gambling like this in history."

Industry representatives said such concerns were unfounded, that national studies had shown that 1 percent of the population suffered from gambling addiction, whatever the form. The method of gambling, they say, does not change that.

"It's no different from people who have a compulsion to drive fast," Rogich said. "Would you blame the car because it's a racy-looking car?"

Jim Theys, of Turtle Creek, near the end of eight hours in Wheeling on the nickel Yukon Gold machine and other slots, said he had no trouble sticking to a budget of what he's willing to lose, typically $300 maximum.

It's a day's worth of entertainment for the 45-year-old factory worker and his wife. He won $500 once on a single spin, but comes out ahead overall "about once out of seven or eight times. Not very often." He doesn't believe he gets back 90 cents per dollar played.

Hannum said it was understandable why losing slots players don't think they win enough.

"It's not as bad as people think it is," he said, "because that 92 percent return includes the big jackpot payoff. If you're not the one who hits the big jackpot, it seems worse. ... But since most of the machines are strictly no-skill lady luck, there's nothing you can do about it anyway."

Gary Rotstein can be reached at grotstein@post-gazette.com or 412-263-1255.

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