Payout Basics
When applied to slot machines, the term “payout” refers to the amount of money a player receives in return for betting. It is most commonly expressed as a percentage or a ratio, and it is calculated by dividing the amount of winnings paid by the total amount of cash wagered. So if a player starts out with $100 and finishes up with $95, the payout is 95:100 or 95%.
Payout Basics
Payout percentages are not at all random. In fact, they are mandated by law and may not fall below a specific minimum determined for each jurisdiction by a regulatory authority. Whatever payout ratios are mandated must be set at the factory as part of a slot machine’s programming. This is the only way of ensuring that the ratio of winnings paid to cash played falls within the legal range. In Nevada, for example, the statewide minimum payout for slots is 75%. There is no limit on the maximum.
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Fortunately for players, most casinos insist that their slot machine be programmed with payouts ratios far above the minimum. Simple supply-demand economics drives the decision. The closer the payout is to 100%, the more money players will be willing to risk. The lower the percentage is, the more profit will be made by the casino per dollar bet, but the lower the volume of play will be.
The challenge is for the casinos to set their payouts at a level that maximizes profitability. Although the point of equilibrium can be quite elastic, in most areas it typically falls between 80% and 95%, with so-called “tight” slots at the low end and “loose” slots at the high end. A casino will usually have a mix of both and achieve an overall payout ratio of above 90%.
Finding High Payouts
For many years, slot floor managers would place their looser slots in high-traffic areas, hoping to draw attention to frequent payouts, which would in turn entice passersby to sit down and play. As players started to catch on to the strategy, slot bosses began mixing up placement, so that today there are no standard procedures for where loose or tight slots might be located. But there are other ways of identifying the higher playing machines.
Competition is one driving factor behind payout ratios. In areas where only one casino exists, or where the number of slot machines is greatly limited, the payout rates tend to be lower. This has been observed at numerous Native American-owned casinos located in regions where gambling is otherwise prohibited. By the same token, along the Las Vegas Strip, where competition is high, payouts are higher. And in downtown Las Vegas, which competes for players with the Strip, payouts are higher still.
Another common tip-off to higher payouts is the machine’s credit denomination. Higher payouts are usually offered at the higher denominated slots. One study showed that nickel machines at a certain casino averaged payouts of 92.5%, while quarter machines provided a 94.1% ratio. The rate of return on that casino’s dollar slots was 95.9%, and the machines that featured a five-dollar minimum paid out at 98.4%.
Knowing this information can help a player decide not only what machine to play but also how much to wager. For example, if six spins are played per minute with a max bet of three credits, a player can expect to wager 1,080 credits per hour. When the payback percent on a machine is 95%, the player might expect to lose 0.05 x 1,080 = 54 credits. On a nickel machine, it would be $2.70. On a quarter machine, that’s $13.50. And when playing a dollar machine, it works out to $54. The size of he player’s bankroll will determine which denomination is worth the risk.
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