Special report

Cutting off the arms

Slot machines are becoming mobile

Something for everyone
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Something for everyone

SOMETIMES the old games are the best. Take, for instance, the “reward-paying punching bag”, one of the earliest attempts at machine-based gambling. For a nickel a punch, punters could pound out their frustrations. If they hit hard enough to move a pointer to the right spot on the dial, they won a prize. Or there was the “manila”, in which hopefuls could win a prize by shooting a nickel from a pistol into a slot. These days most casinos will not even let you smoke, much less punch or shoot your way to a prize.

The first machine to dispense coins as prizes was the three-reeled Card Bell, built by Charles Fey in 1898. Slot machines thrived in San Francisco. By the time the city outlawed them in 1909, it was collecting $200,000 a year in taxes from 3,200 slot machines. By 1931 Frank Costello, a mobster in New York, raked in $25m a year from his 25,000 slots. Today, betting machines—slots in America, fruit machines in Britain, pokies in Australia—account for more than one-fifth of the global gambling market. Their one arm may be vestigial, but they still make out like bandits.

Their appeal lies in their utter simplicity. You do not need to understand a complex system of betting, as in craps. You will not hold up the action if you make a mistake, as you might at a table game. You will not get skinned alive by people who understand the game better, as novices often do when playing poker at a casino. You do not have to interact with a dealer or remember which hand is higher.

Slots are largely passive: feed them money (or cards, these days), press a button, watch the wheels spin or objects align on a screen and see whether you have won, and how much. They demand nothing but cash and often promise payouts of 95% or better. Las Vegas has around 200,000 of them and America as a whole about 1m, taking in an average of $1 billion a day. Australia has around 200,000 pokies, mainly in pubs and clubs, and Britain has at least 250,000 fruit machines.

Alas, that 95% figure does not mean that you personally will get back 95 cents for every dollar you feed in; rather, it means that 95% of the money taken in will be returned to players over the course of the machine's lifetime. So you could have a lucky streak and get back much more than you put in, or you could lose the lot. To keep the game interesting, most of it is paid out in dribs and drabs: a machine that returned $95,000 of every $100,000 in one huge jackpot once in a blue moon would be too disheartening to play.

When it comes down to it, over the longer term slot machines keep 5% of your money in return for a light show and a slimmish chance to win. But people keep playing. Slots pit humans against maths, and the maths always win. But successful slot machines get players to “like the feel of the maths”, explains Chris Satchell, chief technology officer for International Game Technology. IGT, along with Bally Technologies, Aristocrat and Novomatic, is one of the world's leading slot-machine makers. Many people like the older, mechanical machines on which the reels are set in motion by pulling a lever rather than pressing a button, which is why many casinos have retained them. Where video machines are used, they sometimes feature displays that allow the video reels to align imperfectly, as on an old spinning-wheel machine.

Whether the machine pays out lots of little prizes or a few big ones, the payout level is generally set by law. And despite all the myths that slots players like to perpetuate—coins need to be warmed up because machines hate cold ones; coins should never be overhandled because machines hate warm ones; machines are more likely to pay if you use a card rather than cash—it is determined by random draw. Over time the amount the machine pays back to the customer will approach its average rate, but, at least in regulated markets, each spin is independent of the previous one. Yet slot-machine development, assisted by advances in networking technology, involves more than simply tinkering with payout algorithms.

Killer heels

Slot developers understand the power of branding. The most popular machine in IGT's history is “Wheel of Fortune”, based on a long-running television game show. Coming hot on its heels is the “Sex and the City” machine. Its reels depict diamonds, chocolates and strappy shoes. Since its launch in November 2009 it has proved popular, earning up to five times as much as the average slot machine on some floors. Like the television show it appeals to women, which indirectly makes it attractive to men too. In January IGT launched a machine based on “Amazing Race”, a TV show. “American Idol” and “Alice's Adventures in Wonderland”, based on another TV show and a film of the famous children's book respectively, are on the way.

These games involve more than simply pressing a button and waiting to see whether the reels align. The “Wheel of Fortune” machines have a spinning wheel on top of the play area; another version features an immense wheel used for bonus spins. The “Sex and the City” machine offers video clips. “Amazing Race” will have the show's host guiding players through bonus rounds. “American Idol” will allow players to judge performances shown on a video screen. Many of these highlight a shift towards what Mr Satchell calls “community-based” slots playing, designed to appeal to the Facebook generation.

Pick your app

Increasingly slots are linked not just to each other but also to servers, which makes them far more flexible. Traditional slot machines offer only one game. If that happens to “go cold” (ie, become unpopular), they sit around uselessly or have to be taken away. With server-based games the hardware on the casino floor is governed by software on a remote server. If a game goes cold the casino manager can change it to a different one in seconds. Separating the hardware and the software also speeds development, making it much easier and cheaper to introduce new games. The boss of Inspired Gaming Group (INGG), Luke Alvarez, calls his company “the iPhone of slots”. Instead of developing games in-house, it offers an open-source code and works with around 30 game developers.

Server-based slots are still in a minority but growing fast. ARIA, the flagship casino at CityCenter, on the Las Vegas Strip, opened last December with 980 such machines. IGT's server-based games can also be found in casinos in Italy, Finland and France. INGG operates 25,000 of them across Britain and in smaller networks in Cyprus, Italy, Australia, the Czech Republic, Cambodia and Laos.

Yet moves towards faster play, bigger jackpots and more enticing machines are not without their critics. Natasha Dow Schull, a professor of anthropology at MIT, whose book “Addiction by Design: Machine Gambling in Las Vegas” is due out later this year, found that 90% of people attending Gamblers Anonymous meetings in Las Vegas played only machines. Ms Schull says the trend towards video slots that allow gamblers to bet on as many as 100 lines at once increase the frequency of small payouts, making the experience seem more rewarding. That encourages “a slow and gradual bleeding off of your funds”. Leslie Bernal, who heads an organisation called Stop Predatory Gambling, describes slots as “a huge part of our debt culture” and “the biggest something-for-nothing scheme ever invented”.

Yet slots spin on. In the past year IGT's share price has risen by 40% to take its market cap to over $5 billion. Gideon Bierer, the company's vice-president in charge of developing slots for online and mobile play, says this market has “brought a lot of new customers in who weren't interested before and didn't have access”. That is clearly good news for companies such as his. Traditional betting hubs like Las Vegas take a more sceptical view.

This article appeared in the Special report section of the print edition under the headline "Cutting off the arms"

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