The game selection process is a complicated puzzle with an abundance of pieces from which an operator can choose. Besides the visible attributes of slot cabinets, manufacturers, game models, and video monitors versus reel spinners, there are other attributes that are not as visible to the gaming public, such as hold percents and hit frequencies.
While the hold percent of a game is typically chosen to fit within the denomination of the device (meaning that, typically, a casino would decide on a range of hold percent options for each of its denominations), hit frequency does not follow the same rule.
How can hit frequency have either a positive or negative affect on your slot floor? Why should we be concerned with the frequency of payouts on an electronic gaming device? To understand the answers to these questions, we need to step back in time to see how hit frequency has evolved.
Defining hit frequency simplistically, think about a coin — heads on one side and tails on the other. When we flip the coin in the air and let it fall to the ground, we expect to see either a heads or tails. With only two possible outcomes, we could calculate the hit frequency of the two-sided coin as 50 percent. Though we know that each flip resulting in heads will not automatically be followed by a flip resulting in tails, due to variations in the number of rotations the coin takes in midair and the impact of the coin as it hits the ground, but given enough flips, the count of heads results versus tails results will equal out.
While the hit frequency, or payback frequency, does not define the amount of the payout, it does provide the operator with an expectation of how often a gaming customer could realize a payout from the gaming device. This is an important component of the gaming device when casino operators are seeking an increased frequency in the payouts for their customers. Customers frequently recognize payouts as a form of defining whether a casino has loosened its machines or, on the flipside, tightened them.
A lower hit frequency supports increased frequency of the top jackpot, while a higher hit frequency decreases top jackpot hits, instead paying lower amounts more frequently. When selecting gaming devices for a casino, it is best to understand the marketing strategy designed for the facility and what the public perception of the gaming profile will be in regards to slot machine payouts. In the event that the casino intends to promote jackpot winners, the machines sporting a healthy payout frequency of 50 percent or better will probably not award enough top jackpots to your customers to make an impact on your Wall of Winners.
In the past, when slot machines were designed as single-line, 3-line or 5-line machines, hit frequencies ranged between 8 and 30 percent, with the 5-line machines operating in the 30 percent range. The average number of reel spins to complete a full cycle of all payouts in the game library was approximately 10,648, with 22 symbols on each of the three reels. With the current proliferation of lower-denomination and multi-denomination devices supporting the penny denomination, the number of wagering lines continues to increase and so does the payout frequency. With an increase in wagering lines, the machines begin providing increased payouts but in smaller increments.
Over the course of time, and with the casino industry asking for an increased frequency in payouts, manufacturers developed new slot games capable of extending the time on device through more frequent payouts.
Payback percentages have now reached the 100 percent range, offering gaming customers a payout on every spin. In order to provide the high frequency of payback offered on these new gaming devices, hold percent has increased and top jackpots have decreased. Average payouts of $1 to $10 have been replaced with average payouts of 4 cents to 40 cents.
Marketing tools designed to attract repeat visitation, such as player tracking systems and bonus points, take on another challenge to control, with increased payout frequencies that are nearly double that of a Video Poker machine. In the past, point systems attempted to make up the hit frequency difference between reel spinning machines and Video Poker machines by awarding reel slot players 2-to-1 over Video Poker players. For example, every $10 of coin-in played through a reel machine awarded the player 1 point, while the video machines required $20 in coin-in to receive 1 point. Those marketing departments that opted to award bonus points based on theoretical hold did not realize the same impact of higher payback percentages as those that based bonus point rewards on coin-in.
Imagine having a significant number of machines on a casino floor that host payout frequencies of 80, 90 or 100 percent, and watch the overall effect the coin-in from these machines creates on a marketing bonus point program tailored for machines having hit frequencies in the 20–40 percent range.
As you might note, payout frequency is a very important aspect of the design for the casino floor, with far-reaching impacts if not carefully selected when planning the initial denomination hold percentages and future game changes.
Adding to the development of games that offer increased time on device, manufacturers provide a wide variety of themed games with bonus features that offer gaming customers periodic opportunities to participate in bonus rounds in an effort to win additional payouts.
As the penny denomination continues to increase its market share, we should continue to see a wave of new devices with 25 or more wagering lines boasting payout frequencies in the 90–100 percent range.
Why the penny market and not the quarter or higher denominations? This is partly due to customers’ resistance to wagering a large amount of coins on an individual game. Unlike wagering 90 credits on a penny game, which is 90 cents, 90 credits on a quarter machine is $22.50 — and would not be supported by the typical slot player. As you probably noted in the previous example, a 90-cent wager is more realistic for the average gamer than $22.50, and therefore would have more popularity on the casino floor.
Payback frequencies combined with hold percentages will need further analysis and understanding as to how they either improve or decrease revenue opportunities from both the slots and marketing promotions once tailored for a slot gamer participating primarily on gaming devices with 20–40 percent payback frequency.
The emerging penny-based, bonus-enabled games offering higher payout percentages are forcing casino operators to increase hold percentages to compensate for lost coin-in through extended time in bonus rounds combined with higher payout frequencies. Manufacturers are realizing this effect and working on new games with math that supports less of a payback frequency and larger jackpots so casino customers can once again cheer when they hit the “Big Jackpot!”
Rich Lehman is VP of Development for the Las Vegas-based Navegante Group.
A 26-year gaming veteran, he has served as VP of Slots, VP of Casino Operations and
General Manager.
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