Gambling in American History

A Personal Story

Let me tell you about my introduction to slot machines, an introduction that taught me about beginner’s luck. That is what I had the first time I went to a casino in Las Vegas. I was on my job interview at the University of Nevada, Las Vegas, in 1980. The department chairman recruiting me suggested that we go to the Hilton. There I saw bank after bank of slot machines and tables. I indicated a hesitation to play the table games, as I did not know the rules, and they seemed somewhat complicated. Moreover, the games moved very fast, and the players at the tables really looked as if they knew what they were doing. Like other slot machine players, I felt “intimidated” by the table play. So we found some empty machines. I thought I would just have to put in the coins, so I “bought” ten dollars worth of quarters. The machine asked me a question, however: Did I want to play one, two, or three coins? I had to think about that for a while (something a player cannot do when he sits down at a table – take a little time to think things over). The machine indicated that with one coin I could win only with cherries; with two, I could win with cherries and other fruit and bells; with three coins, I could win any time the machine showed a winning combination – cherries, fruit, bells, and the jackpot bars. Well, we were educated, smart people (we both had Ph.D.s, and those are not easy to come by). So we figured the jackpot ($100) was just a bit too much to hope for, too much of a “long shot.” I would play two coins. I played the two coins the first time and lost. I played two coins again, the reels spun, and what do you know, one, two, then three bars – jackpot! Bells and whistles, lights, the $100 jackpot sign flashed. The trouble was that no money flowed from the machine. I had not won the jackpot that the machines so proudly proclaimed for the world to see, because I had only put two coins into the machines. That was bad enough, but soon other people around me were telling me, “Why, you didn’t win because you have to put three coins in for a jackpot.” I was quite aware of what had happened (Ph.D.s have some intelligence). Then someone else would tell me the same thing. I also heard side comments about that “stupid tourist” who does not know you always put in the maximum number of coins. I had most of my roll of quarters left, so I played on, but with very little enthusiasm. When the coins were gone, I left as quietly as I could.
Beginner’s luck? Some might not think so. I certainly did not feel “lucky” at the moment. After I began to study gambling, however, I became quite convinced that that is precisely what I had experienced – beginner’s luck.
Just think, within five minutes of my first exposure to slot machines, I had learned that machines were not easy things that could be played without some thought. Indeed, since 1980 the slots have increased in variety and in complexity. I learned that the gambling devices were smarter than I was and that that might have something to do with the fact that they seemed to be taking over the casinos and winning so much money from the players. I also learned the best lesson any new resident of Las Vegas can ever learn – that the player has to be a loser, or to put it in personal terms, this player (I) was a loser. The lesson has not stopped me from gambling, but it sure has slowed me down. Imagine my potential gambling history had I won $100 after playing one dollar and fifty cents. I shudder to think about it. I have to live in Las Vegas, a city with nearly 200,000 slot machines, and they are everywhere – on the Strip, in locals’ casinos, in bars and taverns, restaurants, car washes, liquor stores, convenience stores, drug stores, and supermarkets.

The Value of the Machines

Slot machines are very attractive. They are the devices that usually get amateurs started gambling. They move very fast and they can be quite “captivating.” This can be quite all right if the gambling is responsible. Certainly, machines add a lot to the entertainment value of many lives. They also shift revenues to employees, as well as to government coffers. Individual slot machines make considerable sums of money for their owners, ranging from about $50 a day ($18,000 plus a year) to over ten times that much ($200,000 plus a year) each, depending on where they are found. Yet each machine usually represents an investment of less than $3,000 or $4,000 a year. A machine and related equipment cost from $5,000 to $10,000, and labor and energy costs to operate the machine are minimal, perhaps an equal amount of dollars (supervisors can watch ten to twenty machines, and a service person can handle 100 machines). These are lifetime costs. The costs can then be divided by a three- to five-year annual cycle. For example, the typical Las Vegas casino machine might cost the operator $4,000 a year to maintain (including all overhead), whereas it produces $35,000 in revenue – that is, it takes $35,000 a year away from the players (even the “smart” ones who know they should put in the maximum three coins each time they play).
In the early days of Las Vegas casinos (the 1930s into the 1970s), slot machines were an extra among the gambling products. The really serious gambling was at the tables, and the machines produced only a small part of the house revenues. Casino owners would say such things as, “They pay the electric bills,” or in a sexist phrase, “They keep the women busy while their men are doing the real gambling at the tables”. Now this casual attitude about machines is gone. One discussion of Las Vegas games published in the 1960s told how machines made about 15 percent of the revenues of the big Strip casinos. Now many Nevada casinos, especially those such as Texas Station that serve local residents or casinos appealing to drive-in gamblers from Phoenix or southern California (e.g., those in Laughlin), bring in over 80 percent of their revenues from machines. Over the past two decades, the machines have also become much more generous to the players, often giving respectable returns of over 95% – a gamble as good as that offered at many table games. The higher returns are essential for the success of the machines, as the players of machines are now much more sophisticated – in terms of searching for best payout schedules.
The value of slot machines for the casinos is reflected in the fact that almost all the casino properties in any competitive jurisdiction will give free services (complimentaries) to slot machine players, something they did only for table high rollers in the recent past.  Since the mid-1980s, the casinos have instituted “slot clubs”, and through magnetic cards they record the amount of play an individual has, then award extra prizes – free meals, free casino stays, free shows, merchandise, and even cash bonuses – based on the player’s patronage. In the Harrah’s chain of casinos (over twenty properties) there is a single slot club, and players can use their card in any of the casinos to accumulate points for prizes.
If there is a Gresham’s law in gambling, it would simply be that slot (and other) machines for gambling will, where permitted, eventually drive out all other forms of gambling. I have studied the intricacies of European casino gambling over the past fifteen years. Country after country seriously deliberated over issues such as whether the casinos could serve drinks on their gambling floors; whether local residents could enter the casinos; whether casinos could advertise and have signage; whether the casinos could cash patron’s personal checks. Although public officials oversaw such earthshaking measures in order to properly protect the public from this “sin” industry, the same governments with very little deliberation decided that slot machines could go almost anywhere – in taverns, in children’s arcades, in seaside recreation halls. Even though Spanish casinos were being “taxed to death” (they pay a gross win tax averaging over 50 percent), over 500,000 slots filled Spanish restaurants and bars, paying scant taxes. British authorities delayed for years a decision to allow casinos to expand their offerings of two machines to four, while at the same time giving no attention to the fact that gambling halls throughout the urban areas and recreational communities were able to have hundreds of machines. The issue in European gambling is no longer how to apply intricate detailed regulation to casinos, but just how wide open noncasino machine gambling can become. Or in the case of France, the issue is to what extent will machine gambling be allowed to go within casinos that were prohibited from having them until the late 1980s. In several U.S., Canadian, and other Western Hemisphere jurisdictions, lotteries are finding that their best revenues come from slot machines dispersed throughout their territories and called video lottery terminals. In many of these places, horse- and dog-race tracks have turned to machines to boost their revenues and have found that slot machines have become their essential business product. More and more, all over the world, the expansion of gambling has become essentially an expansion of machine gambling.
The era of machine gambling seems to have arrived with the twenty-first century, but the ride of machine gambling from the latest years of the nineteenth century has been an uneven and rocky journey.