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Archive for Sunday, April 19, 2009

Casinos cash in on penny slot revenue

Better technology helps make machines more accessible

April 19, 2009

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— Gamblers may be cutting back like other consumers, but one thing they’re not doing is pinching pennies.

Their spending on penny gambling machines produced about one-fourth of all slot machine revenue in Nevada last year, and more in other states. In Missouri, one of few states where gambling revenue rose in 2008, more than half of all casino revenue came from penny slots. For many casinos, penny slots are producing the only kind of revenue that’s rising.

Gamblers say they like the machines — impractical before quiet paper payouts started replacing the tumbling bucketfuls of coins in a jackpot — because they can play longer for the same amount of money.

No matter that casinos like penny slots because they’re more lucrative for the house.

“It’s all just for recreation,” said Kansas City resident Cora Logan, 72, who was playing a penny slot machine at Isle of Capri in Kansas City on her 42nd wedding anniversary. “When you come here, don’t expect to win. If you put a lot of money in these, you’re crazy.”

The four casinos in Kansas City, like most across the country, serve mainly local markets, as opposed to “fly-in” markets like Las Vegas, China’s Macau and, to some degree, Atlantic City in New Jersey. That means most casinos depend heavily on low-rollers who visit often. Logan, who said she hadn’t expected to win when she and her husband walked in, was up $100 after three hours.

“Affordability is why people love them,” said Frank Legato, a slot machine expert and editor of Las Vegas-based Global Gaming Business magazine. “Casinos just love them because the average bets are the same as the quarter or dollar games, but their house edge is bigger on these games.”

To play penny slots — which include video poker machines and slots with colorful video narratives, as well as machines that look and operate more like traditional one-arm bandits — gamblers place electronic bets in one- or two-cent increments. The machines allow wagers anywhere from one penny to $10 or more per spin.

Gamblers feed the machines cash — or credit cards, in some states — and any winnings are paid out with a paper ticket that can be redeemed at a cashier’s cage or money machine or used to place more bets.

With 3-D video graphics, bonus spins and familiar story lines like “Star Wars” or “Wizard of Oz,” the machines provide a form of “active participatory entertainment” that wasn’t available with the old three-reel slots.

Missouri’s 12 casinos hold nearly 11,000 penny slots, more than half their machines.

Statewide, penny slots brought in $81.1 million in February alone, which is about 55 percent of the $146.6 million casinos won during the month. Missouri is among five states — Iowa, Indiana, South Dakota and Pennsylvania are the others — where commercial gambling revenue rose in 2008, while it fell 8.5 percent nationwide. Tribal casinos’ revenue is not counted in national tallies.

Darrell Pilant, vice president and assistant general manager at Harrah’s in North Kansas City, said the number of penny machines is growing because patrons prefer them. And he thinks that growth will continue as new technology makes no-coin play even more appealing.

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