Actual profit of slot machines

Hi there,

First of all, I want to apologize for my poor english skills. I'm not a native English speaker.

I've always wondering what's the real profit of slot machines for casinos. For example, if one day 1,000 people go to a casino with $100 and every one play a few hours of slot machines with a 95% RTP: 1000 x 100 = $100,000, turning a theoretical 5% of profit for the casino: $5,000, it this correct? Or does it count every spin for the RTP? For ex. someone who brings to a casino $100 can play with $400 between winnings and losses, the casino profit for that guy will be 5% of the $400 ($20)? I'd appreciate if someone can explain it to me.

Thank you!

Greetings from Perú.

Hi, Owen, and welcome to the forum!

I'm not a math guy, but I'll try to give you a short version, and let others correct it if necessary.

The 95% example you gave is a theoretical amount that the casino should receive over the long run; for every $100 run through the machine, the casino expects to keep $5 on average. The slot is programmed to have winning and losing spins come up randomly, but each a certain amount of times that will be realized over many, many spins.

Some people will lose the whole $100 without a win; some people will win $100 or more right away and walk away. Other people will keep playing when they win, maybe quit even again, maybe continue until they lose, maybe keep winning and get up with more than they put in.

It all is expected to average out to $5 lost per $100 spent. But almost no individual player will have that exact experience. I think your understanding of it is pretty close to that, based on what you wrote, but I hope that my explanation helps.

FWIW, Casinos in the US (and perhaps in Peru) use the amount a gambler puts through a machine (how much money they "expose") multiplied by the House Edge (rough description of this formula), to decide how valuable that customer has been to them; whether the customer won or lost, their value to the casino is based on that theoretical amount, and they will offer complimentary cash, rooms, and prizes that will draw those customers to return.

Hi!

Thank you! I've read this forum for many years. I really appreciate your response. I was checking some oficial documents from the local government regarding the financial statistics from the local casino and here is some of the info from the last month (Approximately. I'm using example numbers):

Visitors per month: 9,000
Average spend per visitor: $50

Total wagered on slot machines: $4,950,000
Real monthly RTP: 95%

So, as you can see, people spent approximately $450,000 in the month, but wagered $4,950,000. That's eleven times the total spend. I don't know if I'm not understanding correctly the document or there is a kind of error. What does that mean? That the profit of the casino it's the 5% of the total wagered? ($247,500) Or it's just the 5% of the total spend? ($22,500)

Quote: OwenCQ

if one day 1,000 people go to a casino with $100 and every one play a few hours of slot machines with a 95% RTP: 1000 x 100 = $100,000, turning a theoretical 5% of profit for the casino: $5,000, it this correct?

Yes, if and only if they each play $100 of spins and leave.

Most people do not do this. Most people playing on $100 actually play $1200 or more worth of games, as they play through their winnings as well as their initial bankroll.

Every $1 spin on a slot machine has the same 5 cent theoretical profit for the casino, assuming your 95% RTP.

I would expect if 1000 people with $100 each came in that they would play about 1,000,000 $1 spins (or equivalent), and house profit would be about $50,000.

If each spin took a slow 10 seconds, that would mean each player would play about 2 hours 45 minutes. On a more realistic 6 seconds per spin, that's a little longer than an hour and a half. Both of these numbers are well within what I've seen as possible.

If the place is 60% full for 14 hours, this is doable on about 250 machines.

I have no idea if this covers rent on the slot machines and TITO units.

So it's normal that slot machine players wager 10 times their initial bankroll? And the real profit of the casino it's a % of the total wager? This casino have a large screen which holds all the statics from the previous day. Example:

Money played: $1,300,000
Money returned: $1,210,000
Commission: $90,000

So the $1,300,000 isn't necessary what people put on the machine. I would expect that people only put $130,000 or less. So if the casino received $130,000 in cash and returned $90,000, the real return it's near 30%? (!)

Quote: OwenCQ

Hi!

Thank you! I've read this forum for many years. I really appreciate your response. I was checking some oficial documents from the local government regarding the financial statistics from the local casino and here is some of the info from the last month (Approximately. I'm using example numbers):

Visitors per month: 9,000
Average spend per visitor: $50

Total wagered on slot machines: $4,950,000
Real monthly RTP: 95%

So, as you can see, people spent approximately $450,000 in the month, but wagered $4,950,000. That's eleven times the total spend. I don't know if I'm not understanding correctly the document or there is a kind of error. What does that mean? That the profit of the casino it's the 8% of the total wagered? ($247,500) Or it's just the 8% of the total spend? ($36,000)

Well, those are a bit different, perhaps made more complicated by translation from Spanish to English.

If I'm interpreting based on how it's done here:

$4,950,000 is called the "drop", or how much is "exposed" by all the gamblers together by making wagers.

95% RTP is what was returned to players from that drop, or $4,702,500. So the "win" or "hold" on the machines was $247,500, the other 5%.

The 9000*$50 per person (assuming this is only what they directly bet, not the amount they spent on their entire visit, like the economic impact including bar profits, gift shop, whatever), reflects the real impact of the HE on repeated exposure of your money to it. The house edge takes a cut at your money every time you cycle it, not just the first $100 you expose. And that adds up. So I would say, the house was able to keep (gross) 55% of the money made available to them during that month (247,500/450,000), while that base amount (450,000) was exposed to them approximately 11 times per $100 available.

I could, as always, be wrong. But I don't think those numbers are unrealistic.

Quote: OwenCQ

So it's normal that slot machine players wager 10 times their initial bankroll?

Some more, some less, but I think this is a reasonable approximation for many players. This matches what I generally observe for "normal" players.

Compulsives and AP's are different, but averaging them together might come out around the same.

Thanks! That was I thought but I didn't knew that was too much. In the document also says:

Gross revenue (WIN): $450,000, which it's the amount of visitors * average spend. I'm really trying to figure how much this casino earns, haha.

Quote: OwenCQ

So it's normal that slot machine players wager 10 times their initial bankroll? And the real profit of the casino it's a % of the total wager? This casino have a large screen which holds all the statics from the previous day. Example:

Money played: $1,300,000
Money returned: $1,210,000
Commission: $90,000

So the $1,300,000 isn't necessary what people put on the machine. I would expect that people only put $130,000 or less. So if the casino received $130,000 in cash and returned $90,000, the real return it's near 30%? (!)

The $1,300,000 is exactly what people put in the machine. Your question is (I think), where did that money come from? It could 100% be straight out of people's pockets, it could be them cycling the same money 10 times, 20 times, 30 times on average. That answer is the RTP. If everybody just plain lost, and kept feeding new money into the slots anyway, the RTP would be 0%. In your example above, the RTP is 93.077%.

So the casino made $90,000 that day. Other days, it could be a negative number, if the money returned was larger than the money played. But for the real impact on the players, you'd have to know how many came in (the numbers you listed before) and their average or actual losses. I'm sure the casino tracks those, but what they really want to know is how much of the money that came in people's pockets stayed in their casino. They could've broken everybody and realized 100% of what came in. Maybe it was 2%. In your previous example, it was 55%. I'm sure those metrics matter to them in determining what games to keep offering, what clients to concentrate on making into repeat customers, whether their staffing is appropriate (not leaving people with money looking for games, but also not a lot of paid staff standing at dead games). But the bottom line is they made 90K that day, or almost 7% of the drop. That's actually a little low, I think; again, I could be wrong.

Yes, my question was if they really put $1,300,000 in bills or they have just played with the money they had and "win" over and over, because if people really put $130,000 and the money cycles 10 times on average the real profit for the casino it's $90,000 from that $130,000.

Quote: OwenCQ

Thanks! That was I thought but I didn't knew that was too much. In the document also says:

Gross revenue (WIN): $450,000, which it's the amount of visitors * average spend. I'm really trying to figure how much this casino earns, haha.

Ok, so this figure doesn't make sense to me as gaming winnings; it's a pretty simple equation, what people spend on the slots less what they win back leaves the rest for the casino. Maybe as a total amount they made, including purchased meals, drinks, etc, all revenues, but not just from the machines.

But it's the exact number of visitors (9,000) multiplied by their average spend ($50): $450,000. This document doesn't say anything related to non-gaming like bar and hotel.

Quote: OwenCQ

Perú.

Well spelled.

In Spanish, yes :P