Insight US SLOTS ASSESSMENT - AGEM
HOLDING ON TOO TIGHT
The Association of Gaming Equipment Manufacturers (AGEM) has issued a comprehensive report on slot hold percentages across the US that makes compulsive reading
The Association of Gaming Equipment Manufacturers (AGEM) has issued a comprehensive report titled “Building Better Business – Assessing the impact of hold percentages on overall slot revenue” that reviews the impact of tightening hold percentages in key gaming states across the United States.
AGEM engaged respected Las Vegas-based firm Applied Analysis to assess a variety of factors impacting slot revenues and to focus on the states with published slot hold percentages and the corresponding revenue and report the results going as far back as 1990 from Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Jersey, Ohio, Pennsylvania, Rhode Island and South Dakota.
UNDERSTANDING RETURN TO PLAYER AGEM, through its members, has become increasingly
interested in better understanding the concept of “Return to Player” (“RTP”) and its overall impact on gaming revenue. Generally speaking, slot revenues within the United States have been trending on a relatively flat to down trajectory. There are two schools of thought with regard to the correlation between RTP (or the share of wagers held by slot operators (‘slot hold percentage’ or ‘slot win percentage’)) and overall gaming revenues (or ‘slot win’). Some believe that slot machine operators have been choosing to utilise ‘tighter’ machines in an effort to capture a higher share of revenue from their players. Others believe that this ‘tightening’ of the hold percentages on slot machines has impacted the overall player experience, resulting in lower returns on a net basis for slot operators over the longer-run due to fewer trips and/or shorter time on the device.
Quantifying the impact of hold percentage choices is a difficult task given the evolution of the gaming experience, the ever-changing nature of the economy as a whole, and other external factors. Given the volume of information available in the public domain and the various ways to analyse the information, the Association asked Applied Analysis (AA) to assemble, analyse and report on available information. The
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AGEM’s Slot Market Assessment
During the past decade (since 2004), 10 of out 12 states (83 per cent) reported slot hold percentage increases
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During the past decade, seven out of 12 states (58 per cent) reported slot win declines
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Slot win among the surveyed states reached a peak of $26 billion in 2007 and finished at $22 billion in 2014
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The report shows that blended slot hold in key states has increased 14.5 per cent over 10 years with no material increase in win - rising slot hold “very well may be contributing to (slot revenue) decline.”
summary report is intended to provide baseline information on historical market performances and shed light on the issue at hand. Additional analyses, including case studies, primary research and other analytical assessments, may be warranted to evaluate the interplay between slot hold percentages and overall gaming revenue.
Overall, the objective of the analysis is to evaluate whether a lower or higher RTP impacts slot revenue. Proponents of a lower RTP argue that they seek efficient usage of assets by increasing the player churn rate. Conversely, proponents of a higher RTP argue that they seek to elevate entertainment levels and therefore player interest and participation. The proposed approach is designed to elicit any meaningful insight and/or trends in this particular regard from available sources of information.
AMONG THE REPORT’S KEY CONTENTS l
Blended slot hold hit a low of 5.96 per cent in 1996 and hit an all-time high of 7.70 per cent in 2014
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Iowa at 9.37 per cent had the highest slot hold in 2014; Nevada at 6.40 per cent the lowest
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New Jersey experienced the biggest slot-win decline from 2004-14, falling 47.3 per cent
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Iowa showed the highest slot hold increase, tightening 32.9 per cent from 2004-14
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Florida hold loosened by 9.2 per cent from 2004-14 and revenue increased 153.8 per cent during the same time period
In addition to the highlights from Applied Analysis’, the AGEM report includes previously published commentary on the slot hold topic from respected gaming industry experts and progressive thinkers such as Buddy Frank, Charlie Lombardo, Andrew Klebanow, Bruce Rowe, Roger Gros, Allon Englman, Steven M. Gallaway, Daniel Mitchell and Louis Ross.
Blended hold percentage has increased 14.5 per cent from 2004 to 2014 and slot revenue has increased 1.1 per cent during the same period
“While it is clear there are a wide variety of factors impacting gaming revenues, this report is important for both suppliers and operators and gives additional perspective on the effect of slot holds on the player experience,” said Marcus Prater, AGEM Executive Director. “It is understood that there is a delicate balance between giving players a fair entertainment value while maximising revenues for casino operators. It is also important to note that the industry needs to consider all new ideas to stop the erosion of slot
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