Small-time Gamblers

May 24, 2013
Posted by Jay Livingston

Someone on the Internet is wrong. I just can’t believe it’s Mark Kleiman
I made my usual argument that (in rough numbers) 80% of the users of almost any drug use it moderately, take no harm from it, and do no harm to others, but that the other 20%, who use more than is good for them, account for 80% of the consumption and an even larger fraction of damage to themselves and others. . .  Since the industry that sells the drug (or offers other potentially habit-forming services such as gambling) will always be financially dependent on dependent problem users, while the public interest is in serving the desires of non-dependent non-problem users while minimizing the number of dependent users.
Mark surely knows about drugs and alcohol.  And the distribution of other activities (serious crime, for example) may be even more skewed than 20-80.  But gambling – at least casino gambling, is different. It didn’t use to be, but it is now, and I’m not sure why it changed.

In the old days, casinos too relied on “whales” – the high rollers who gambled large amounts on table games like craps, roulette, and blackjack.  Casinos saw the slot machines as diversions for the whale wives or whoever – small-time customers dropping in their pennies, dimes, and quarters and pulling the handles. 

That was then.  Now, the larger part of casino revenue comes from not from the few but the many – the smaller-time folks playing the slot machines.  The whales still matter.  The average table brings in 15-20 times as much money as each slot machine, even when you factor in the table’s larger capacity.*  (Tables are communal; slots are a solitary vice.)

Perhaps as early as the mid-70s but certainly by the mid-80s, casinos began increasing the number of machines relative to the number of tables.

(The differences in absolute numbers are so great, I used a secondary Y-axis for the tables.  Take note of the axis scales.) 

The ratio of slots to table games increased from about 20:1 to more than 30:1.

Among casual or infrequent gamblers and in newer gambling venues like Pennsylvania, the slots account for an even larger share of the house take.  But even on the Las Vegas strip, the traditional feeding area of the whales, slot machines still account for nearly half (45%) of revenues. 

Why did casinos shift their bets from the few whales at the tables to the myriad krill at the slots?  Slots are not whale-friendly. They don’t handle large and varying bets. But aside from that, they have several advantages for the casinos. Slot machines
  • work a 24/7 shift
  • can’t cheat the house
  • can’t cheat bettors
  • don’t call in sick
  • don’t have drug and alcohol problems
  • don’t join unions
  • don’t require health benefits
  • don’t get arguments from bettors
The time-line suggests that the shift to machines had something to do with competition from other states. The first non-Nevada casino opened in New Jersey in 1978. Starting around 1990, other states started to get in on the action. Or maybe the success of these other casinos revealed a previously neglected or uncourted population – a population that the casinos could easily accommodate. 

To go back to Mark Kleiman, for whatever reasons, the gambling market does not share the inequalities of drug and alcohol markets, where the heavy users far outweigh the long tail of the distribution.  True, some of those small-time players at the slot machines may be problem users. And many of the high rollers at the tables may be problem free (as Book of Virtues whale William Bennet claims to be. But in the overall distribution of gambling revenues, things are more evenly shared between the whale and the tail.

* Data on Nevada come from a UNLV site (here)

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