## How Do Algorithms Work in Casino Slot Machines?

Slot Machines have been the backbone of the casino industry since late 1980s, when public corporations started taking over the gaming industry by building mega resorts in Las Vegas and around the world. With slot machines being such a huge revenue driver for the industry, it’s worthwhile to explore the how slot machines work.

## Random Number Generators (RNGs)

Slot Machine algorithms use a Random Number Generator as the primary engine to determine outcomes. This is because older machines were susceptible to slot cheats.

Simply stated, the RNG determines when the player wins and how much the player wins. However, the term Random Number Generator is not an accurate term in casino slots. The algorithm is not truly random.

It’s based on a math formula with an initial input value (independent variable) that determines the final output value (dependent variable). The input value is based on the time the player initially presses the play button.

However, the player cannot expect to play the same slot machine at the same time daily and have similar results. This is because the time stamp that the algorithm uses is several decimal places deep.

## Three-Coin, One-Line Slot Machine

Originally slot games were simple three-coin, single-denomination, one-line games. The player would play one, two, or three coins and would be paid out accordingly.

A traditional example of this type of machine is the three Cherry Jackpot Slot Machines. There would be eight to 10 symbols on each reel.

When one, two, or all three cherries would come up on a machine’s center reel display, the machine would pay out.

## Multi-Line, Multi-Credit Slot Machine

Newer slot games are now penny games offering a multi-line, multi-credit option. And the player makes a determination on the number of credits to play per spin.

The number of winning combinations has increased but this comes at a cost. The player’s average wager significantly increases with this type of machine.

Just because the number of winning combinations increases, it doesn’t mean the player wins more often. Consider the following mathematical breakdown of the traditional three-coin, single-line slots and the multi-line multi-credit machines.

• Three-Coin Quarter Single Line Slot Machine

The average spin rate of a slot is 10 spins a minute. Therefore, over a two-hour play period this represents a total number of spins of 1,200.

With an average wager of \$.75 and a 10% hold, this represents a player loss of \$90 for a single trip. With a routine player coming two times a week this represents a total loss for the month of \$720.
• New Multi-Line, Multi-Coin Games

With an average spin rate of 10 spins a minute over a two-hour play period, this represents a total number of spins of 1,200. With an average wager of \$0.90 and a 10% hold, this represents a player loss of \$108 for a single trip.

With a routine player coming two times a week this represents a total loss for the month of \$864. The total effect of this cost of play example is a \$144 increase in loss per month. This is a 20% increase in loss rate or a 20% decrease in value to a player.

## Hold Percentages

The introduction of lower denomination on the multi-line, multi-credit games pay out less than higher denomination three-coin single reel games. Because game designers believe players want a big win to create the “OMG” effect, \$0.01 games that have top prizes of \$1 million, \$100,000 ,or even \$10,000.

This has the unintended consequences of creating a mathematical necessity for large volatility in these types of games.

This means there will be a whole lot of losing players for that one jackpot. This is true for the linked mega jackpots seen on casino floors and big jackpots seen in the bonus rounds of many games. In some cases the top prize has a 1 win in 15 million spin hit ratio.

The range of players not winning any money on these high-variance games is between 6.9% and 29%. This range can be attributed to variations in a game's theme and the amount of time the game has been on the market.

The slot machine's win rate is set by the casino operators and is called the “House Advantages” (HA). HA is weighted in rate and is based on the denomination of the game; the lower the denomination the greater the HA.

Traditionally this was done to compensate for the lower wagers per spin in the three-coin denomination era. This means that players are paying an increased HA rate when moving from a higher-denomination game, three-coin quarter game to a-lower denomination, multi-line, multi-credit game.

The player is wagering more money and at greater risk when moving from traditional three-coin machines to a multi-line, multi-credit game.

## Themed Versus UnThemed Games

Players are attracted to a game’s theme, but the experience stays consistent with other multi-line, multi-credit games. We can definitively prove this because there are several generic versions of the Wheel of Fortune slot game.

This is arguably the most successful casino game currently on the market. The generic versions do not even approach the Wheel of Fortune play rates.

The Wheel of Fortune game is the strongest brand of all time even though it is a participation machine, and has one of the poorer payback structures of all games on the casino floor. This is because everyone recognizes the Wheel of Fortune brand name, simply because it’s been on television for over 30 years.

Every new themed game a manufacturer puts out requires a royalty cost to a licensing company. Using the images and names of a brand does not come cheap for game manufactures.

To offset this cost, slot manufactures pass the cost to consumers by increasing the hold percentages. The algorithms of themed slot machines are always programmed to hold more.

## Decision-Based Gaming

Some slot machines are decision-based games. Video Poker is a decision-based game and the house advantages are usually half, or less, of that in typical slot machines when played optimally.

These games are popular because the decision directly involves the player. The smarter player is rewarded and these games are set to 98 or 99% payback.

## Progressive Combination Machines

Some newer games have a dynamic winning combination paradigm. This means the number of winning combinations increase or decrease over time. Some machines show the number of winning combinations available after a spin.

Every so often the number of combinations increases. And when the number of winning combinations gets high enough, the machine is primed to pay out.

This doesn’t mean that the algorithm is telling the machine to pay out immediately. It means that the payout schedule has shifted. However, when a jackpot does hit on these types of machines the number of winning combination does immediately drop.

Lastly, some machines have minor, major, and progressive jackpots on them. The amount of each jackpot is displayed right on the machine. This acts as a timer of sorts.

These essentially mean that when jackpot levels on the individual machine get high enough, the machine will pay out soon. Each machine is different and must be tested individually to know what levels are best to play at. But in general the higher the better.

Previously, casinos would place signs around specific machines that would say must hit progressive by X amount of dollars. But because players would look for machines that were close to the designated dollar amount then only play those machines, they had to become less obvious.

The amount that each jackpot has to be at before it is primed to pay out varies from machine to machine and often from casino to casino.

In the final analysis, the algorithms of slot machines are numerous. Each brand of machine has subtle differences. But there are a few things we know:

1. Random numbers are not at all random and are still pretty unpredictable.
2. Traditional three-coin, one-line machines don’t burn through money as quickly as other machines do.
3. Multi-line, multi-credit machines do burn through your dollars fast.
4. Higher denomination machines hold less than lower denomination machines.
5. Themed machines generally have higher hold percentages than non-themed machines, because they have to pay for the licensing.
6. Decision-based games offer lower house advantage when played correctly.
7. Some machines have dynamic winning combinations. The more combinations they have the better the chance of winning.
8. Some machines have thresholds where they have to pay out before the jackpots get too high.

These are some of the algorithm traits that exist for casino slot games. It’s not a complete list. And as newer games are developed some of these traits will be expanded but not eliminated.

The complex math algorithms that these machines are built on, build on themselves. The next level will likely be some sort of Artificial Intelligence component. Good hunting.

Nicholas is a 17 year veteran of the casino gaming industry. He is former player manager with the infamous MIT Blackjack teams and is a regular attendee of the Blackjack Ball, a gathering of the world’s top professional gamblers.

He is the Managing Director of the Alea Consulting Group, a leading gaming consultant company with a focus on gaming economics and, is a frequent contributor to world class business publications like Forbes and Entrepreneur magazines’ and over 15 gaming trade publications. He is also the founder of Casino Exploits a player centric casino gaming site.