New Oregon Video Lottery Machines Generate More Revenues and Controversy

New Oregon Video Lottery Machines Generate More Revenues and Controversy
Lottery Director Jack Roberts Says He's Uncertain Why Revenues Are Up 10%, But Probability Explains Why

The Oregon Lottery is replacing old video lottery machines with new VLMs and the move is causing gambling recovery advocates to protest. The rollout of the state-of-the-art machines promises players the ability to play more games at one time, while betting less money on each of those games. Casual readers might think a gaming machine which allows someone to gamble in smaller increments would be a good thing from the gambler’s perspective, but gambling addiction counselor say it is likely to lead to an uptick in problem gambling.

The Oregon Lottery has 12,000 machines placed around the state of Oregon. Over the course of the last year, the state lottery corporation has been replacing old machines with the newer models, which allows gamblers to pay as little a few cents at a time. The revenue reports show that gamblers are spending 10% more on the video lottery machines than they were a year ago at this time.

Portland-Area Gaming Experiences

Take an example of Oregon gamblers. Robert Shock and Harmony Welch play Oregon lottery terminals once a week or so, at the Silver Dollar Pizza Company in Northwest Portland. Mr. Schock says that the old machine let a player gamble for 4 spins for a $1, essentially 25-cents a spin. Schock says those VLMs paid quite well.

Schock told Oregon Public Broadcasting, “When they first came out, we started playing that ‘Pig’n Play’ [machine] and we would win a lot, like $60 off of $5. But now we just lose it.

More Betting Options

The new machines provide players with a wider range of betting options. Gamblers can bet smaller amounts, while playing a multi-spin video lottery machine. Multi-spin slot machines are popular in the offline and online gambling industries these days, because they offer a sense of action and many chances to hit the jackpot at once. Multi-spin action also adds up, whether the gambler notices it or not.

Schock added, “Yeah, you can bet, like, one penny and play one line and sit there for hours if you want to.

The Oregon Lottery collects enough money to pay in $500 million a year to the state. With the 2014-2015 changes, the increase in revenues is real. No official has explained why revenues are up.

Jack Roberts Offers His Theories

Oregon Lottery Director Jack Roberts says the increase in revenues might be due to an improved economy.

Roberts told OPB, “We don’t have any evidentiary reason to believe that these games are addictive. I know there are theories floating around that the machines are somehow addictive to people. But frankly that’s never been demonstrated and we’re not seeing any signs that people are playing longer or playing more.

Roberts later reiterated he has no evidence that players are playing longer, or whether new players are trying out the new machines and liking them. Game designers tend to be a little more scientific, so whether Jack Roberts understands why his gaming machines are bringing in more revenues, someone at the Oregon Lottery does.

The House Edge and Variance

There are reasons why the new machines pay back less, and they don’t necessarily have to do with a lower house edge. Gambling mathematicians and game designers like to talk about “variance”, which simply is a mathematical way to discuss the ups-and-downs of gambling.

Let’s say a gaming machine has a house edge of 7%, which means you expect to lose $7 for every $100 you wager on the machine. Every gambler who walks into the casino isn’t going to lose $7 on a hundred bucks wagered, though. Some won’t lose at all. But if a whole bunch of gamblers wager $100,000 on a VLM and one of those gamblers wins $1000 on a jackpot, the house edge means that all the other gamblers who play during a given time span around that jackpot are probably going to lose $1000, plus an additional $7000 to account for the house edge. Or if one gambler wins $10, you might expect to see another gambler lose $24, thus accounting for the house edge.

In either case, nothing is assured. Notice I use words like “expect“, “expectation“, and “probably“. The house edge does not assure results for any small or limited number of spins. Even a thousand spins might have a wide variation in results from another thousand spins. Probability applies in really large numbers. The more spins you take, the closer the results are going to be to the house edge.

Think about that. The more spins in a game, the more likely your results are going to match the house edge.

By convincing gamblers to play a lot of spins at one time, the lottery has convinced gamblers to play a game they are more likely to lose. Luck plays less of a factor with more spins. In short, the variance is less. The Oregon Lottery is taking a bit more of the luck out of the game by having people play a whole bunch of spins for tiny amounts. Thus, revenues have increased by 10%.

Do Not Use This Example

Frankly, if you’re going to wager $100 on a gambling machine, it’s better to gamble all $100 on a one spin than it is to make 10,000 1-cent bets. The reason larger bets are such a stigma is the fact problem gamblers can’t stop if they lose that $100 bet. Of course, they couldn’t stop if they won that $100 bet, either. They would keep playing until they lost. Play long enough and the casino always wins.

Underdogs in Sports

Consider the sports world if you don’t believe me. Let’s say two football teams play a game. Inevitably, one is the favorite and the other is the underdog. If the underdog gets ahead in the game, they inevitably want to shorten the game by running the ball and forcing the clock to run. That’s why teams who play top quarterbacks talk about “ball control”. They want to shorten the game and keep the ball out of the hands of their most dangerous opponent.

The same works for other sports, like soccer. If the underdog scores, you can expect they are going to pack in the defense and play for a 1-0 victory. A variation of that scenario happens in most sports with a clock.

Good Luck Beating the House Edge

In a casino setting, gamblers should always see themselves as the underdog. Shorten the game and you might win. That’s what gambling recovery advocates like Wes Wood of Voices of Problem Gambling Recovery seek to do. Legislators also have been calling for measures to protect gamblers.

House Bill 3317 and House Bill 3318 are lottery reform bills which are supposed to help problem gamblers. HB 3317 assures the VLM operators take socioeconomic data, to assure the new revenues are not a hidden tax on the poor. HB 3318, sponsored by Representative Kathleen Taylor of Portland, establishes a “Responsible Gambling Code of Practices”. A third bill, HB 3316, would have classified certain venues as casinos, forcing those operators to give up their lottery license. The bill failed, because it would have cost the state $83 million a year.

The new video lottery machines should be good for the state budget of Oregon. VLM gamblers should have more play options, which is always nice. But players need to understand the math underlying gaming machines and be cautious when playing. Sometimes, the intuitive, common sense betting option can be a sucker bet.

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