How Do Slot Machines Work
In 1894 the Bavarian born American inventor Charles August Fey released a device known as a slot machine onto the market. At first the device was sold exclusively to bars who put in the corner of their drinking establishments in the hopes that it would entice patrons to stay and drink longer.
Soon what they found was that the machine itself became the main attraction with queues of customers lining up to spin the reels. Then the prizes on offer were things such as free food, snacks and drinks.
Within just a couple of years slots had evolved to the point where people were winning real money and not small change either! 130 years later in 2024 slots are the lifeblood of the land-based and online gambling sectors.
They attract the biggest percentage of customers and they account for almost two-thirds of total revenues, but just how do they actually work? Read on to find out.
Slots: The Money Makers
It’s no use simply telling you that slot machines make a lot of money, instead allow us to demonstrate that by showing you cold, hard figures. We’ll start in the United Kingdom, a country widely regarded as one of the most open and forward thinking in terms of gambling.
In 2020, the gross gambling yield in the UK was just under £15 billion. Online casino gambling accounted for £5.7 billion of that figure which itself was made up of £3.2 billion from online slots revenues alone.
Whilst figures for land-based slot machines aren’t as accurate in the United Kingdom, it’s estimated that just over £4 billion was made land-based slots. That means then that around £7.2 billion of the UK’s gross gambling yield came from slot machines with the rest coming from table games, sports betting and lottery sales.
This isn’t just a British phenomenon either. In the United States in 2022 land-based and online slots – of which there still aren’t many due to legalisation issues – generated revenues of $49.36 billion which was 4 times larger than the total sports betting revenue.
How Slots Work
Reading about the revenues of slot machines is all well and good, but just how exactly do they make their money? Well fortunately for us, it’s quite simple. Slots have something known as a Return to Player (RTP) percentage.
This figure shows you on average how much a player will see returned to them for every £100 they wager. For example a 90% RTP slot would return, on average, £90 for every £100 wagered. In terms of profit, that’s £10 for the slot operator.
This means that slots have regular and predictable profits, whereas other casino games have more variable and much lower profits. To put that into perspective the highest house edge for a table game is roughly 5.26%, whereas slots can have RTPs from 88% to 95%.
Why are Slots so Profitable for Casinos?
Making around double the amount of profit as a table game doesn’t account for slots accounting for two thirds of casino gambling revenues. So what else is it that makes slot machines so profitable?
Low Running Costs
Slot machines cost a lot to buy, and there are of course maintenance costs throughout the lifetime of a slot machine but the only constant expense barring winnings is electric. Table games on the other hand need to be regularly manned by croupiers, and in the case of most casinos, watched by security cameras to ensure that players aren’t cheating.
All of that costs money and reduces the eats into the profits of the games, which already have a lower profit margin than slots. By not having to be manned by staff, slot machines save enormously on running costs and thus maximise profits.
(Electricity is pretty much the only operating cost when it comes to slot machines.)
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Popularity
How many regular people do you know that could sit down and play roulette of the rip? Or to put it a different way, how many people do you know that could confidently explain to you the rules of ANY table game? Chances are not many.
Conversely, anyone can play a slot machine. You don’t need to understand probabilities, you don’t need to learn strategies or techniques, and all you have to do is sit down and play. It’s almost the dictionary definition of plug-in and play gambling.
For this reason slot machines are incredibly popular because when it comes to gambling, accessibility is King. And that’s before you even consider all of the effort that slots developers put into making their games appealing!
In Summary
Slots are easy to run. They don’t require constant management or overseeing from staff members and what’s more, they’re incredibly easy to pay. Add into all of that the fact that they have the highest profit margin of any casino game and it becomes abundantly clear why they are the lifeblood of online and offline casinos alike.