Penny slots hitting it big in Missouri

KANSAS CITY, Mo. -- Gamblers may be cutting back like other consumers, but one thing they're not doing is pinching pennies.

Their spending on penny gambling machines produced about one-fourth of all slot machine revenue in Nevada last year, and more in other states. In Missouri, one of few states where gambling revenue rose in 2008, more than half of all casino revenue came from penny slots. For many casinos, penny slots are producing the only kind of revenue that's rising.

Gamblers say they like the machines -- which were impractical before quiet paper payouts started replacing the tumbling bucketfuls of coins in a jackpot -- because they can play longer for the same amount of money.

No matter that casinos like penny slots because they're more lucrative for the house.

"It's all just for recreation," said Kansas City resident Cora Logan, 72, who was playing a penny slot machine at Isle of Capri in Kansas City on her 42nd wedding anniversary. "When you come here, don't expect to win. If you put a lot of money in these you're crazy."

The four casinos in Kansas City, like most across the country, serve mainly local markets, as opposed to "fly-in" markets like Las Vegas, China's Macau and, to some degree, Atlantic City in New Jersey. That means most casinos depend heavily on low-rollers who visit often. Logan, who said she hadn't expected to win when she and her husband walked in, was up $100 after three hours.

"Affordability is why people love them," said Frank Legato, a slot machine expert and editor of Las Vegas-based Global Gaming Business magazine. "Casinos just love them because the average bets are the same as the quarter or dollar games, but their house edge is bigger on these games.

"People playing penny machines are not concerned about that. They just want to have fun and play a long time with little money."

To play penny slots -- which include video poker machines and slots with colorful video narratives, as well as machines that look and operate more like traditional one-arm bandits -- gamblers place electronic bets in one- or two-cent increments. The machines allow wagers anywhere from one penny to $10 or more per spin.

Gamblers feed the machines cash -- or credit cards, in some states -- and any winnings are paid out with a paper ticket that can be redeemed at a cashier's cage or money machine or used to place more bets.

With 3-D video graphics, bonus spins and familiar story lines like "Star Wars" or "Wizard of Oz," the machines provide a form of "active participatory entertainment" that wasn't available with the old three-reel slots. That makes them especially big among people who go to casinos for the social aspect.

"I'm just here to have fun," said Stephanie Wright, 41, of Kansas City, as she played a one-cent "Blazing 7s" machine at Isle of Capri. "My boyfriend plays cards and I like to sit and play these while he does that."

Wright used to play quarters in her roughly weekly visits to Kansas City casinos before she got hooked on penny slots.

"If you want to bet the max, you can, but I go low," she said. "Sometimes I get excited and go big once in a while, but usually I don't bet that much."

Missouri's 12 casinos hold nearly 11,000 penny slots, more than half their machines. Statewide, penny slots brought in $81.1 million in February alone, which is about 55 percent of the $146.6 million casinos won during the month.

In adjacent Illinois, which lost gamblers to Missouri in 2008 when a smoking ban went into effect, penny slots brought in $18.9 million in February, or roughly 15.4 percent of $123.3 million in total casino revenue for the month.

Missouri is among five states -- Iowa, Indiana, South Dakota and Pennsylvania are the others -- where commercial gambling revenue rose in 2008, while it fell 8.5 percent nationwide. Tribal casinos' revenue is not counted in national tallies.

Darrell Pilant, vice president and assistant general manager at Harrah's in North Kansas City, said the number of penny machines is growing because patrons prefer them. And he thinks that growth will continue as new technology makes no-coin play even more appealing.

"I can't say that in three years or five years every machine on the floor will be video, but certainly at some point there will be fewer and fewer traditional slot machines," he said.

Higher-denomination, three-reel slot machines will always be in demand among hard-core gamblers who play for large jackpots and not necessarily entertainment, he said. But their presence in casinos is gradually diminishing.

Before coinless payment technology came on the scene in 2001, gamblers' winnings clanged into a metal hopper, creating the din that typically greeted casino visitors. Cashing out nickel jackpots could be especially annoying when a machine ran out of coins and an attendant had to refill it midway through a payout. And the gambler always came away with not just buckets full of nickels that had to be exchanged, but dirty hands from dealing with so many coins.

Without a paper receipt, Kansas City's Logan would have been saddled with more than 55 pounds of pennies -- at 181 pennies per pound -- when she won that $100 on her anniversary.

Technological changes have made the concept of denomination almost irrelevant, experts say. Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno said the term penny slots is a misnomer because most wagers on the devices are much greater.

"There's a touch of delusion to this whole discussion," Eadington said. "The average play per spin is obviously way above a penny -- usually the 30- to 50-cent range, depending on the market."

Pilant compares someone losing $30 or $40 in a slot machine over a few hours with a person who spends the same amount going to a ball game or night on the town.

That's a familiar tack among casinos as they market the entertainment aspects of gambling and lessen their focus on who is most likely to leave the casino with less than they brought in.

And penny slots, because they keep people in their seats longer, play right into that theme -- especially in markets that depend on return customers.

"The difference we talk about is frequency," Pilant said. "Vegas is a low-frequency market. A Kansas City customer might go there twice a year but maybe 40 times here. The decisions are different in Kansas City than in Vegas. At the end of the day you've got to make sure the customer who lives in your market is loyal to you."