Never tell us the odds! Sun tests VLT payout probabilities

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This article was published 06/07/2013 (4459 days ago), so information in it may no longer be current.

The mathematics of probability are notoriously slippery — especially when it comes to gambling.

But with $100 in cash, a notepad and a pen, two Brandon Sun reporters recently set out for a downtown Brandon watering hole to see if we could verify some of the mathematics of Manitoba Lotteries.

According to the last seven years of annual reports (the ones posted online at manitobalotteries.com), VLTs in Manitoba pay out just under 93 per cent based on dollars played. But see if you can find a player who thinks they get $93 back for every $100 played.

In lottery lingo, that’s what’s known as the “return to player” or the “payout percentage” and it’s about the same as a house edge of seven per cent. Not every spin is the same, though. Calculating the edge is based on all the spins of all the slots wheels in the province over the entire year. Individual players or different machines may, of course, see a variety of hot or cold streaks.

The simplest example is flipping a coin: It’s heads or tails, 50/50.

If you only flip the coin four times, you have a pretty good chance that it won’t be two heads and two tails. You could get a streak of four (either way) or you could end up with three of one and one of the other.

If you flip a coin 20 or so times, it’s not unusual to still end up with 12 or 13 heads.

But the more times you flip the coin, the more likely you’ll end up closer to an even 50/50. Flip it 100 times and you’re likely to be pretty close.

We decided to take the same approach with a VLT.

With $100, we loaded up video lotto games that had no element of player choice. The two we used were called 7s Wild and 5 Lines. We played $1 per game, and we played 100 games, in five sets of 20.

Certainly, over the short run, we expected to win some and to lose some. But we thought 100 random spins would be enough to bring us relatively close to the promised 93 per cent payout. (Also, the Brandon Sun wouldn’t advance us $1,000 to “test the VLTs” for a few hours more.)

We fell very short.

After 101 spins (we miscounted at one point), we were left with just $56.50 from our original stake.

What happened?

Maybe with a larger bankroll, we could have bent the results back to the average. But taking a closer look at the math, it’s also possible that having a few big winners requires most people to lose a lot.

If one person puts in $1 and ends up winning $930, then 100 people have to lose $10 each for the payout percentage to average out.

Of course, it’s not that simple — because the payout percentage is not the same as cash winnings.

Let’s say you put $10 in a VLT and bet $1. That takes you down to $9, but when you spin the wheel, let’s say you win $11 and so you end up doubling your money. With a stake now of $20, you keep betting $1 and spin the wheel another 12 times, but unfortunately you lose every time.

Left now with $8, you cash out.

From your perspective, you lost $2. You might think that’s the same as a payout percentage of 80 per cent. But it’s not.

From the house perspective, you made a $1 bet a total of 13 times. You lost 12 of those dollars, and you won $11 once.

The payout percentage is calculated based on your total dollars played (that’s $13 in this scenario) and the total dollars won (here, that’s $11). In this case, the payout percentage is 84.6 per cent.

Notice how the “payout percentage” is higher than the amount you were able to cash out? It’s the same in Manitoba — and numbers from Manitoba Lotteries bear it out.

Although the payout percentage has been steady at just under 93 per cent since 2005-06, the amount of money they pay out is a lot less. Based on the number of dollars actually fed into VLTs, and the number of cash actually paid out, and not counting phantom “wins” or “losses” that are just numbers on a screen, what we’ll call the cashout percentage is more like 75 per cent.

But it has been rising.

That’s good news for players. In 2005-06, players only managed to keep 75 cents for every dollar they fed into the machines. By 2011-12, they managed to eke out an additional two pennies. Now, 77 cents on the dollar may not sound like much, but it was bad news for the province.

According to Manitoba Lotteries’ annual reports, despite $130 million more being plunked into VLTs last year compared to 2005-06, revenues from VLTs were almost the same. And they were trending down, after peaking in 2008-09.

One possibility for the change may be that players were getting better at figuring out the odds as they got more familiar with the games.

The province rolled out new VLTs —with new games — earlier this year.

» ghamilton@brandonsun.com