Not so long ago, a man named Dennis Krum posted an article on vpFREE about video poker and the devolution of gaming. www.gamblingforums.com
After a quick read, I found the premise interesting and invited Krum as a guest on my Gambling with an Edge radio show. Krum accepted. That particular show may be heard at www.slot-machine-resource.com
I am grateful that Dennis Krum came on the radio show. I discovered that I recognized his face but not his name. He reminded me that we were both at the same event about 10 years previously and were both seated at the same table. I remembered the event but not that he was at the table. I do, however, have no reason to doubt him.
I ended up disagreeing with his premise. This comes across slightly on the radio, but I further clarified my thoughts after the show aired.
Krum’s premise is that casinos are middlemen. They offer games, collect from the losers, pay off the winners, and keep the difference as their fee for having the facilities. All they should be concerned with, according to Krum, is maximizing the amount of play. Their profits will come.
This theory works well enough on games of chance — such as craps and roulette (although there are said to be pros at craps and I KNOW there are pros at roulette). If it is strictly chance, there is no reason for casinos to eliminate anybody.
It’s different, in my mind anyway, when you have games of skill. If a casino offered a blackjack game with sufficient rules, bet spread, and penetration so that competent players could earn $500 an hour, every counter in the country would camp out there. There would be a few wannabe counters who lose, but this game would be juicy enough that large numbers of good counters would move into that casino “for the duration.” And even if there were enough seats for all counters and still had some $5 tables for the recreational players, the many tables losing $3000 an hour from the pros would dwarf the few making $100 an hour from the squares.
The casinos have to do something to keep from hemorrhaging money — despite Krum’s thesis that they should always want to maximize the amount played. They can tighten the rules, penetration, bet spread allowed, or eliminate certain players. If they don’t, they will surely go bankrupt for creating a candy store for knowledgeable players.
The same with video poker. Maybe 10 years ago, Caesars Palace, probably by accident, installed a couple of FPDW (100.76%) machines that took $300 a hand to play. While that is beyond the means of most players, there are plenty of players in Vegas (including some who would create temporary teams and pool their money to play) to keep those machines occupied 24/7. (I would have gladly paid $500 to have an 8 hour shift on one of those machines. I could easily have won or lost a sizeable amount of money over those 8 hours, but the odds were definitely in my favor. Assuming I could get 100 hands an hour — you do get a W2G every 12 hands or so and that slows things down— $30,000 coin-in an hour at a 0.76% rate comes out to $228 an hour plus benefits from the Total Rewards system, which was more generous then than now.) Anyway the machines lasted a couple of days and I didn’t find out about them until after the fact.
A dealt $240K royal sealed the deal on the removal of the machines. Caesars over-reacted. It barred from all Harrah’s properties that particular player for having the nerve to get a dealt royal. We can rant and rave all we want on how inappropriate that was, but let’s go on.
To survive, the casinos MUST somehow balance their wins and losses. They can tighten machines, limit points earned on their loosest machines, restrict players, etc. They can lower their slot club rate, the mailers, the amounts of the drawings, their comp rate, whatever.
Several casinos are in considerable financial stress. Krum argues casinos should want more and more business and should never tighten machines or restrict players. He’s entitled to that opinion, but he’s not going to get any casino manager to agree with him. He’ll get players to agree with him because we don’t like the restrictions casinos place on the game.
As players, we always want MORE. You could give us a 105% game with a 2% slot club and a 3% comp rate and we’d still be asking for senior discounts and be REALLY ticked that we have to pay a $12 daily resort fee.
You can argue that there are enough square players and others playing silly money management schemes that casinos can fade a few winning players. And you’d be right. Except if you give the strongest players a very positive high limit game, we can easily wipe out all the profits generated by the lower-limit players.
Running a casino isn’t easy. It’s easy for players to resent casinos tightening up. It’s kind of like an extra tax on players. Nobody likes taxes and everybody wants the OTHER guy to be taxed.
It’s easy for people to argue how casinos SHOULD spend their money. Everybody who has some money is used to fending off “requests for donations” from a wide variety of charities. Well, players following Krum’s thesis are basically requesting “donations to players.” And for some reason, casinos are lending a deaf ear.
As they should.
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Your guest is 100% correct. Casinos worry too much about hold percentage as a descriptor of their profitability. Casinos on the Las Vegas strip have gone to hitting soft 17 and paying 6 to 5 on blackjack and guess what, their hold percentage either didn’t budge or barely changed. The best way to increase profitability is to increase the drop and overall action. You do that by getting more customers into the casino, loosening comps, and by getting players to play longer and by setting up procedures to maximize hands per hour dealt. Bill Zender writes extensively about this in his book “Casino-ology”. You can still protect games and let everyone play. Cutting off most comps and reducing penetration on players deemed a genuine threat is very effective at game protection. The biggest issue fixed by letting everyone play is that you don’t backoff good customers by mistake. A casino that has a just a 5% chance of making a mistake and backs off a good customer will, over a few years, wind up backing off most of it’s good customers (except for the really obvious morons). This is because the risk isn’t just 5%, over a period of years and repeated skills checks that 5% risk is re-applied over and over again (like compound interest). Eventually everyone gets the boot. This is how most casinos lose their customers, they do it intentionally…by accident.