Friday, October 2, 2015

Greed – Biting the Hand That Feeds You

A lot has been written and said about the recent woes of the gambling industry – fewer people gambling, less money being generated by games of chance, changing demographics, etc. Some of the commentary has merit but the facts are that the gaming industry is making more money in the USA and around the world than it ever has. Most of the trepidation among casino execs comes from their insecurity about being able to attract young audiences or what are referred to as Millennials. Those fears are justified.

In the past week I read two articles, one lengthy, comprehensive, and prophetic by Motley Fool’s Jeff Hwang, and another in my local newspaper by Matt Spillane. In my mind, both articles touch on the issue of greed.

Hwang, a well-known writer and personality in the poker world, makes a case for how best to address the “Millennial Problem.” See Entire Article Here . . . His premise is that most of the solutions extant in the business do not address the core issue that “. . . the gaming industry as a whole is giving less and less action, while millennials in general are more perceptive to nickel-and-diming.” In Hwang’s opinion what the casino execs fail to realize is that Millennials are not the idiots they perceive them to be but are savvy, experienced, potential customers who see through the hype and will not fully participate until the casinos give them the value they know does not now exist on the casino floor.

 Hwang’s analysis includes charts and graphs that show clearly what many of us sense in our gut when we walk into a casino – the value that we used to get and, for us older players, were used to getting, has slowly been eroded in favor of higher house advantages. From the almost complete dismantling of 3:2 payoffs on blackjacks to the precipitous increase of low value table games, a reasonably intelligent gambler can no longer hope to reduce the house’s odds to a manageable level.

The inexperienced moderate income player no longer has a place in a casino. The very lowest stakes table games in the vast majority of establishments require a minimum bet of $10 at off-peak times. Most evenings and definitely weekends it may be difficult to find any table even at that rate. The norm has become $15 blackjack tables and many $25 tables. 

Expecting novice gamblers to risk those stakes to “experience” the game is short-sighted and has been keeping new players away.

Even slot machines, the perennial refuge of the small time gambler, have surreptitiously increased stakes to the point of fleecing customers. Courageous slot players in the old days would risk a $3 maximum per pull on a dollar machine in return for an advertised 98% pay back. Sometimes you won and sometimes you’d lose but you never felt like you were being robbed. These days a “penny” slot player needs to risk far more than a dollar per spin to activate the jackpot and nickel machines requiring more than a hundred units per spin can eat through a small bankroll in no time. To add insult to injury, the payback on these low denomination machines is often in the mid 80% area.

All of these innovations that tend to increase the stakes that gamblers play at also tend to decrease the numbers of players that are playing. That’s simple economics. But greed is in play here and the mentality is to get as much as you can into the casino coffers as fast as you can. Slowly, the casino experience is losing its former aura of entertainment in favor of a “get it while you can” attitude on the part of the corporations.

And don’t think that your local lottery vendor is giving you a better deal, which brings me to the second article I mentioned. It’s really only a small piece in the local newspaper but the gist of it is simply that one of the nationally available lotteries, Powerball, will soon be INCREASING the odds of winning the jackpot. That’s right! I said “INCREASING,” not decreasing. 

The disclaimer in the article says that smaller prizes will be easier to win but who do you know that plays the lottery to win a “smaller” prize. The only reason anyone plays is a chance at the jackpot – that life-changing hundreds of millions of dollars!

So, even as lottery players in New York have decreased since 2013, the wisdom here is that making it harder to win will attract more players. I don’t think so. If you though that 175,223,510 to 1 odds were bad, what do you think 292,201,338 to 1 will be? Really bad. Really, really bad!

In a quest to make more money, more money for investors no matter what anyone tells you about where the profits go, those who control our country’s gambling interests are biting the hands that feed them. The greedier they get the fewer people will participate, especially younger, smarter, more discerning players like Millennials. And a few of us older ones will be a lot more careful about where we plunk down our retirement benefits.

Wake up!

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