Casino series gives advantage of information
Whether you are a gambler or a staunch casino opponent, Joseph Ryan's series "House Advantage" shone a light this week on an aspect of the casino industry that you need to see if you are to fully understand how gambling affects you and the state.
The question of the hour isn't really whether casino gambling is good or bad. The industry is profitable, and the state has long since determined that that motive alone trumps any niggling issues over its moral standing or occasional dangers.
But as lawmakers wrangle over whether to expand casino gambling in Illinois, it is important for them and for gamblers as well to understand how the industry is profitable. In recent years, as Ryan's research showed, that has been through a subtle adaptation of the mechanics of one of the most popular forms of gambling - the slot machine - to wrench more money out of fewer customers.
That is hardly a novel concept in business. It's most typically known as "return on investment" or ROI, and our series showed that casinos get a much greater ROI from so-called penny slots - which can cost less to play but also pay out less winnings over time - than from other more-expensive machines. So, they're making those games more fun and more plentiful.
The result is that despite a decline in their customer base, casinos' revenues are actually increasing.
Overall, the research found, even though attendance at Illinois casinos has declined by 13 percent since 2000 and total bets have increased only 1 percent, revenues have actually increased by 20 percent. That's good financial news not just for the casinos, of course; it's also a welcome development for the state, which taxes casino profits at rates of up to 50 percent.
Yet, as legislators debate whether to permit a massive expansion of gambling that could add thousands of slot machines to venues such as Arlington Park where they currently are not allowed, it is a critical piece of information to know. For essentially, the issue isn't just a matter of expanding the public's access to gambling casinos. It also involves a dramatic increase in the kind of attractions that keep the largest percentage of the customer's dollar.
Gamblers, at least, should be aware of that, and casino representatives aren't shy about suggesting that they are. Their interpretation of the numbers is that customers find the penny slots more exciting and entertaining, so they're willing, in essence, to pay more for the opportunity to play them.
There is, of course, that nasty complication of problem gamblers. It is perhaps not surprising that when a casino opens within a community, problem gamblers increase in the neighborhood. It is surely eye-opening to note, however, that the state of Illinois, which collected nearly $13.5 billion from casino gambling and the Lottery between 1995 and 2007, has spent a paltry $7.3 million - about five one-hundredths of a percent of its total take - on support services for them.
The moral issues of gambling-supported state revenues get plenty of debate, and the social effects of the business are also well-documented. Precisely how the casinos earn their money is not as well known, and the particular effect of penny slots was almost unheard-of before Ryan's reports. Yet, these are critical to the discussion, and whatever steps the legislature takes regarding gambling expansion - indeed, whatever steps you take yourself in deciding whether or how to gamble for fun - our research ought, if nothing else, lead to a more informed judgment.
Jim Slusher, jslusher@dailyherald.com, is an assistant managing editor for the Daily Herald.