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Deal Me In

Friday
Jul252014

Winning will come at a steep price

Dear Mark: I love your column in the Biloxi Sun Herald. It is the number one reason I get the paper. Keep up the great work. Anyway, I was curious, when you hit a mega-jackpot, are you paid the full amount all at once, or does it come in yearly installments. Not that I think I am one day going to hit a super-sized jackpot, but I do like to plan ahead. Steve P.

 

Okay, Steve, you hit a Big Kahuna, say $25,000,000, so what happens next?

Today, most slot manufacturers’ offer winners two ways of receiving their newfound wealth. You definitely want to seek accounting and/or legal advice as to your tax implications, because how you receive your payout will determine exactly how much you will net and how much will go to the government. On the positive side, winners typically have between 60 to 90 days to decide whether to take a lifetime payment or all of it, up front, in one-lump sum.

Okay, Steve, you’re young, and you don’t want to appear on Dr. Phil two years from now telling 4PM viewers how you pissed away your $25 million bonanza. To avoid that humiliation, you decide to take a set annual payout for a specific number of years. From IGT, maker of the Megabucks machine, you are looking at a payout over 25 years.

On a $25 million jackpot, that means an annual payout of $1,000,000 and an annual tax bill of around $400,000, which equates to about 10 million in taxes over the duration of the payout.

Let’s say instead you decide to take it all up front. Going the lump sum route initially nets you approximately 60 percent of your jackpot from the casino. In addition, you still owe Uncle Sam. From the remaining $15 million, the IRS will demand another 40 percent, a cool $6 million, leaving you with about $11 million in walk around loot.  

At this point in my answer, I have moved above my pay grade, so, Steve, I would strongly recommend that you consult your CPA or accountant as to your overall tax consequences if Fortuna (Tyche), the Greek goddess of fortune, shines her light on you.

 

Dear Mark: Who determines the hold of a slot machine, the casino or the maker of the machine? Nicolas R.

 

Each slot manufacturer has a book that contains all the available hold percentages for the specific models and denominations of their slot machines, so, Nicolas, the casino simply selects the make, model and the return they want.   

Say for instance, the casino wants to order a quarter machine with a 93% payout, giving the house a 7% hold.

What the hold means is that over a “period of time,” the quarter machine ordered is going to pay back 93%. And what do I mean by a “period of time?” Typically, it is about 10 million handle pulls.

The reasoning for 10 million yanks of the handle, it is because it is the number the manufacturer has determined it would take a particular machine to achieve that overall 7% hold calculation.

Before that many whirls of the reels, the machine is going to go through countless hot and cold cycles. When the machine first hits the floor, it could easily run negative for the house, spitting out coins making for a hot machine. But as the slot closes in on that 10 million mark, the machine will tighten up, and

at the end of that cycle, it is going to hold at 7%. Unfortunately, Nicolas, only Nostradamus can predict hot and cold runs.

 

Gambling Wisdom of the Week: “Losing as much money as I can get hold of is an instant solution to my economic problems.” – Lucian Freud (1922-2011)

 

Friday
Jul182014

Where'd da go?

Dear Mark: With apologies to General Douglas MacArthur, the question still remains, what happens to old slot machines that have outlived their usefulness? I have noticed that some of my favorite machines mysteriously disappear, one casino at a time, until they are just a fleeting memory of spinning reels and flashing lights. Gone, but not forgotten. Is there a graveyard for our dearly departed friends? Leigh H.

 

Any time you see a slot machine disappear from the floor, from the casino’s point of view, that machine was misbehaving, or better stated, underperforming.

All machines, Leigh, need to show reasonable results or their replacement is inevitable. A gaming machine’s performance is measured by two factors: the amount of coins wagered daily (“coin in”) and the amount collected daily by the casino (“win”). If a machine’s performance falters ever so slightly, a slot manager could decide a change is needed in the slot mix, meaning the placement and positioning of machines on the casino floor.

My guess here, Leigh, is that you might also be inquiring about those 20th Century antique machines from manufacturers like Mills and Jennings or some of the later IGT or Bally machines from the 70s or 80s. Their resting places have a variety of possibilities. The first being, as with any slot machine, they are usually sent to a facility that strips them for usable parts and sorts the rest for scrap.

Also, stored in the basement of many casinos is that slot graveyard you speak of, where they live out their lives collecting dust. 

Some machines might go to a private collection, but, depending on local law, they may have to be rendered inoperable. Many a Man Cave has one sitting in the corner to pilfer quarters from the owner’s friends. A collector like Yours Truly, would never part with his 1934 Mills Star “Firebird” QT nickel machine, as it pays for the FREE Guinness or PBR, their choice, offered when some sucker is yanking its handle.

Then there are retail establishments specific to the selling of older slot machines in gambling towns like Reno and Las Vegas, where selling gambling equipment is legal. Some of these stores have a decent sized collection on site. If you are a want-to-be buyer of a “dearly departed friend,” it is important to check state and local laws before you pull the trigger (handle), although, generally speaking, antique slot machines are legal in most states if they are over 25 years old. You can also do a Google search on “old slot machines for sale,” or, go to eBay, where a plethora of slots is always for sale.

Even though Nevada may be the gambling capital of the United States, the slot machine was actually born elsewhere, in San Francisco.

The first mechanical slot machine, the Liberty Bell, was invented in 1895 by Charles Fey, a San Francisco mechanic. Fey’s machine housed three spinning reels, each decorated with diamonds, spades, hearts and one cracked Liberty Bell per reel. When the bells lined up, they produced your biggest payoff: 10 nickels. The original Liberty Bell used to be on display at the Liberty Belle Saloon & Restaurant in Reno, but since its closing in 2006, it is now exhibited at the Nevada State Museum.

Back in the 40s and early 50s, those older mechanical slots were chock full of springs and gears that were powered by a player pulling the handle, which started the reels spinning. The problem with these early machines was that they were limited in the size of the jackpots because they could only accept one coin, which restricted the number of coins they could pay out. Once the electromechanical machine appeared, it allowed multiple-coin play, which included electrically powered hoppers that could pay out much larger jackpots.

When the computerized slots were introduced in the 80s, machines with progressive jackpots linked among different machines hundreds of miles apart, offered huge jackpots starting in the millions. Essentially, Leigh, slot machines keep advancing and getting more complicated, necessitating new homes for the older ones. I will write in a future column about some new 3-Reel mechanical slots with the feel of a traditional slot that are now hitting the floor.

 

Gambling Wisdom of the Week: “Slot machines are the cotton candy and the McDonald's of the casino. Everyone knows that they're bad for you, but few can resist their junk-food appeal.” – Andrew Brisman