Numbers, Transparency, and the Health of Gaming

A new policy in New Jersey is a step back for the industry everywhere

Illustration by Jon Estrada

Illustration by Jon Estrada

The gambling industry is built on numbers. Well, it’s built on money, but money is counted using numbers. Casino operators make sense of what’s happening at their tables and slot machines by looking at the numbers. Without them, it would be just about impossible to run a casino.

The industry is often misunderstood, partially because many people don’t grasp the nature of casino math. Some confuse the amount of money gambled with the amount the casino keeps. Others confuse revenue (what casinos take in) with profits (what’s left over after they have paid their bills). Real numbers can clear up these misunderstandings.

For example, in 2012, players gambled about $140 billion at Nevada casinos. That sounds like a huge number, and it is. But players won back more than $129 billion of that money, so casinos took in less than $11 billion that year.

And that $11 billion doesn’t shoot straight to the bottom line. Casinos, like any other business, have expenses. In fiscal 2013, casino departments on the Strip spent more than 30 percent of gaming win on comps, about 18 percent on payroll, and another 7 percent on taxes and licenses. Total expenses accounted for two-thirds of revenues at the departmental level, and that’s before management paid for things such as utilities and debt service, let alone depreciation of assets.

Which is why, despite taking in more than $23 billion in total income in fiscal 2013, Nevada casinos posted a cumulative loss of more than $1.3 billion.

Casinos need numbers detailing things from slot hold percentage to promotional play expenditures to manage themselves; regulators need them to ensure that the business of gambling is conducted fairly and honestly, and the public needs them to understand this mysterious business a little better.

For years, New Jersey has published casino statistics that were nearly unrivaled in their detail. Unlike Nevada, which aggregates results by reporting areas, the Garden State broke them out by property. With more than 300 locations, doing that in Nevada would be unwieldy to say the least, but in New Jersey, which never had more than a dozen casinos, it made sense.

The monthly revenue reports in Atlantic City included the results for all table games and slot machine denominations. So if you wanted to find out how roulette performed at Borgata vs. the Trump Taj Mahal, for example, you could. The public had an unprecedented window into how the business operated. And those who study and explain the industry to the public had a magnificent set of data to work with.

This month, however, New Jersey’s Division of Gaming Enforcement has adopted a new policy. Now it will no longer offer breakdowns of games in its monthly results. Instead, it will only disclose how much was won by casinos at “table and other games,” “poker” and “slot machines.”

That makes it much more difficult to gauge the performance of individual games, not only at certain casinos but across the market. They are not aggregating the individual game data, as Nevada does; they are, for now, eliminating it entirely.

So a business that already mystifies much of the public just got a little more mysterious. Why is that a bad thing? Because, as the Nevada Revised Statutes state, “the continued growth and success of gaming is dependent upon public confidence and trust.” And that trust is extended a bit more with every piece of relevant information that becomes available.

It’s more than academic. While most of the public has an inkling that gambling odds favor the house over the long haul, it’s not so easy to tell which bets are better than others by looking at the games. It’s possible, of course, to go online and look up information about the theoretical house advantage of different games. But New Jersey’s game breakdowns let players actually see how much money the casino kept at individual games. At one casino, the house kept about 14 cents of every dollar bet on baccarat and 42 cents of every dollar bet on Big Six (a.k.a. the Wheel of Fortune). If access to these state-verified figures helped one gambler bet more wisely, the disclosures are worth it.

Particularly as gambling moves online, where there is even more confusion among the public, a little bit of transparency can go a long way.

David G. Schwartz is the director of UNLV’s Center for Gaming Research.