Casinos Bet on High-Tech Slots to Improve Returns

Hunkered in a windowless office and bathed in the competing glows of a computer screen and an incandescent floor lamp, Lance Peterson writes one-liners for Rodney Dangerfield, Regis Philbin and Gene Wilder.

He’s preparing them for their casino performances -- not onstage, but for talking slot machines bearing their names.

“Thanks a lot!” quips Dangerfield, when a gambler deposits a buck in the machine. “Your kids don’t need college anyway!” Bada bing. Or, “Thanks, now I got some drinkin’ money.”

If a gambler is slow to wager on the Philbin machine, the host snarls, “Hello? Are you out there?” Or, “Push a button! Do you think we have all day?”

Wilder, the mad scientist from the movie “Young Frankenstein,” welcomes gamblers’ money: “Does that mean you love me?” and, when they leave, “Drop by anytime, we’re always open.”

Peterson, who may have one of the most unusual jobs in the gambling industry, works for the world’s largest slot machine manufacturer, International Game Technology. IGT and numerous other slot manufacturers share the same goal in a fast-changing industry: to create a new generation of high-tech million-dollar slots to make it more fun to lose money.

Using stereo soundtracks, digitized video and interactive, touch-sensitive screens, new slots hit themes of nostalgia and pop culture, from Humphrey Bogart and Marilyn Monroe to Spam and Harley-Davidson.

In 2002, gamblers poured more than $28 billion into slot machines in the 14 largest markets in the United States, plus more into slots operated in Indian casinos that don’t report their revenues, according to gambling industry analysts at Bear Stearns.

On the Las Vegas Strip -- long the capital of traditional table games such as blackjack, craps and baccarat -- slot machines generate more than 50% of gambling revenue. Nationwide, slots bring in 75% of total wagers.

Just as society turned to television, then to the earliest TV computer games such as Pong, and on to Nintendo and Sony PlayStation, the slot machine has advanced from the simple mechanical device where table gamblers would park their wives with a bucket of coins to fast-paced, multimedia centers driven by powerful microprocessors.

“I have an edge on every bet the customer makes,” said Wally Barr, president of Park Place Entertainment, whose flagship is Caesars Palace in Las Vegas. “My job is to get him to sit and stay and play. I’ll win more than I lose.”

Slot players are displacing old-time gamblers who enjoy the camaraderie of throwing dice and playing cards.

Harvard University professor Robert B. Putnam, whose book “Bowling Alone” explored the demise of social interaction in favor of individual pursuits, is not surprised. “Television taught people to watch ‘Friends’ rather than have friends,” he said. “Today, relatively little of our leisure time is spent interacting with other people. Now we spend it observing machines.”

Many gamblers who don’t understand the nuances of table games prefer the simplicity of slot machines.

“When you want people to participate in casino gaming, slot machines are an easier entry point,” said Phil Satyre, chairman of Harrah’s Entertainment. “You can play it alone, set your own pace and, if you make a mistake, nobody notices.”

Casinos love slot machines. They are guaranteed moneymakers, typically configured to keep about 5 cents of every $1 wager. (By comparison, table games make about 15% profit but have greater overhead.)

But casinos also are paying more for them. The manufacturers spend more than $1 million to research and develop the most advanced models, and pay licensing fees to use brand names, from cartoon characters to television shows and board games.

To recoup those costs, some slot manufacturers are demanding a percentage of the revenue generated by their most popular machines. Many are leasing rather than selling their machines to casinos. They are linking slots for huge jackpots and splitting the profits with casinos.

IGT, which built 70% of the slot machines played in the United States today, sold nearly 140,000 machines last year, making $846 million. It made an additional $882 million from leasing and profit-sharing agreements for the highest-end models.

The head of game development for IGT, former Sega pinball designer Joe Kaminkow, said his team of 600 designers and engineers is working on 160 new models. Progress is recorded on index cards tacked to a wall inside his office. To shield them from a visitor’s wandering eyes, he lowers a window blind over the display.

“Ten thousand baby boomers turn 50 every day,” Kaminkow said. “These are their new pinball machines.”

Among IGT’s most innovative machines are those in which Vanna White appears in a video clip applauding the gambler and Pat Sajak brags about how much money he is giving away in “Wheel of Fortune.” The company’s “I Love Lucy” slot emits the smell of chocolate (think candy factory, a classic Lucy moment) or shows video clips from the old sitcoms. In a machine from slot maker Bally, Ray Charles sings as blind gamblers use Braille buttons and hear a soothing voice announce spin results.

The flood of more complicated slot machines is burdening the Nevada Gaming Control Board, which examines the machines to make sure they are not, and cannot be, corrupted by cheaters.

Last month, its chairman, Dennis Neilander, asked state legislators for money to expand his testing laboratory. The newfangled slots, he said, “require enormous amounts of processing ability to run the more complex programs, and we need more engineers and equipment to keep pace.”

Reel-spinning slot machines were introduced in 1899 by Charlie Fey, a Bavarian electrician and machinist who settled in San Francisco. The town was filled already with poker machines that spun playing cards, and slot machines with upright, roulette-type wheels. Fey invented a spinning, three-reel “Liberty Bell,” which became a huge hit and evolved into the classic slot machine.

To skirt ambiguous gambling laws, manufacturers designed models that dispensed gum, disguising them as vending machines -- which led to the cherry, plum and orange symbols on the reels.

The most significant advances since then were designed less for entertainment than to speed up play or encourage bigger bets.

The classic pull arms have given way to push buttons, and machines have long accepted paper currency, freeing gamblers of coin buckets -- and prompting larger wagers.

With touch screens, gamblers could choose from multiple games and increase their bets from single pennies to multiple dollars.

The newest machines no longer noisily pay off in coins, but spit out paper receipts that can be redeemed by a cashier -- or inserted into another machine. Patrons prefer not to handle dirty coins, and “cashless” machines have cut maintenance costs by 40%.

Manufacturers realized the best way to extend play -- and get gamblers to spend more money -- was by offering “bonus rounds” where the most exciting sound and video action appears.

This is where Peterson, a lanky 31-year-old, found his niche. He joined the company at 18 as an assembly line worker, then moved to customer service.

An entertainer at heart, Peterson writes one-liners for a radio station and performs in community theater. The company discovered his talents; he has written scripts that are heard on more than 100 models of slots.

He loves an audience -- even if it’s just one person sitting in front of a slot machine.

“It’s our goal,” Peterson said, “to get people to put money into the machines just to see them perform.”