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The Oregon Video Lottery

#1

The Oregon Video Lottery - How a State Runs a Gambling Racket.

I have to start this story at the very beginning. I had a great step-dad. He was an old seaman. He had a penchant for relating to and raising kids. He raised five of his own, seven step-kids through the women he married, and pretty much raised all the kids in the neighborhood too. The last 20 years of his working life he was the Bosun on the Malaspina, one of the largest ferries that plied the waters between Southeast Alaska and Washington. He worked a week on and a week off. On his weeks off you would usually find him sucking down Rainier beer with his buddies at one of the bars in Juneau.

Jim’s lifelong dream was to own a bar or tavern…“one of these days, kid, when I retire, we’re gonna get us a joint” he would say. When he retired in 1987 he bought a tavern in Canby, Oregon. I went down to visit. There was a stand alone video poker machine in the tavern. I knew absolutely nothing about video poker in those days and hardly payed attention to it. But then one day someone cashed out some credits. Jim payed him for the credits. The machine clearly had a sign on it saying for amusement only.

I asked Jim what was going on. He said the guy that owned the machine filled him in on what was going on. Though the machines said “for amusement only” pretty much all the bar and tavern ownersin Oregon payed off winners to induce action. That is, as long as they knew the person, because it was illegal. They wouldn’t pay off strangers. You had to go through some sort of vettting process in order to be trusted. Jim got 25% of whatever the machine won.

You know the saying “be careful of what you wish for, you might just get it.” Jim’s dream of owning a bar didn’t work out to well. Oregon had very strict liquor laws. Bar or tavern owners couldn’t really drink in their own establishments. Owning a bar boils down to babysitting drunks. Jim couldn’t sit in his own joint knocking down beers with his buddies. That was a killer for him. Instead of being the babysitted drunk he was now the babysitter. He didn’t like that at all.

The Alcohol Control Board ran undercover operations in Oregon. They came in his joint and caught him knocking down beers with his buddies. They revoked his privelege of serving drinks in his own bar. Though he owned the place he couldn’t even go behind the bar anymore. This wrecked the whole thing for him. He sold the tavern a year later and moved back to Juneau so he could knock down beers like he wanted to with his old buddies.

This is just the beginning of the story of how a state runs a gambling racket. I’ll fill in the rest later. I have a very busy day ahead and have to get out and do it.

To be continued…

#2

I just got home last night from a long drive back from Oregon. It was the culmination of a trip to Salt Lake City to go to the Family History Library to do some genealogical research, then on to Wendover to check that scene out, then to Oregon to visit one of my sisters and family.

In Oregon I stopped to eat at a Denny’s. In my search for the restroom I stumbled onto six machines that had video poker and video lines games on them. What the hell? I looked on the machines for the manufacturers…IGT, Bally’s, Spielo. I immediately started asking questions to those around me. After my meal I whipped out my windows phone and started googling. At the hotel in Pendleton I brought my laptop in and did some more googling. Quite a story.

I remembered my step-dad and watching the illegal video poker activity in Oregon in 1988. But I was not the only one watching. The authorities in Oregon were watching too. Lotteries got introduced in Oregon in 1984. The officials involved figured that illegal video poker was a $100 a year industry in Oregon.

These officials studied the situation out…then went gansta. They moved to take over the industry. The first move was to outlaw private ownership of video poker machines. The next move was to buy their own machines and place them in the bars, restaurants, and taverns. Up to six machines per business. And they gave the businesses about a 25% cut of the money generated. They had copycatted the entire business model of the illegal operators. LOL! They called it the Oregon Video Lottery. And the machines are known as Video Lottery Terminals. They operate with RNG’s.

The games on the machines were capped at a 95% payback and a $600 max jackpot. In 2005 they added video line games to the mix. In 2011 they took the $600 cap off. I don’t know what the cap is now but I seen jackpots as high a $6000. In 2015 they replaced the old machines with the new modern stuff from IGT, Bally’s and Spielo.

There are 12,000 of these video lottery terminals spread out amongst 2400 small businesses. The figures I see online are the machines gross about $900,000,000 a year. About 25% goes to the small business owners then after expenses the state has about $550,000,000 to spend on education, parks and economic development.

When you see the sign in the screenshot below hanging in front of a small business it means they have the machines inside:

http://www.imgur.com/EaWvOap

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#3

At their website http://www.oregonlottery.com/games/video-lottery you can read about the video poker games and video line games you will find in Oregon. They offer five video poker games and 51 video line games. As the companies involved are IGT, Bally’s and Spielo you will see a lot of the games that you are familiar with in your jurisdiction. They also publish the payback percentages of these games. The paybacks are the same on every machine no matter the location.

The video poker is abysmal. The best games, Flush Bonus by Spielo, Flush Fever by IGT, and Flush Frenzy by Bally’s have RTP’s in the 95.5% range. The Deuces Wild game returns 90.88% to 91.22% depending on your bet level. Pickem has a return of 91…9%. There is a pending lawsuit in Oregon over their use of the auto-hold on video poker. All the games have auto-hold. It is estimated that the hold is 3% more than the intrinsic value of the games because of the auto-holds steering players to inferior draws.

The line games have returns in the 92% range. I visited several of these mini-casinos and the line games were definitely more popular with the players than video poker. That seems to be the trend these days. I’ve visited several of the Indian Casinos-and Deadwood-in the northwest and video line games dominate the casino floors.

The Oregon Lottery, after the state income tax, is the second biggest contributor to the Oregon State Budget.

#4

In 1995 six Dotty’s casinos opened around Las Vegas. They came in under the “restricted license” that allowed bars to have up to 15 machines. These mini-casinos had a country kitchen look. They became popular enough that by 2010 they took heat from the larger locals casinos who took their case to the Gaming Commission. New rules were instituted to make it tougher for Dotty’s to compete, like having at least 2500 square feet of floor space, at least 8 bartop machines, and a kitchen operating at least 12 hours a day. But this didn’t phase the Dotty’s owners. They may have up to 100 locations today.

Where did this business model come from? And what was up with that country kitchen look?

In 1992 five Dotty’s Deli’s opened in the Portland, Oregon area. Though they were billed as Deli’s they were really after the gambling action. At the time a small business could have up to 5 machines and got a 35% cut of the gross win from the state. They came up with the country kitchen look to make it look like grandma’s kitchen. Older women were the target market. But if you ordered something to eat in one of these joints you would probably get some prepackaged junk that was heated in a microwave so no one went to them to eat. The anti-gambling crowd piled onto Dotty’s for running an out and out gambling operation…not just supplementing their income from gambling. The Dotty’s controversy in Oregon pretty much became the test for what these small business’ could get away with.

Under pressure the state instituted a law that at least a third of the income must come from non-gaming sales. Dotty’s started selling cheap cigarettes. Today the average price of a pack of cigarettes in Oregon is $5.69 but you can buy a pack of Marlboro at Dotty’s for $4. Guess who gets all the cigarette business around Dotty’s locations.

In a money grab the state cut the take of the small business’ to 19% to 26% depending on how much they grossed but allowed one more machine to make a total of six. This did not deter Dotty’s owners as they have 40 stores around the Portland area today, Some of them carry other names, like Paddy’s. Strip malls are their typical location. Maybe 600 feet of floor space. Only one attendent on duty. Last year, the best Dotty’s location took a 1.3 million dollar win with just six machines. That’s an average of $600 a day per machine. And of course there are a lot of copycatters in Oregon taking their lead from Dotty’s.

A few years back the state of Illinois legalized up to five machines for small businesses. In Illinois the state takes just a 30% cut of the money won. Dotty’s jumped right into the market. They have 60 stores there today with plans for 150.

#5

IMHO, that move in Ill. has done more damage to local casino than about anything else the idiot politicians could do.

#6

Hook, I was just over that way. I stopped at Jumer's Rock Island. Only there for a few hours on a weekday afternoon but the place was packed. And I got a chuckle seeing about a dozen people lined up at an ATM machine.

#7

Damn, wish I’d a known that. That’s my home base & I’m there 3 - 4 times/week. If it was busy, musta been given some junk give-a-way or something…that’s what brings em out. Good thing tho, cuz I’ve got a feeling if we’d get together, we’d spend about 10 hours sharing stories. Too bad I missed ya.

#8

Mickey wrote: "Under pressure the state instituted a law that at least a third of the income must come from non-gaming sales. Dotty’s started selling cheap cigarettes. Today the average price of a pack of cigarettes in Oregon is $5.69 but you can buy a pack of Marlboro at Dotty’s for $4. Guess who
gets all the cigarette business around Dotty’s locations. "

I always wondered why Dotty’s has the cheapest cigs, cheaper than the Indian smoke shops. They’re selling them at a loss, just so they can meet the state regs on percentage sales allowed.

#9

$600 per machine per day. That's pretty amazing. When these started popping up in in the Chicago burbs I was wondering how the numbers could work. Strictly from a business perspective. For the bar owners it's a no brainer. You're already managing a going concern. You pull the pool table out of the back room and put in machines. The bar owners' slice of the take is all gravy.

The strip mall outfits I couldn't quite wrap my head around. Could you generate enough of a win from 5 machines to net a profit? There is absolutely no other reason to enter one and no other real revenue stream... and a fair amount of gambling competition in the area. In the couple I've seen it sure doesn't look like they generate anywhere near $600 per machine.

From a gamblers perspective, I can't figure out a way to make money. There's no club allowed. The only advantage play I see is free candy for players.

C

#10

I agree. There are three of these joints within a couple of miles and I’ve never seen much activity in any of them.

#11

I replied earlier that I think machines in bars, etc. really hurt the casinos. I don’t frequent bars so I don’t know how busy these machine are, buts here’s what’s wrong w/ this. I’m guessing that the people playing these machines are folks stopping for a drink on the weekends after cashing checks, etc. They are going to play any pay table & are probably not too skilled. They are going to lose their $20/$50, whatever & are the exactly the people that the casino makes most of their money on. No comments on my English grammar pls.

#12

Never mind then. The inertwebs and the Illinois gaming authority make this pretty easy to research. The "sleepy" little strip mall outfits I have seen are taking in 14 to 15 million in action per year. House win is consistently between 7% and 10% of action. Usually around 8%. The bars I'm familiar with are doing 6 to 8 million in action.

8% of 15,000,000 is 1,200,000. 30% of that goes to state and municipality... leaving $840,000 to cover expenses. Even if I'm missing something it looks like a pretty good investment. I wonder if I'm too late to get into the wee casino business? Of course an independent would have to give the slot operator their cut. Still....

C

#13

C, it's my understanding that the machines are owned by the slot route operator. After the state's 30% take the rest of the money is split 50/50 between the business owner and the route operator.

#14

I understand. If I were one of the big boys with dozens or more of these slot rooms I would want a piece of that end of the business also... if it's Kosher with Gaming Board.

C

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On 4/7/2017 5:37 AM, mickeycrimm@yahoo.com [vpFREE] wrote:

C, it's my understanding that the machines are owned by the slot route operator. After the state's 30% take the rest of the money is split 50/50 between the business owner and the route operator.

#15

Hook wrote “I replied earlier that I think machines in bars hurt casinos.”

Hook, the machines are not just in bars and restaurants in Illinois. They are also in gas station/convenience stores…and truck stops. And I pulled off the interstate at Princeton, Illinois to see a sign on a business called “Suzie’s Video Poker and Slots.” I went in to investigate. There were five machines, four of them being played, and a slot attendent reading a book. The slots were the only business in the building. This building was certainly not modern and probably had only about 800 square feet. I googled up this “Suzie” and found out it was a chain outfit.

Another thing I noticed about these “five machine casinos” whether they were in a bar, restaurant or gas station was they placed no extra burden on the employee’s. Every location had a ticket redemption kiosk next to the machines. When one cashes out they just insert the ticket in the kiosk, grab their money, and hit the road.

#16

And also in clubs, halls or lodges. Max $2 bet and max $500 win.
All gambling transactions handled by machine. No risk or extra
labor for the bar or any other operating business. No brainer
business decision. An almost free 200K per year for some dive bars.
C

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On 4/13/2017 7:34 AM,
[vpFREE] wrote:

mickeycr…@…com

  Hook wrote "I replied earlier that I think machines in bars hurt

casinos."

  Hook, the machines are not just in bars and restaurants in

Illinois. They are also in gas station/convenience stores…and
truck stops. And I pulled off the interstate at Princeton,
Illinois to see a sign on a business called “Suzie’s Video Poker
and Slots.” I went in to investigate. There were five machines,
four of them being played, and a slot attendent reading a book.
The slots were the only business in the building. This building
was certainly not modern and probably had only about 800 square
feet. I googled up this “Suzie” and found out it was a chain
outfit.

  Another thing I noticed about these "five machine casinos" whether

they were in a bar, restaurant or gas station was they placed no
extra burden on the employee’s. Every location had a ticket
redemption kiosk next to the machines. When one cashes out they
just insert the ticket in the kiosk, grab their money, and hit the
road.

#17

Only thing wrong w/ your post, I suspect, is w/ the pay tables these machines probably have there wouldn’t be much :cashing out"

#18

Hook wrote" …there wouldn’t be much cashing out."

Hook, the machines in Illinois are the same as Oregon…and I suspect have the same payback percentages as the published percentages in Oregon. I think I have some pictures on my phone. I’ll see if I can put some up here. And they are pretty much the same games. One of the things I haven’t mentioned so far is there are a few wongable/vulturable games on the machines in Illinois.

#19

It’s all about convenience . If people near the joint, they will play. Older lady playing one of the local games knew the odds were bad. She could get a bus and go to major casino for literally no transportation costs and get a free meal. Her friends would be there. Her problem, she only had couple hundred to play. If she went to casino with the girls and lost bankroll early, she had to sit a few hours with no $$ and no play. So she plays local. If run out of money, she walks home. If she gets some play, she usually plays till losing. She’s actually playing for entertainment ?

Cheers…Jeep

#20

This is the Bally multi-game machine found in both Oregon and Illinois:

http://www.imgur.com/Kk0wc06

This is the IGT multi-game machine found in both Oregon and Illinois:

http://www.imgur.com/QlChUNu

This is the Spielo multi-game machine found in both Oregon and Illinois:

http://www.imgur.com/mwgW04O

These three machines are present in every location in Oregon and Illinois. The line games are dominant.