The true loss for a society of Pokie Players

UPDATE 26th of May:

I have recently discovered that turnover is defined by cash plus wagering wins, which means if a person puts in $300 cash, wins and loses $2700 over the course of the day in small increments, and then loses their $300 too, they have “wagered” $3000 and “won” $2700 so the expenditure is only $300 ie 10% gross margin. So I cant even begin to count how much has really been lost or wagered by problem gamblers! This makes true measurement/ accurate metrics so much more important.

You may have heard that NSW has the second highest number of gaming machines in the world (99k), second only to Nevada (181k).  But unlike Nevada, whose capitol is Las Vegas, these poker machines are all in local pubs and clubs, being played by regular locals, not tourists. (The 200k gaming machines in Australia does not include those in Casinos.) So what does this mean for local people and our communities in NSW and around Australia?

The Queensland Government have been conducting a survey “Australian Gambling Statistics” nationally for 33 years.

33 years ago, in 1990/91, Gaming Machine gross profit (known as expenditure in the survey) was $3.2bn in today’s dollars, or $233 lost on average per Australian adult . As shown in Figure 1, the biggest losers were NSW ($680.50) and the ACT ($649.10).

Figure 1 Real Gaming Machine Expenditure per capita 1990/1991

Gaming machines were first made legal in Australia in 1956, but these days Australians play electronic gaming machines (EGMs) with much faster spin cycles and multi line play that can accept notes, without limit. This means that a person can now put as much as $1500 an hour through a gaming machine (Productivity Commission). Figure 2 compares the old mechanical “one armed bandits” with the modern EGM.

Figure 2 An original Aristocrat gaming machine compared to a modern Electronic Gaming Machine

Now, in 2015/6, these product innovations along with deregulation has more than doubled the average Australian adults loss to $650 (Figure 3 shows this broken down by State) , and quadrupled gross profit to $12bn.

Figure 3 2015/6 Gaming Machines real expenditure per capita

Gaming Machine Turnover is a massive $142bn up from $23bn in 1990, and 4% of adult Australians (600,000) play gaming machines more than once a week. An estimated 95,000 Australians (0.6% of the adult population)  are classified as Problem Gamblers, and it is estimated they are responsible for 40% of gaming machine turnover (Productivity Commission).

That average loss of $650, even the NSW loss of $1,023 shown in Figure 3 seems to obscure this imbalance.

Whilst the various State legislation requires gaming machines to pay out a minimum of 85% of turnover as winnings (Productivity Commission), anyone who has ever gambled knows that these winnings are not evenly distributed. How can we get a better sense of how much people in our communities are losing?

Firstly, turnover is a more accurate measure of how much money people put through the EGMs. This has increased 423% since 1990/91 from $1,812 per adult to $7,670 in 2015/6 .

But if 40% of turnover is contributed by 95k problem gamblers, how much is that per problem gambler?

Figure 4 Real Gaming Machine Turnover by Problem Gambler

$600k per problem gambler in 2015/6 (Figure 4), up from from $98k in 1990/1. At today’s prices in Sydney, that could mean up to 95,000 families lost their homes to playing the pokies.

There isn’t much other data available other than these averages, and even from simple maths, you can see the figures are quite devastating.

My goal is to convince national government policy makers, to change the way gaming machine losses are reported on. Gaming machines account for every dollar that flows in and out of them and are reported to the State for tax collection purposes.

State Governments must show a frequency histogram of the amount of gains and losses from these machines so our community understands the true cost to individuals, and just how rare a win is. Im sure it is even more than $600,000 for some people.

This way we will all learn the true cost of gaming machines to our society.

Context:

I needed to counter balance my last post with this one, against gaming machines!

My goal is to convince my target audience, national government policy makers, to change the way gaming machine losses are reported on. Gaming machines account for every dollar that flows in and out of them. We should be able to show a frequency histogram of the amount of gains and losses from these machines so society understands the true cost to individuals, and just how rare a win is. The medium for this article is an online blog.

My data is from the Australian Gambling Statistics 1990–91 to 2015–16, 33rd edition which is a survey conducted annually by the Queensland Government.  The data comes in excel format, ready to use.  I augmented this with data on the number of gaming machines in each state, combined with the Australian Government Productivity Commission’s Inquiry into Gambling from 2010.

Some definitions:
Gaming machines: All jurisdictions, except Western Australia, have
a state–wide gaming machine (poker machine) network operating in clubs and/or hotels. (WA only has machines in the Crown Casino, 1,750 of them). The data reported under this heading do not include gaming machine data from casinos. Gaming machines accurately record the amount of wagers played on the machines. So turnover is an actual figure for each jurisdiction. In most jurisdictions operators must return at least 85 per cent of wagers to players as winnings, either by cash or a mixture of cash and product.
Instant lottery: Commonly known as ‘scratchies’, where a player scratches a coating off the ticket to identify whether the ticket is a winner. Prizes in the instant lottery are paid on a set return to player and are based on the number of  tickets in a set, the cost to purchase the tickets, and a set percentage retained by  the operator for costs.
Expenditure (gross profit): These figures relate to the net amount lost or, in other words, the amount wagered less the amount won, by people who gamble.  Conversely, by definition, it is the gross profit (or gross winnings) due to the operators of each particular form of gambling.

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