Monday, August 28, 2006

Gambling in Australia

I have just managed to get Australian Gambling Statistics 2006 prepared by the Queensland Treasury. This data is not available on any website (why?) and costs $175 for the CD rom. It is the most comprehensive aggregate picture of gambling in Australia, providing consistent time series reporting since 1979-80.

Gambling expenditure measures total losses while gambling turnover measures the total amount wagered. The figures for 2004-05 are surprising,

1, Australians overall gambled $142 billion in turnover of which 72% was on gambling machines (pokies). In NSW, Victoria and Queensland gambling on pokies is about 90% of total wagering.

2. The biggest gamblers on average in terms of turnover are in NSW ($11,880 per head), Victoria ($9,627) and Queensland ($7,846). But never fear Queenslanders - your gambling turnover is increasing faster than any state at 10.4% with 18% growth in pokie turnover.

3. Total gambling expenditure in Australia is about $16 billion with the average NSW citizen losing about $1336 annually, average Victorian losing $1133 and average Queenslander $1003. The majority of losses are on pokies - in NSW these comprise 71% of all losses, and in Victoria and Queensland about 55%. Again Queensland, take heart, your losses are growing strongly - again mainly from pokies.

4. Racing, Lotto and Casinos are fairly static or declining markets. They are small fry. The big growth area is pokies.

29 comments:

observa said...

Naturally no govt wants to do a comprehensive, socioeconomic breakdown of who is losing the majority of the dough here.

Tanya said...

"But never fear Queenslanders - you gambling turnover is increasing faster than any state at 10.4% wuth 18% growth in pokie turnover."

Blame it on the Cockroaches and other Mexicans who are holidaying or moving permanently to the sunshine state! ;-)

Steve Edney said...

Suprisingly your figures indicate that pokies work out to be better on average than other forms of gambling from an expected return point of view. Pokies return 91% of total volume, where as other forms return 72%. I can only imagine that lotteries (about the only bets signifigantly worse than pokies) are responsible.

Obviously there are two reasons pokies have such a high turnover figure. Availability, and the ability to rapidly re-bet winnings.

Finally is there a way of allowing gambling but reducing its impact by changing the nature of the games. If we adjusted the expected return of pokies to say 95% would this almost halve the amount lost on pokies or would it merely mean that people play for longer? With the volume bet goes up and the losses remain almost the same? It would make the machines less profitable per unit time for pub owners and make them less likely to install them rather than do other revenue increasing activities such as having live music, trivia etc.

hc said...

Steve,

You are right. The possibility for rapid re-betting means that the pokies only gradually empty your pockets.

You are asking about the price elasticity of demand for pokies. I don't know but I'd be interested in finding out.

Whether losses fall also depends on whether people continue playing until they lose their stake or play for a fixed time as recreation.

There is some modelling and hard analysis required here.

FXH said...

Charging $175 for something that is already sunk and could be plonked online for marginal cost seems silly.

I'm guessing they'll sell about 150 of these CDs to Universities.

FXH said...

Turnover = Victoria ($9,627)

Losses = average Victorian losing $1133

So you have to put in about $10 to lose $1?

Steve Edney said...

FXH, yeah pokies return about 90% of their bet.

The amount lost is really the figure that is of most interest not the turnover. A game that lets you lose only a small amount per bet on average, but replay extremely rapidly will generate huge turnover that's not necessarily reflective of how bad it is.

If the return on pokies went from 10% of each bet, to 1% but you assume everyone still plays until they empty their wallets (ie. they arelimited by the maximum losses not the rate of loss or time it takes) then the turnover amount would increase by a factor of about 10 without increasing the losses.

FXH said...

steve - but aren't pokie machines limited by time / access. Wouldn't people have to be at the machine for say 5 times as long to empty their wallets? I'm assuming machines are 70% - 80% occupied at present - so that there must be a "sweet point" for optimum payout /play time (to owners not mug punters).

harry does the study show a punter spending curve - is it normal curve?

how much of the turnover or loss is provided by "problem" or more correctly high $ punters and how much by the "average", say 1 St.Dev. punter?

Steve Edney said...

fxh yes. Of course they would. I'm not suggesting that it would have exactly that impact. I am suggesting though that if we make the take on pokies 1/2 as much as it is currently, people might compensate by playing 1.5 times as long, and so increase the turnover while reducing the total amount lost by say 75% (or something).

Sam Ward said...

As opposed to slot machines in unregulated Las Vegas, where regular slots pay off at up to 93.5%,

http://wizardofodds.com/slots/slotapx3.html

and video poker machines at up to and over 100% (with perfect strategy).

http://en.wikipedia.org/wiki/Video_poker

Of course most people don't actually get 100% or close to it because they don't bother to learn the strategy.

But if that was a requirement we'd also ban Chess.

"Suprisingly your figures indicate that pokies work out to be better on average than other forms of gambling from an expected return point of view."

This is only surprising if you have always believed the media spin about pokies.

They are no worse than any other kind of gambling, it's simply that there are more of them because of regulation.

It's not legal to stick a blackjack or poker table in your pub. If it was, people would do that instead of playing pokies, because it's a lot more fun.

Sam Ward said...

And by the way Harry, you still haven't responded to my points in your last pokies post.

hc said...

It is the repetitive issue Sam. The expected payoff is high for a single pull of the handle but you replay quickly so the losses accumulate.

I'll respond to your other points but right now looking into WA data. Its a nice controlled experiment on the effects of banning pokies on total gambling.

Sam Ward said...

"Its a nice controlled experiment on the effects of banning pokies on total gambling."

Pokies are not banned in WA.

They are just confined to a monopoly business which happens to be owned by Australia's richest family.

In addition, many pubs and clubs have slot machines.

There are 2 stipulations:

1. These machines are not permitted to pay out in cash. They can only pay out tickets which are redeemed at the bar.

2. All profits have to be donated to a non-profit organisation in the local area.

Also, they pay out even worse than normal pokies do.

hc said...

Sam, I didn't know that. The statisics I am looking at show zero losses and expenditure on pokies in WA. So much for what seemed like a good idea.

Steve Edney said...

"This is only surprising if you have always believed the media spin about pokies.

They are no worse than any other kind of gambling, it's simply that there are more of them because of regulation"

But, with the exception of Lotteries, they *are* worse than most other forms of gambling in terms of return.

Table games would be much more fun I agree. I'd be much happier with people playing roulette, blackjack and poker for money in the pub than the machines. Not only would they likely get a better deal they would be a fair bit more social.

Sam Ward said...

They aren't that much worse Steve.

The main point is that pokies require no skill.

Blackjack is the best returning game (97.5%) in most casinos IF you know basic strategy and execute it perfectly.

If you use other worse strategies then your return could be as low as 85% or worse depending on the particular rules.

Then there are games like Caribbean Stud and Pontoon which return lower than standard blackjack and the strategy is much more complex (The Basic Blackjack Strategy was proven 30 years ago and is quite simple to remember)

Roullette, Two Up and the money wheel are the only casino games where strategy does not affect your return.

Roullette returns 94.7% with 2 zeroes or 97.3% with 1 zero.

Then there is Keno, which is no different to the lottery except the draw happens immediately rather than once a week. The returns on Keno are similar to the regular state lottery.

Slot machines/Pokies are on a par with sucker games like Pontoon and Carribean stud, better than Keno but worse than Blackjack and Roullette.

As I said, they aren't really that evil, they are just ubiquitous.

The real problem most people have with pokies is that they replaced other entertainment options that pubs used to have (Live Bands, Quiz Nights, Topless barmaids etc).

This is more of an idictment on the entertainment industry than it is on Poker machines in my opinion.

Sam Ward said...

Note that you are forgetting one very important point when discussing money lost on poker machines:

Pubs that install pokies typically offer reduced drink prices and cheap meals because they are using the pokies are their primary revenue source rather than markup.

A good percentage of what people lose on pokies they save on reduced prices of food/drinks.

The average price of a Beer or a Counter Meal in a pub in Sydney or Melbourne is about 70% of what it costs in Perth.

Perth is the most expensive place in Australia to have a night out - And is right up there with Hong Kong, Tokyo and New York City in a worldwide comparison. (London and Singapore would beat it pretty easily though).

Sam Ward said...

Harry: Burswood Casino has 523 video poker machines and mechanical slots.

I am unsure on the stats of the pub-based machines, they are obviously called something else other than "pokies" or "slot machines" because I can't find anything about them on google.

Next time I go down to my local I will take a look at the manufacturer/model of the machine they have there and find you some info about it.

I have always found this situation to be a little bizarre. There are definitely pokies in WA pubs, they just aren't called pokies and don't dispense coins.

And there aren't very many of them, I think you need a particular kind of license and a pre-existing sponsorship deal with a non-profit community group to be allowed to install them.

We (SMCC) are sponsored for $1500 per year by the Nookemburra hotel, the money for this sponsorship comes from their one slot machine.

If you are going to do a state-by-state comparison, then you should also take other forms of betting into account. Horse and Dog races are very, very big news in WA, and many pubs (3 just within a 5 minute drive of my house) have TABs inside them.

I'd personally rather have pokies than a TAB because I can't stand horseracing after having it shoved down my throat from an early age.

Some places have both a TAB and Pokies.

Sam Ward said...

http://yobbo.wordpress.com/2006/08/30/points-on-pokies/

Harry, I've tried to compile all my responses to this topic in one post. You might like to check it out.

FXH said...

sam - I can't say I've observed any correlation between pokies and cheap meals / beers in Melbourne pubs and bars.

taust said...

there was some good work done in Victoria several years ago. It analysed ways of controlling the amount of time people spend at Poker machines.

Effectively it just meant reversing all the features commonly used by pubs. Make sure the room has a clear view of the outside, make sure it has many ways of telling the time; make sure the lightiing level is high, make sure there are other competing activities available.
Funny though none of this is ever put in the regulations for controlling so called problem gambling.

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bTin said...

Taust,

I was wondering if this study/ work done in Victoria was a journal article? I am doing a essay on reducing problem gambling for uni and would love to research some more on this particular area. Could you please give me a website?

Benji said...

The governments really don't care who loses money gambling as long as they get the taxes.

Anonymous said...

Regarding the statement that "pokies" return 90% of your bet....

This is actually not true. The slot machines return 90% of the money that was initially put into them, but not 90% of the amount wagered. This is because people "cash out" money that is in the machine but has actually not gone into play. The casino posts this 90% number to make customers feel all happy inside. They call this the "hold" percentage, or the amount of money that is put into the machine that the casino gets to hold. The amount that you are keeping obviously varies depending on the type of machine, but I think its more like 80%.

Regarding the Price Elasticity of Demand for Pokies...Again, this varies depending on the type of machine, but Demand for slot machines is quite elastic(magnitude greater than 2), but less elastic than the entire gambling industry (which has a magnitude of greater than 3). Im actually doing a research project for school regarding supply and demand for slot machines.

hc said...

I'd be interested in talking with you since IO am working on the same topic.