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Grinding Down the Bankrolls of the Masses

David Schwartz of UNLV wrote a neat article on blackjack in Forbes today (h/t to Charlie).  In it he explores what's happened over the years as casinos have tried to make changes to the margins to earn more rake from each player. This includes 6-5 blackjacks and standing on a soft 17.

Proponents of 6:5 and the other edge-padding rule changes argue that the vast majority of customers don’t know the difference. Walking a casino floor and seeing 6:5 tables packed with smiling players, they might be right. But the numbers tell a different story. 

Since 2000, the number of blackjack tables in the state of Nevada has fallen by over 31 percent. Yes, but the amount casinos win from blackjack is still the same, some might argue, so things aren’t that bad. Factoring in inflation, though, the amount Nevada casinos have won at blackjack has fallen by 46 percent.

This is not much different than is seen with a marginal takeout increase in any game. Betting volume depends on a few things, one of which is bankroll size - as bankrolls get degraded less is rebet. But also, the enjoyment a bettor gets from a game is directly correlated to them having a chance to win, and although the black jack changes are marginal, over time this enjoyment degrades too. 

The same phenomenon was seen in scratch off lotteries, but things went the other way. These ticket bandits started at well over 50% takeout because lottery players scratching tickets were deemed to be not in any way price sensitive.  Over time this was proven incorrect, where now - at least in one state - scratch off ticket takeout on larger sized ($20 or more) tickets is lower than Del Mar exacta takeout. 

In horse racing we don't talk about this much, and frankly, takeout increases are normally hidden, then trumpeted with a short term revenue bump. The key to that is short term, because in the long term, bankroll degradation is something that stunts growth, and what's particularly penal about it as a strategy - you don't even see it happening in real time. You just wake up one day and wonder where half the people went. 

Have a great Tuesday everyone. 



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