APNewsBreak: AC casinos to keep some slot jackpots

AP News
Posted: Apr 05, 2011 12:21 PM
APNewsBreak: AC casinos to keep some slot jackpots

A new rule that took effect Tuesday lets Atlantic City's casinos terminate some multi-machine slot jackpots and keep money that would have been used to pay the jackpots.

The casinos would have to give the public 30 days' notice; if no one wins by then, the casino can remove those machines and cancel the accrued jackpot. The previous regulations required them to transfer the jackpot to a different progressive, or multi-machine system.

The change applies only to progressive slots within a single casino. Progressive jackpots linked among several casinos would not be affected.

Regulators say the change allows casinos to more quickly get rid of underperforming slot brands and replace them with others.

The changes also permit the casinos to increase the odds of winning progressive jackpots from the current 50 million-to-1 to 100 million-to-1.

Josh Lichtblau, director of the Division of Gaming Enforcement, which issued the new rule, said it is designed to give the casinos the flexibility to more quickly remove slot machine themes that are not proving popular with gamblers.

"It's providing the casinos with a tool to provide new, fresh slot product to the casino floor for consumers," he said.

The change is in the spirit of casino regulatory reform that was passed earlier this year by the state legislature and signed into law by Gov. Chris Christie, changing or eliminating some rules the casinos found outdated, expensive or burdensome. That was done to help improve their financial position and flexibility as they fight off fierce competition from casinos in neighboring states that have taken away nearly a third of Atlantic City's casino revenue over the past four years.

New Jersey allowed casinos to cancel progressive jackpots once before, in 1992. In just the first three months after the change was made, the casinos canceled $16.6 million worth of jackpots, and kept the money.

Those jackpots often made the difference between profits increasing or decreasing at the time.

The rule was later undone, requiring the casinos to transfer progressive jackpots in games that were being removed from the casino floor to other progressive games, a rule that stood until this week.

Lichtblau said the casinos will not be allowed to play "bait-and-switch" with slot games, allowing jackpots to build up, then canceling them, only to return them to use soon afterward with a smaller jackpot. The new rules require that when a particular progressive theme is ended, it can't be brought back.

"We're going to be very vigilant about that," he said.

The change will not affect slots customers. They will still either win or lose while they are playing a particular machine.

The difference is for the casino. Under the new rule, the casinos will no longer have an outstanding liability _ or an obligation to pay for _ a slots jackpot that is canceled.

The money taken in from slots players will continue to go straight into the casinos' "drop" and be counted as revenue in counting rooms. The difference is the casinos no longer have a potential liability on their books to pay it out once it is canceled.

Lichtblau said the same concept applies to a single slot machine that is taken out of service for whatever reason: the casino keeps the money put into the machine and no longer has the possibility of having to make a payout to someone playing it.

David Hughes, chief financial officer of Trump Entertainment Resorts, which owns three AC casinos, said he doubts casinos will make frequent use of their new freedom to cancel jackpots and keep money that would have been used to pay out prizes.

He said casinos still have the option to transfer jackpots to other progressive systems, and predicted many will do just that, rolling it over into new slot machine systems that should prove more popular.

"You don't do it for financial reasons," he said. "You'd have a backlash from your customers if you did that. You'd anger your customers, and customers are what drives everything."

The new rules also allow casinos to increase the odds of winning progressive jackpots from 50 million to 100 million-to-1. Lichtblau said that would apply mainly to new slot machine systems being purchased and installed. Casinos wanting to increase the odds on existing systems already on the casino's floor would have to ask permission from the gaming enforcement division.