CONTACT US   |    CAREERS
News and Views

Free Play - Is it Free?

As each machine/player tracking manufacturer brought their version of free play to the industry the question of how to value free play became a topic of debate from marketing departments to the financial side of casinos. Many casinos thought free play was exactly that — free — and to this day we run into many marketers who still don’t grasp the intrinsic cost of free play.

MAKE NO MISTAKE – FREE PLAY IS NOT FREE. If you really think about it Free Play is a replacement for the cash coupons we sent to players, through direct mail, prior to the advent of ticket in ticket out systems. Free Play has real advantages though; if set up properly, it somewhat eliminates breakage. If we have rules that insist free play must be played through before cash out we can generally assume we have minimized the instance of players cashing out free play and walking with the casino’s money, which couldn’t be done with cash. It dramatically cuts stand time in lines therefore presumably increasing time on device and it lessens the number of cash transactions, therefore lowering the margin for error and need for excess cash on hand.

Think about the idea that free play really only replaces coupon cash; one simple way to look at it is the free play dollar then, once in a machine, behaves exactly like cash and it becomes clear that free play does have a cost and that cost is roughly discounted by the hold percentage only. In other words, if the game a player is on using free play has a theoretical hold of 8%, then every free play “dollar” costs 92 cents. If the hold for the game is 2%, the cost of the free play “dollar” is 98 cents. If your floor is set at an average theoretical hold of 6%, every free play dollar introduced into the system costs 94 cents.

Why? Because once that free play “dollar” enters our system it is the same as cash. The likelihood of someone winning on that free play dollar is the same as the likelihood of someone winning with cash and that free play comingles with the cash to meet the coin–in to win ratio of the overall theoretical hold. This is a simplistic way to look at the value of free play which doesn’t consider time. If we over incentivize our patrons are we really cutting into real cash time on device? Free Play may actually move in value from the first cycle with consideration for how much time players actually spend on the games. But for now a simplistic view is adequate to demonstrate that free play indeed has a value. If you don’t recognize it in your pro and post formas, you will undoubtedly eventually recognize it in your slot hold.

Think of it this way: If the entirety of our players played with free play, at the end of the gaming day we would still have jackpots paid out against absolutely no real revenue — the drop would be coupon tickets and the actual hold for that day would be negative. So beware marketers, although it may be the slot department that takes the heat because of the deterioration of hold, it could actually be you creating the deterioration in net revenue by following an irresponsible reinvestment strategy.

Our company, SMP Communications is a gaming agency that has been involved in Casino Loyalty Program planning and strategy for over a decade. We have a successful track record with over 35 casinos and we are available to help you in your efforts to create real incremental gains through careful analytics to strategy processes.

Related reading: ESTABLISHING PLAYER LOYALTY TAKES MORE THAN SENDING OFFERS THROUGH DIRECT MAIL. Coming here soon.

7626 E Greenway Rd
Suite 100
Scottsdale, Arizona
85260
Toll Free (888) 796-3342
Phone (480) 905-4100
Fax (480) 905-7110
Email info@smpcom.com