“Everybody wants free play; that’s why we have this big avalanche,” said Eliot Jacobson of Raving Consulting at the Host Development Conference in Las Vegas last month. “Free play has gotten a little bit out of hand.”
You can tell from that last bit that Jacobson isn’t much of a free play fan. He explained that free play is usually given as a percentage of theoretical win; a fixed percentage of ADT is awarded as free play. “One of the biggest problems in this industry is understanding the value of free play,” he said. “People say free play is free because eventually we’re going to get it all back so it’s not costing us anything. The truth is somewhere in the middle. The actual value of free play is an issue that a lot of places are running into. They use easy answers, and those are going to lead you into trouble.”
To paraphrase, here’s how it works: You have a dollar of free play on your card which is sometimes activated by a triggering amount that you have to put in along with it. You cycle it through; it goes into the meter that’s holding ordinary credits. Any win against that free play goes directly into the meter. Once it goes into the meter, it is no longer free play it is money in the person’s pocket who can decide to do with it what they want.
There are many reasons why free play isn’t free, according to Jacobson. An example: Once free play goes into ordinary cash, it is treated as ordinary coin-in. It is not distinguished from coin-in that is generated by ordinary cash. So the player is generating false coin-in based on the free play. Which means any theoretical being generated is false theoretical. “Anything that causes false theoretical places value on that person which is not true value, which muddies the waters for their ADT,” he said.
Free play can cause rating inflation. “If someone brings $100 to your casino and plays it, he’s going to get so much theoretical,” said Jacobson. “A guy who brings $100 and has a $25 free-play coupon, that $25 is going to generate its own theoretical. You caused his theo to go up, which forces you to give him more free play, which leads to more false coin-in. By giving someone free play, you are artificially raising the levels of your players in your system over time. You can see theo inflation happening; you can actually witness that in your database.”
Confusion can and has resulted. “This happened in South Dakota,” said Jacobson. “They thought 2012 was the best year-over-year result ever until someone pointed out they had given more free play away than they ever had. They weren’t accounting for it correctly so they were actually seeing false win.”
So what’s the real cost of all this and can it be mitigated? One way Jacobson measures it is through time lost. “Every player comes to your property with a time window, which is usually going to be fixed for most,” he said. “You’re not going to get more play than what that time allows. The problem with that is all of the free play that is being generated eats through that time window. You can say you’ll get it back, but what you’ll never get back is that time. So the value of free play in one sense can be the percentage of their time window that you are occupying with that free play. Free play is always going to cost you at least half of its face value; I would use that as a benchmark.”
In terms of managing costs, one useful suggestion came from an attendee: “What we have seen with our competitors is their free play will end at midnight and then start the next minute for the next day,” he said.”If somebody comes in late at night, they can get their free play for this week and at 12:01 they get next week’s free play. So they can have a session that’s pretty lucrative for them. What we do is give them a little bit of a break where it might end at midnight, but it has to be 6:00 am or 8:00 am the next morning before you get your next free play. We’ve found that has really cut down on the amount of free play that’s used.”