I first heard the word "breakage" in the context of casino operations during a discussion with a slot manager at the Palms. Concluding a rant about the undesirablility of video poker players (as opposed to reel slot players) he said, "and there's no breakage."
What he meant, in a gross overgeneralization, is that video poker players use their players cards, take advantage of free play offers and promotions, and use all the points they earn.
Breakage occurs whenever a casino doesn't have to provide something a player has been offered or is entitled to. It's a huge source of casino profits.
Much, perhaps most, breakage is the "fault" of players. The casino sends out room offers, dining credits and free play that can be used only on certain dates. The customer can't make it to the casino while the offers are valid, so they go unused. Breakage.
But another kind of breakage is, in my opinion, manipulative at best and deceptive at worst. This occurs when casinos set things up so it's almost impossible for them to give players what they promise.
A simple example is a drawing or tournament with an advertised prize amount. But the time frame for claiming the prizes is so restrictive that the casino knows a percentage of the money will be forfeited. A few years ago, many casinos would mail prizes to guests who couldn't personally claim them after a drawing or tournament. Now it's not uncommon to require winners to claim within as little as half an hour.
Another way to create breakage is to design a drawing or promotion so that the biggest prizes do not have to be awarded. An easy want to do this is to provide more prizes than there are winners, and have each winner pick a prize. Let's say a casino advertises a drawing with 10 winners and a top prize of $10,000. But each winner has to select an envelope from a total of 20, only one of which contains $10,000. In my opinion a casino operating such a drawing should be allowed only to advertise the top prize guaranteed to be awarded as the top prize. In this case that would be the 11th-highest prize, because the 10 highest prizes might not be selected. The top potential prize ought to be allowed to be mentioned in advertising only if it is made clear that this prize might not be awarded. The usual "win up to $10,000" in a case like this is at best misleading.
There are ways to set up a promotion so that the creation of breakage is achieved with great subtlety. Let's look, for example, at the weekly seniors drawings at the Silverton.
The casino holds three drawings each Monday for players 50 and older, at 2, 4 and 6 p.m. There are 15 prizes at each drawing, ranging from $50 free play to $1,000 cash. A player can win at one, two or all three drawings each week. Tickets are earned on Mondays only based on amount of coin-in. All tickets remain in the drum for all remaining drawings that day.
But every senior is entitled to a free entry. Part of Silverton's seniors day promotion is a half-off buffet or entree at the cafe. To get this discount, players have to swipe at a kiosk. With the discount they automatically get an entry into the drawing.
Players need not be present to win, but must claim their prize within two hours of each drawing. Those who are serious about these drawings time their play on Mondays to end just before 2 p.m., wait for the results of that drawing, come back just before 6 p.m. to check the results of the 4 p.m. drawing and wait for the results of the final drawing.
How many people who come for a cheap lunch and have one ticket in the drum are going to check the results of all three drawings? Not many, I'm sure. I wouldn't. Same for casual players who might earn a few tickets. And plenty of people are going to have things to do that keep them from checking, even if they have good reason to do so.
I participate in these drawings almost every week and usually win at least a couple of times a month. Winners have to sign a sheet of paper on which all the winners' names are listed. Signing for the 4 p.m. drawing just before the end of the two hours claiming period, I often have seen that only a few of the 15 winners have shown up to get their prizes.
It's important to understand that even a promotion designed to create breakage, and even one that's deceptively advertised, can be an advantage play. And the Silverton, for example, undoubtedly would provide a much smaller prize pool on Monday if the rules provided that all prizes had to be awarded.
Nonetheless, I agree with Michael Gaughan, owner of South Point, whose philosophy is that casinos ought to give away what they say they are going to give away.