Slot-makers, regulators solve the puzzle of skill-based slot games

In the coming weeks, an Atlantic City casino is likely to be the first in the nation to host a new kind of slot machine—an arcade-style, first-person shooter game called Danger Arena.

Produced by startup slot-maker GameCo, Danger Arena doesn’t look like your typical slot machine. It is housed in what looks more like an arcade console than a slot cabinet. It has an Xbox-style controller.

But most groundbreaking of all is the game play. Each play typically lasts less than a minute, and players win by using the controller to shoot robots on the screen. The more robots, the more winnings. No spinning reels, no waiting for lucky bonus rounds. Winning depends on the skill of the player.

Danger Arena, at press time very close to final approval by the New Jersey Division of Gaming Enforcement, is the first game in the New Jersey slot approval lab that was submitted in response to a call two years ago by state regulators for different kinds of slot games, including games employing skill as a primary path to the highest winnings.

Danger Arena is by no means alone among new games this year that will employ skill, and New Jersey is by no means the only jurisdiction welcoming skill-based slot games. Over the coming year, the industry can expect to see an entirely new category of slot machines introduced to casinos in Nevada and New Jersey, and perhaps eventually across the country.

There is palpable momentum in the movement to bring skill to the slot floor, but make no mistake: The game style is in its embryonic stages, as manufacturers are still trying to get on top of what has been a monumental mathematical challenge—how to offer profitable skill games within the parameters of slot regulations designed to return a minimum portion of wagers to players.

It’s a tall order, but after two years of effort, several manufacturers appear close to filling it.

Genesis of Skill Slots

No entity has worked harder to make skill-based slots a reality than the Association of Gaming Equipment Manufacturers (AGEM), which issued a challenge to its members around two years ago to broaden the slot audience in the face of declining revenues.

Many of the major slot manufacturers had dabbled in skill for years. Bally introduced Pong to the slot floor as early as 2007, and had produced other games such as All That Jazz that employ skill in bonus rounds. IGT has its “Video Reel Edge” series, in which the bonus sequences are much like arcade-style video games, and other manufacturers have produced what have become known as “hybrid” games—traditional slots with an element of skill in the bonus.

However, in 2014, the New Jersey Division of Gaming Enforcement called on slot manufacturers for something more—new styles of games that would include skill as a major factor in winning or losing.

The reasons were many: The younger generation of casino-goers were openly disdainful of traditional slots, preferring mobile-game entertainment. Some current players were abandoning the dominant form of slot machine, the multi-line penny game, because of the high hold percentages typical to the genre.

For the slot market to be sustainable into the future, New Jersey regulators said, something new was in order.

New Jersey was not alone. By 2014, AGEM was already working with regulators and lawmakers in Nevada to draft what would become Senate Bill 9, a statute specifically allowing for variable-payback slot machines—in other words, games that would allow a return-to-player (RTP) that would increase with higher levels of skill.

The passage of SB 9 in Nevada came at the end of a year of workshops involving AGEM, the Nevada Gaming Control Board and representatives of major slot manufacturers. AGEM then worked with the gaming board to craft what would become Regulation 14, along with the technical standards that would govern the new skill-based games. 

“When we created the skill/hybrid games category in SB 9, it was a collective effort between the industry and the regulators to try to add another type of game to casino floors in Nevada,” recalls A.G. Burnett, chairman of the Nevada Gaming Control Board.

Burnett says the idea was to blend chance with skill to create games that would attract new players while adhering to the statutes which require slot machines to be fair to all. SB 9, the enabling legislation for the new category of game, was passed in spring of 2015. AGEM then worked with the gaming board to craft what would become Regulation 14, the technical standards that would govern the new skill-based games.

It was not an easy task. How do you place a cap on skill so casinos aren’t slammed by advantage players who happen to be very skilled at video games? On the other end, how do you assure that less-skilled players achieve at least the state-required minimum RTP?

According to Burnett, topics like these were discussed during a series of three workshops with manufacturers and AGEM representatives as the regulations were being crafted. He says ultimately, the manufacturers will determine the best way to achieve both goals.

Burnett says in the end, the gaming board is concerned with two basics: that games are fair to patrons, and that they can be properly audited for revenue and taxes. “Aside from that, everything’s on the table,” he says.

At the same time the Nevada process was ramping up, New Jersey was working on its own regulations to govern skill-based gaming. Unlike Nevada, the state’s gaming authorities saw no need for a totally new statute governing variable-payback slots. “We have statutory authority to authorize casino games,” says Eric Weiss, deputy executive director of the New Jersey Division of Gaming Enforcement. “This is just another casino game.”

Gaming Laboratories International, which certifies slot machines for jurisdictions in a large swath of the U.S., took the same approach, placing skill games under the GLI 11 standard used for all slot approvals.

Statute or not, New Jersey and GLI were dealing with the same issues as Nevada and AGEM in making skill games a reality. Weiss says the skill games are approved using the exact same parameters on which pure-luck slot machines are evaluated.

“The skill-based games are not that much different,” Weiss says. “You’re coming up with a theoretical hold percentage. When you understand how the game operates compared to a paytable, you have to make some mathematical assumptions on this, but we have very talented and experienced mathematicians who worked with the vendor to determine what the theoretical would be on those games.”

The final skill-based regulations in New Jersey are similar to those adopted in Nevada—approval of a skill game in Nevada virtually assures approval in New Jersey.

One significant difference in the New Jersey regulations from the Nevada rules is something called “adaptive play.” Essentially, the regulation allows manufacturers to incorporate automatic adjustments to an RTP that is below the state minimum—a nod to fairness for players without the skill to excel at the new games.

“We have the 83 percent hold requirement for any game that is a slot machine,” Weiss says, “and at the end of the day, these manufacturers are selling these products and claiming there’s going to be a theoretical hold. But what happens if everyone who comes in is just very poorly skilled?”

The New Jersey regulations allow automatic adjustments to be incorporated to meet the state RTP minimum. The DGE is not setting any rules on how that can be achieved, although Weiss offers a few suggestions: “Can we have a mystery bonus award that brings the payback percentage back up? Or could they have a hidden Easter egg in a first-person shooter-type game where you hit a can that has the value behind it to bring the payback percentage back up?

“We’re not prescribing how to use that feature; we just make it available to the vendor.”

Weiss adds that the regulation is targeted only for poorly skilled people who cannot achieve the state minimum RTP on skill games. “If well-skilled people are beating the game, it cannot adapt by lowering the payback percentage,” he says. “You can only correct for poor play.”

Nevada authorities opted not to codify any adaptive regulation, Burnett says, so as not to upend the basic premise that each game on a slot machine is an independent event, with each person having the same chance as the next to win, whether by chance or by skill.

“A lot of that dialogue has to occur between the casino operator and the manufacturer, and we did not want to necessarily put restrictions into our tech standards that would stop that dialogue,” Burnett says. “We recognize that you’re going to have players who are naturally just better than others, and as long as the patron goes into the game with full knowledge that a lot of it depends on his or her skill, and notices are given—and we did require that in our regulations—then it’s going to be something that’s between the player and the operator.”

Nuts and Bolts

Details such as these are what the industry’s suppliers and regulators have been working on to make skill-based slots a reality. And according to Marcus Prater, executive director of AGEM, we’re still at the beginning of the process.

“Despite AGEM leading this effort, I’ve maintained that this is going to be a slow process, and we won’t see the end effect for roughly five years,” Prater says. “I’m trying to promote some patience on the hype.”

Prater says companies are still trying to solve the substantial mathematical challenges proposed by skill games. “Those are questions that need to be addressed, and we don’t have the answers yet,” he says.

“I do believe these companies will solve the riddle, but it’s a slow process. For this to become commercially successful, it needs to grow. For it to grow, we as suppliers need to get product on the floor to see how players react.”

For the suppliers who participated in the regulatory workshops in Nevada, that means all players—not just young players seeking slot experiences different from the norm. “We really are looking at skill-based games not exclusively as a way to bring in that mystical millennial crowd,” says Matt Reback, vice president of marketing for Konami Gaming. “We think skill-based games need to appeal to the core player. And frankly, we believe they will and can appeal to the core player, but also at the same time, potentially new slot players.”

Konami was deeply involved in the Nevada regulatory workshops on skill games. “We were part of a working group within the industry to review and influence the development of regs and standards,” Reback says. “Our thought was, in combination with the other suppliers, let’s take all that experience and wisdom we have and try and help, so that we move the industry forward in a good way.”

As far as solving the mathematical riddle of skill games, Reback draws parallels to video poker, which he calls the “best and most solid analogy” to skill-based slots in terms of balancing chance and skill.

“We’ve got years and years of knowledge looking at a game like that, where you have to have an RTP range,” Reback says. “On the top end and bottom end, you have to satisfy those requirements. If you’re going to cap it at 95 percent or 98 percent, skill can only get you up to 95 or 98, the same way video poker will get you up to the top end of your pay table with perfect strategy.

“The same thing on the bottom end. If you sit there and don’t push a button for your entire experience, we need to make sure we can guarantee a minimum RTP, because that’s what the regs and standards require.”

‘Gamblified’ and Ready

Reback calls it “gamblifying” the skill game. If zero skill is employed, he says, the element of chance needs to be employed to ensure that the bottom return is at least within state requirements—and the more skill employed, the higher the return, up to a maximum level.

Konami is applying these principles to its first two games designed under the variable-payback guidelines. Beat Square is based on the Japanese game concept Jubeat—owned by sister company Konami Digital Entertainment.

Reback likens it to a hand-based version of the digital dancing game “Dance Dance Revolution”—also, as it happens, owned by Konami.

When musical notes appear, instead of dancing with your feet as in Dance Dance Revolution, you use your hands.

This is accompanied by Frogger: Get Hoppin’, a casino version of Konami’s popular arcade hit in which players manipulate a digital frog across lanes of traffic and obstacles. Konami Gaming released a standard slot with a bonus event replicating the arcade game last year. This time, the better players are at getting that frog across the street, the more they will win.

To a point, of course.

“I think video poker is the right analogy,” Reback says, “because in our games, you can play Beat Square and have really good strategy or play Frogger and get really good at it, but at some point, no matter how good you get, over time the game is never going to put the operator in a position to get beat by advantage players.”

Other slot manufacturers are joining the skill-based effort this year. Everi, for instance, is using a newly acquired license to bring the hit mobile video game “Fruit Ninja” to the slot floor. One format will be a traditional video slot on the company’s High Rise cabinet, with a pure-skill bonus game based on the popular fruit-slicing game, which is the second-most downloaded paid mobile app in the world.

The other form, though, is pure skill—an out-of-revenue game for the TournEvent instant-tournament system. “When a player goes into the TournEvent contest, instead of popping balloons and spinning reels, they’re going to be slicing up all kinds of fruit, dodging a bomb, and those kinds of events, in a pure skill game,” says David Lucchese, executive vice president of games for Everi. “We believe the TournEvent execution will attract not only the current customer base, but the millennial base and the Gen X base.”

Everi solved the variable-payback puzzle by letting the operator select the level of skill. “Since all jurisdictions are not created equal, we built levels into the software from full skill to faux skill,” he explains. “The operator can run it at full skill, but we’re going to give them the ability to dial it back—it’s less about automated adjustment, if you will, and more about operator-selectable.”

Also involved in working toward skill-based gaming is leading slot-maker International Game Technology, which was the first to apply skill in a big way with its Video Reel Edge slot series. Games like Tulley’s Treasure Hunt and Blood Life were traditional slots in the base games, but gave the player the option to play a skill-based bonus that placed the player inside a Nintendo-like 3D video game.

“Those were largely due to working with the industry to change the rules to allow those styles of games,” says Jacob Lanning, vice president of international market strategy for IGT. “It’s definitely a category and rule set we’ve been pushing.”

IGT continues to release products in the Video Reel Edge series. This year, the company launches Texas Tea Pinball and Cleopatra Pinball, which both feature a true skill-based pinball bonus using virtual flippers.

IGT is launching a game called Lucky’s Quest that falls more closely under the new variable-payback guidelines than the Video Reel Edge games, which employ much more chance.

Lucky’s Quest is a mobile-style matching game that will be available for play on the CrystalCore cabinet, as well as on a mobile device using IGT’s On Premise mobile on-property network. It’s based on a narrative starring a dragon named Lucky. In Lucky’s Quest, players can unlock characters, win credits and advance to new levels based on performance in the title’s symbol-matching game. Players with more skill achieve more opportunities to win the prizes.

As far as how IGT solves the balancing act between skill and chance, Lanning says it depends on the game. “There are a few different ways we’ve done it,” he says. “It really depends on the game type, and the decisions that we make are really driven by the experience we’re trying to create for those players.”

On the Video Reel Edge series, skill is balanced by doing “asynchronist progressives,” Lanning says. If you trigger the skill bonus and play poorly, the difference between the actual outcome and the theoretical expected outcome is put into a progressive pot, which is awarded as a mystery progressive to future players. The values of the progressive prizes are adjusted according to the skill levels of previous players.

Scientific Games also is no stranger to skill-based traditional slots. This year, the company takes it up a level with Space Invaders, the famous arcade shooting game, which the slot-maker has modified to fit the variable-payback regulations.

“It’s a hybrid game,” explains Jamie Vann, senior principal game designer for Scientific Games. “You do play a slot game, so a big portion of your return is based on random outcomes. However, your skill can affect a large portion of your return.”

The game offers the option of a free-spin bonus for those less-skilled. “If you play with above-average skill, you will return more in the skill bonus than you would in the free-spin game,” Vann says.

Beyond that, the levels of what can be achieved with skill, and what must be achieved for a minimum RTP, are achieved much as they are with arcade games. “Optimal play” is relative. On Space Invaders, says Vann, optimal play means every shot you took hit the target you were aiming at, and it was always the most valuable target on the screen.

“We know there aren’t going to be any players who can actually do that,” he says. “The art of this is going to be how to figure out how good players are going to be in the field when you put your game out.”

Finally, at GLI and before regulators in Nevada are games from the young company that has made bringing computer games to casinos its main business. Gamblit Gaming is ready to begin Nevada field trials next year, says founder and CEO Eric Meyerhofer.

Meyerhofer says Gamblit’s games, which feature rewards for reaching higher levels as in a mobile-style game, use a system of “skill points” earned through skilled play that can be used in jurisdictions where skill games are not yet approved. “This is a different kind of product,” he says. “We think the slot market is incredibly well-served, but we’re looking to reach that untapped market in casinos—in our opinion, those under 45.”

First to Market

While manufacturers across the industry test the waters with skill-based products that solve the skill/chance equation in various ways, one young company appears on the brink of being the first to launch a live variable-payback game on a real slot floor.

New York-based GameCo Inc. was founded in 2015 with the sole purpose of “bringing video games to casinos,” says Blaine Graboyes, the company’s CEO.

The company’s core product is the Video Game Gambling Machine, or VGM. It uses an arcade-style cabinet, and features a custom controller designed in partnership with Suzo-Happ.

It is a pure video-game platform. “This isn’t an enhanced slot machine or a bonus round,” says Graboyes. “The actual game experience is, I play a video game and my skill in the game determines my payout.”

Graboyes says the first GameCo skill offering, Danger Arena, will be launched in an Atlantic City casino just after the Global Gaming Expo trade show. He did not want to reveal the casino pending final approval of the game.

Danger Arena is a simple first-person shooter game. “It’s the

kind of thing you’d see on an Xbox or PC in terms of game play,” says Graboyes. “Typically, the game experiences are about 45-90 seconds in length. On our first game, I’m fighting robots. If I take out six or more robots, I’m in the money. If I take out 10 robots, I get the highest payout.”

GameCo builds its games under the GLI 11 standard, which is the current standard for slot machines, electronic poker and blackjack. Graboyes says the first games will target a 90 percent return-to-player. “And I’m pretty confident we’re going to hit that number.”

Answering the Questions

Much of the industry will be watching the first skill-based slot games very closely. As that happens, Prater says AGEM is dedicated to helping new jurisdictions craft skill-based/variable-payback statutes and regulations, including a best-practices document the organization offers new jurisdictions that incorporates “what we feel are the best of Nevada, New Jersey and the GLI 11 standard,” Prater says. (For more information, visit AGEM.org.)

Meanwhile, as Prater and regulatory officials stress, the remaining questions, puzzles and solutions that will form the art of skill-based gaming will ultimately be answered by the operators, through live casino action.

What will skill ultimately do to slot return? Will the games work well on the main floor? Placed next to the ultra-lounge? In special millennial-friendly rooms or slot areas?

Graboyes at GameCo says his potential customers are divided on these questions. “Some casinos have definitive plans for dedicated areas,” he says. “Other casinos are just giving them top placement on the floor. I’m not really sure which will perform better. The way I view it, this is a great opportunity for beta-testing in the field, and getting actual data, and then adapting it.”

“All of us are wading into this brave new world of skill-based with a couple of jurisdictions,” adds Everi’s Lucchese. “We view skill-based games as evolution, not a revolution. Let’s wade into it; let’s learn together and see where we go.”

Frank Legato

Author: Frank Legato

Frank Legato is editor of Casino Connection and also editor of Global Gaming Business magazine. He has been writing on gaming topics since 1984, when he launched and served as editor of Casino Gaming magazine. Legato, a nationally recognized expert on slot machines, has served as editor and reporter for a variety of gaming publications, including Public Gaming, IGWB, Casino Journal, Casino Player, Strictly Slots and Atlantic City Insider. He has an B.A. in journalism and an M.A. in communications from Duquesne University in Pittsburgh, PA. He is the author of the recently published book on gaming, How To Win Millions Playing Slot Machines... Or Lose Trying.