How electronic gambling machines work: Structural characteristics

AGRC Discussion Paper No. 8 – July 2017

Policy and regulation

In Australia, EGMs account for over $14 billion in gambler losses, or 62% of all gambling revenue. Around $2.5 billion of those losses occur in casinos (Queensland Treasury, 2016; Productivity Commission, 2010).

A recent study using nationally representative data from four countries found that while high expenditure on EGMs is associated with the most harm, harm can also accrue to those spending more moderate amounts (Markham, Young, & Doran, 2015).

Policy makers and regulators tasked with protecting gamblers and reducing harm associated with EGMs have at their disposal the Australia/New Zealand Gaming Machine National Standard v10.30 (Australian and New Zealand National Standard Working Party, 2015).

The standard currently applies to all Australasian jurisdictions and specifies a range of technical standards required for approval by regulators. It is not without its problems. One is that each Australian jurisdiction applies distinct parameters (Australian and New Zealand National Standard Working Party, 2015, pp. 76-80). Another is the orientation of the standard towards technical, rather than harm prevention or reduction, priorities (Livingstone & Woolley, 2007).

Arguably the biggest problem with the standard is that understanding of specific "structural characteristics" of EGMs and their relationship to gambling harm and behaviours is not well reflected in it.

EGM structural characteristics (see below for more detail) are discrete but integrated elements of game design that in the aggregate constitute the game portrayed on an EGM. They are the "building blocks" of an EGM game.

A better understanding of the role and importance of EGM structural characteristics could help develop better policy and deliver more effective harm prevention or minimisation interventions.

Reducing harm from EGM use

Some EGM characteristics may add to the enjoyment of those who derive pleasure from the machines. The issue for policy-makers is to balance this consideration against the harm generated by an EGM characteristic. This is identical to challenges arising when developing policy and regulation for other consumer goods, services and public practices (e.g., motor vehicles).

EGM characteristics are not accidental aspects of game design, nor are they immutable. EGMs have evolved rapidly in recent years to utilise many characteristics known to increase the addictive potential of games, and, as a corollary, increase the likelihood of harmful consequences for a substantial proportion of those who use them.

The process of game evolution has been well documented (Schüll, 2012), and its rapid growth has delivered digital devices that far exceed the revenue performance, and addictive and harm-inducing potential, of older, mechanical poker machines.

Given the rapid and continuing evolution of EGM design, it appears that regulators are not always aware of the implications of some aspects of game design. Australian regulators have all "outsourced" game testing to commercial operators who determine whether games meet the standards, and issue certification.

Understanding the mechanism by which a characteristic of EGM design boosts reinforcement (e.g., by disguising losses as wins - see below), and thus increases the machine's addictive potential, could help craft policy responses that would limit the harmful impact of such a characteristic.

Research relating to many specific game characteristics and configurations is relatively modest (Parke, Parke, & Blaszczynski, 2016). Facilitating researchers' understanding of the new generation of EGMs would assist regulators in the crafting and application of standards.

Rapid progress in understanding the impacts and effects of EGM design could be facilitated by providing bona fide researchers with regular access to probability accounting reports (PAR sheets), and actual game data. Improved access to actual game data would be supported by the introduction of comprehensive pre-commitment systems, enabling de-identified data sets to be generated.

A public health approach

Gambling regulation has become overtly aligned with public health principles in recent years. Gaming machine standards and other requirements for approval of EGM games provide an important set of tools to incorporate practical and highly effective mechanisms for the prevention and reduction of harm, and the improvement of consumer protection measures.

Understanding the effects of EGM structural characteristics, and re-orienting the national gaming machine standards towards harm prevention and reduction priorities, represents a reflection of a fundamental principle of the public health approach. Access to better information and real-world data would be of great benefit in achieving this goal.

However, there is already ample evidence available of the relationship between some important EGM structural characteristics, and the harms associated with the use of EGMs. Acting on this understanding would provide considerable benefits.

As well as protecting gamblers, minimising harm would permit the development and continuation of a sustainable EGM gambling industry, where the benefits of EGM use are largely retained.