Introduction to Slot Machines Invented
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In this post, I’ll do my best to answer the question, “Where Were Slot Machines Invented?” Between you and me, understanding the history of slot machine development provides us with invaluable insight into this entertainment device.
WMS Industries Inc. Had been hovering around the slot machine industry for a few years, but by the 1990s they had grasped the video slot revolution by the horns. WMS developed its first video slot with a second screen bonus. Reel 'Em In featured a fishing theme where players were able to trigger a Pick'em style bonus game.
Armed with this knowledge, we can begin to understand what next technological advancements to expect. What follows is a brief chronological history of significant developments in slot machine technology.
Throughout, notice how slot machine popularity waxes and wanes alongside the governmental responses to this type of gambling. I’ll begin with Charles Fey in 1887 and finish with the invention of first video slot machines in 1994.
A multitude of other blogs will detail the technical development of slot machines from the mid-90s to today. They’ll have more detail due to their emphasis on current winning strategies.
Future topics are expected to include modern casino business operating
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Charles Fey and the First Slot Machine
The first place to answer “Where Were Slot Machines Invented?” begins in San Francisco. The Liberty Bell is arguably the first slot machine for gambling with automatic payouts.
It was invented in 1887 by Bavarian-born Charles Fey in San Francisco, California. This slot machine simulated the card game of poker, having three spinning reels each with five symbols: diamonds, hearts, horseshoes, spades, and an image of the Liberty Bell.
The highest jackpot, fifty cents or 10 nickels, occurred when all three reels showed a golden Liberty Bell. It was a massive success.
Fey is generally considered to be the “Father of Slots,” in part due to this invention. However, he’s also because he worked so hard to popularize the game.
For both these reasons, Charles Fey’s San Francisco workshop is a California Historical Landmark.
Bell Fruit Gum Slot Machines
Bell Fruit Gum slot machines were manufactured by Industry Novelty Company starting in 1907.
The reels on these machines included cherry, melon, orange, apple, and bar symbols. It had non-cash payouts in the form of fruit-flavored gum, allowing machine owners to avoid prosecution under the anti-gambling laws of that time.
The cherry and bar symbols became traditional to slot machines, and are still commonly used today. The bar symbol was the company logo of an early slot machine manufacturer.
I’ve written a detailed post on fruit machines, which can be found at Why Do Slot Machines Use Fruit?
By 1910, Worldwide Slots!
By 1910, slot machines could be found worldwide. Companies in Europe were mass producing 30,000 of them. In America, machines were installed in most cigar stores, saloons, bowling parlors, brothels, and barber shops.
Improvements immediately found in these slot machines were:
- Cast iron machines instead of wooden cabinets
- Improved mechanicals for back-to-back jackpots
- New coin acceptor developed to limit the use of fake coins
- Designed to be quieter
In 1909, new laws began to be introduced prohibiting slot machines from dispensing cash. These new restrictions resulted in slot machines having the aforementioned non-cash payouts of fruit-flavored gum.
Prohibition, The Golden Age of Slots
From 1920 to 1933, Prohibition existed in America. When we learn about the history of the United States, we’re generally taught that Prohibition was a time when the making, consumption, or supplying
What generally isn’t taught in history class its consequence with regards to slots. Since slot machines were mainly found in bars and saloons, they moved to speakeasies alongside the distribution of alcohol – and returned to offering cash prizes.
So, as a result, during America’s Prohibition slot machine popularity increased even more.
How much? Well, the time of Prohibition is also referred to as the “Golden Age of Slots” due to this tremendously increased popularity.
Las Vegas, Nevada
Gambling was legalized in the state of Nevada in 1931, due to the increasing popularity of gambling despite political pressure on the gaming industry. In the 1940s, slots were installed in Las Vegas’ Flamingo Hotel.
However, after World War II, municipalities began to be drawn by the prospect of tax revenue. A consequence of this governmental response was an exponential growth in the manufacturing and playing of slot machines which continued well into the 1960s.
Slot machine development advanced from a fully mechanical machine to an electromechanical device in 1963 with the Money Honey slot machine by Bally Technologies, a company formerly limited to the manufacturing of pinball machines.
Besides improving gameplay with all manner of flashing lights and sounds, electrical components allowed for multi-coin bets with higher payouts. Bally Technologies would continue to develop slot machine technologies for decades.
By 1970, Bally had added more reels and made coin-handling improvements to allow for more coins and higher denominations, resulting in more enormous jackpots for consumers. Bally went public in 1975, trading on the New York Stock Exchange as the first gaming company.
The first genuinely electronic slot machine, e.g., the video slot machine, was developed in 1976 in Las Vegas, Nevada. It was placed in the Hilton Hotel in Las Vegas. It received approval from the state of Nevada, but only after additional security modifications were made against cheating.
Atlantic City, New Jersey
Atlantic City, New Jersey legalized gambling in 1978, by which time the Bally Technologies behemoth had cornered 90% of the market for slot machines. Bally continued to add reels, knowingly both decreasing the odds of winning but also increasing the size of jackpots.
Over time, the number of symbols per reel was increased to a maximum of 25 and wagers were raised to $5, $25, and eventually $100. Coins would continue to be provided during slot machine jackpots until they ultimately began being phased out in the 1990s.
U.S. Patent 4,448,419: The Random Number Generator
An answer to the question “Where Were Slot Machines Invented?” wouldn’t be complete without including an electronic board component commonly found in modern slot machines.
Bally Technologies hired a computer programmer to increase the size of jackpots without losing profits for the company. This improvement was accomplished by utilizing the concept of a random number generator (RNG).
As it is challenging to computer generate a truly random event – take it from me; I’m a physicist. So, sometimes the more accurate term pseudo-random number generator (PRNG) is used.
Who Manufactured The First Video Slot Machine Downloads
In any case, this focused business development resulted in yet another technological revolution in slot machine gaming.
For those interested in this sort of thing, see Igne S. Telnaes’ U.S. Patent Number 4,448,419, awarded in 1984, entitled “Electronic gaming device utilizing a random number generator for selecting the reel stop positions“.
The Arrival of Computer Microchips
In the 1980s, computer microchips allowed a leap forward in slot machine technological advances. This including the capability of having video slots, online slots, and linked machines for progressive slots.
In Las Vegas in 2003, a linked slot machine with a shared jackpot reached an enormous size before it was won: nearly $40 million.
Video Slots
One of the first slot machines with video reels was the Fortune Coin by Walt Fraley. Slot manufacturer IGT purchased its patent from Mr. Fraley, then developed it further to overcome an initial distrust of this new technology by slot machine players as well as improving its overall technical operation.
Due to the application of targeted marketing techniques, video poker machines were found to be honest and could be trusted, thereby overcoming people’s initial skepticism over how fair the video slot machines would be, and building a public perception of trust.
In the 1990s, the advent of the internet and increasingly fast and powerful computers allowed for the first electromechanical slot machines with bonus games, multiple lines, and the modern version of online slots.
Casinos have established a broad base of slot players while, along with today’s ready online access, online game developers are mostly only limited by their imagination.
Two Active Screens
The first video slot machine with two screens was created in Australia in 1994, followed by America in 1996.
The second screen was used to provide the player with a different environment in which bonuses could be played.
Summary of Slot Machines Invented
The history of slot machines is filled with technological developments. Each step in this chronological journey brought forth more inventions included in the modern slot machine.
Before Charles Fey’s 1887 invention in San Francisco, there were gambling machines – but they didn’t have slots for coins.
Therefore, despite prior technologies being used in that device, Fey’s coin-operated machine is considered the first genuine “slot machine”.
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Have fun, be safe, and make good choices!
By Jon H. Friedl, Jr. Ph.D., President
Jon Friedl, LLC
The gaming industry is big business in the U.S., contributing an estimated US$240 billion to the economy each year, while generating $38 billion in tax revenues and supporting 17 million jobs.
What people may not realize is that slot machines, video poker machines and other electronic gaming devices make up the bulk of all that economic activity. At casinos in Iowa and South Dakota, for example, such devices have contributed up to 89 percent of annual gaming revenue.
Spinning-reel slots in particular are profit juggernauts for most casinos, outperforming table games like blackjack, video poker machines and other forms of gambling.
What about slot machines makes them such reliable money makers? In part, it has something to do with casinos’ ability to hide their true price from even the savviest of gamblers.
The price of a slot
An important economic theory holds that when the price of something goes up, demand for it tends to fall.
But that depends on price transparency, which exists for most of the day-to-day purchases we make. That is, other than visits to the doctor’s office and possibly the auto mechanic, we know the price of most products and services before we decide to pay for them.
Slots may be even worse than the doctor’s office, in that most of us will never know the true price of our wagers. Which means the law of supply and demand breaks down.
Casino operators usually think of price in terms of what is known as the average or expected house advantage on each bet placed by players. Basically, it’s the long-term edge that is built into the game. For an individual player, his or her limited interaction with the game will result in a “price” that looks a lot different.
For example, consider a game with a 10 percent house advantage – which is fairly typical. This means that over the long run, the game will return 10 percent of all wagers it accepts to the casino that owns it. So if it accepts $1 million in wagers over 2 million spins, it would be expected to pay out $900,000, resulting in a casino gain of $100,000. Thus from the management’s perspective, the “price” it charges is the 10 percent it expects to collect from gamblers over time.
Individual players, however, will likely define price as the cost of the spin. For example, if a player bets $1, spins the reels and receives no payout, that’ll be the price – not 10 cents.
So who is correct? Both, in a way. While the game has certainly collected $1 from the player, management knows that eventually 90 cents of that will be dispensed to other players.
A player could never know this, however, given he will only be playing for an hour or two, during which he may hope a large payout will make up for his many losses and then some. And at this rate of play it could take years of playing a single slot machine for the casino’s long-term advantage to become evident.
Short-term vs. long-term
This difference in price perspective is rooted in the gap between the short-term view of the players and the long-term view of management. This is one of the lessons I’ve learned in my more than three decades in the gambling industry analyzing the performance of casino games and as a researcher studying them.
Let’s consider George, who just got his paycheck and heads to the casino with $80 to spend over an hour on a Tuesday night. There are basically three outcomes: He loses everything, hits a considerable jackpot and wins big, or makes or loses a little but manages to walk away before the odds turn decidedly against him.
Of course, the first outcome is far more common than the other two – it has to be for the casino to maintain its house advantage. The funds to pay big jackpots come from frequent losers (who get wiped out). Without all these losers, there can be no big winners – which is why so many people play in the first place.
Specifically, the sum of all the individual losses is used to fund the big jackpots. Therefore, to provide enticing jackpots, many players must lose all of their Tuesday night bankroll.
What is less obvious to many is that the long-term experience rarely occurs at the player level. That is, players rarely lose their $80 in a uniform manner (that is, a rate of 10 percent per spin). If this were the typical slot experience, it would be predictably disappointing. But it would make it very easy for a player to identify the price he’s paying.
Raising the price
Ultimately, the casino is selling excitement, which is comprised of hope and variance. Even though a slot may have a modest house advantage from management’s perspective, such as 4 percent, it can and often does win all of George’s Tuesday night bankroll in short order.
This is primarily due to the variance in the slot machine’s pay table – which lists all the winning symbol combinations and the number of credits awarded for each one. While the pay table is visible to the player, the probability of producing each winning symbol combination remains hidden. Of course, these probabilities are a critical determinant of the house advantage – that is, the long-term price of the wager.
This rare ability to hide the price of a good or service offers an opportunity for casino management to raise the price without notifying the players – if they can get away with it.
Casino managers are under tremendous pressure to maximize their all-important slot revenue, but they do not want to kill the golden goose by raising the “price” too much. If players are able to detect these concealed price increases simply by playing the games, then they may choose to play at another casino.
This terrifies casino operators, as it is difficult and expensive to recover from perceptions of a high-priced slot product.
Getting away with it
Consequently, many operators resist increasing the house advantages of their slot machines, believing that players can detect these price shocks.
Our new research, however, has found that increases in the casino advantage have produced significant gains in revenue with no signs of detection even by savvy players. In multiple comparisons of two otherwise identical reel games, the high-priced games produced significantly greater revenue for the casino. These findings were confirmed in a second study.
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Further analysis revealed no evidence of play migration from the high-priced games, despite the fact their low-priced counterparts were located a mere 3 feet away.
Importantly, these results occurred in spite of the egregious economic disincentive to play the high-priced games. That is, the visible pay tables were identical on both the high- and low-priced games, within each of the two-game pairings. The only difference was the concealed probabilities of each payout.
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Armed with this knowledge, management may be more willing to increase prices. And for price-sensitive gamblers, reel slot machines may become something to avoid.