Slot Machines have been around since 1895 when the Liberty Bell machine was first introduced. It was a 3-reel mechanical slot with 10 symbols/stop points on each reel. You line up the symbols on the pay line and money comes pouring out. Very simple. The way it worked was you put in your coins which unlocks the break so that you can pull the lever which winds the springs that makes the reels start spinning. A braking system stops the reels and sensors determine the position of the reels and the amount of the payout if any.

With 10 symbols on each reel and 3 reels, it’s easy to calculate all of the possible combinations of outcomes…10 x 10 x 10 = 1,000 possible combinations. Adding up all of the winning possibilities from the 1000 possible combinations, the machine would pay out 750 coins, so the payback percentage on the machine was 75% which gives the machine a 25% profit.

Furthermore (this is important to note as we move into the next section), if a player hits a symbol on the pay line of the 1st reel then the same symbol on the pay line of the 2nd reel…at the time the 3rd reel is still spinning the player has a true x in 10 chance of landing the same symbol on the 3rd reel for a win (with x=the number of times that symbol appears on the 3rd reel).

As the popularity of slot machines grew, the casinos demanded machines from the manufacturer that offered larger Jackpots to their customers while maintaining an acceptable profit for the casinos. This was initially accomplished with larger reels so that more symbols could be placed on each reel, and with more reels.

There are 3 main mathematical factors for a slot machine to be commercially successful:

- HIT FREQUENCY: How often will a slot machine come up with a winning combination, regardless of how big the win is. The higher the frequency, the more attractive the game is to a player. Most successful slot machines have a hit frequency in the 15%-20% range (1 in 6 spins on average).
- PAYOUT PERCENTAGE: Over the long run, how much will the machine pay back to the players. This will typically fall in the 75% to 98% range for most machines in casinos today. The higher the payout percentage, the more attractive to the player. A lower the payout percentage means more profit for the casino…but only if the machine is being played.
- JACKPOTS: The number of available jackpots and the size of those jackpot is the bait to lure in the players. The bigger the jackpot is, the more likely someone will want to try their luck.