Inside Asian Gaming

N on-negotiable slot credits or what is commonly called free play has become the primary form of customer incentives in many casinos. Free play is now used instead of cash for point and coupon redemptions as well as for a variety of promotions. Combined, free play has become the single greatest component of player reinvestment. The increased use of free play has also created unintended consequences. Free play has affected multiple departments within the casino including Slots, Marketing and Accounting. This article attempts to identify the emerging issues of free play and how they are impacting both the casino and the customer. Accounting for free play One of the primary issues regarding free play is how to account for it on the income statement. There is a dramatic range of opinions on how free play should be accounted for and how its effects should be measured. Does a dollar in free play cost a dollar? Is it free or is its cost somewhere in between? Views differ depending on your role in the organization. There are those who would argue that free play is simply a marketing tool that allows a customer to initiate a handle pull and any winnings generated by that handle pull will eventually be cycled back into the machine. To them there is no real cost to the casino except perhaps, in a modest reduction of slot hold, which can be periodically increased to compensate for that loss. The “free play is free” contingent believe that, unlike cash, free play should not show up as a marketing expense on the income statement and can simply be tracked in a contra revenue account. Casino marketers in particular like this approach since it allows them to dramatically increase their marketing spend without requiring an increase in their marketing budgets. Others would argue that free play should be booked as cash, less the aggregate hold of the slot floor. For example, if a customer receives $100 in free play and the slot floor hold is 8%, then $92 should be booked as an expense. Still others believe that, since free play can be cycled through the machine only once and any winnings generated from that cycle can be redeemed for cash, free play should be booked at 100% of its value, just as if it were cash. While there are no clear and consistent policies regarding the presentation of free play on the income statement, failure to at the very least note it (as revenue and offsetting expense) on the income statement creates a situation where management loses sight of the amount of free play issued. Contra revenue accounts alone cannot accomplish this. Marketing, Slots and Accounting all need to know how much free play the casino is issuing and both the daily operating report and monthly income statement are appropriate vehicles for that purpose. Nevertheless, until the industry adopts standard accounting practices for free play, each casino company is left to decide how best to show this expense or whether to show it all. Cash protection and free play protection It can be argued, quite forcefully, that free play is much like cash. A patron can redeem a free play offer, wager that free play once and cash out whatever drops to the slot machine’s win meter. In this case, free play is pretty much like cash and therefore it needs to be protected, just like cash. Casino operators are very good at protecting cash and long ago developed controls to protect its most liquid asset. Cash is kept in a vault. The vault is usually surrounded by a cashier’s cage. The cage is normally in clear view of a security officer seated in an elevated podium. A plethora of security devices protect that cash and cameras monitor the movement of cash within the vault, cage and at the cashier’s cage window. Casinos have long had in place methodologies to distribute cash and to properly account for those disbursements. Take for instance the redemption of slot club points for cash back. First a customer would go to the players’ club and present their identification and players’ club card. The casino representative would verify the customer’s identity; look up the customer’s account and issue a redemption through the casino management system. A coupon would then be printed on check- Feature Emerging Issues in the Use of Free Play