Machine management: Hit the jackpot

AWP machines keep customers happy and boost pub profits. By Phil Mellows

It hunches there in the corner, flashing and beeping, playing jingles and going chunka-chunka-chunka when somebody has a win. But do you really know what that AWP machine contributes to your business?

For a surprising number of smaller community pubs machine take makes a vital contribution, as important as beer. The average tenant collects £7,800 a year from an average 1.34 AWPs on site.

The figures, and many more like them, come from the School of Machine Management run by Leisure Link, the biggest machine operator in the UK with 90,000 machines out there.

Held at three sites, in Cumbria, Kent and the company's headquarters in Burton-upon-Trent, the school is the brainchild of managing director Jim O'Halleran. "The aim is to raise the profile of machines within the pub industry," he said. "It's a crusade, really."

The worry is that too many machines are badly located and slackly managed. That licensees, area managers and even those responsible for them back at the pub company HQ don't appreciate their importance and aren't getting the full benefits.

Tutors Steve Sharp and Mark Batty begin the two-day course by talking about the appeal of AWPs. One of the first things you learn is that you don't call them "bandits".

"That's not a term you'll hear in this business," said Mark. "For the people who play fruit machines they are a source of pleasure. They only fulfill a slight gambling need."

In fact, the returns on an AWP are fixed rather higher than you might expect in other forms of gambling. Attempts to adjust machines so the pay out strays very far from an average 80 per cent have proved near disastrous.

Some years ago Bass, as it was then called, decided to test a 74 per cent return. Initially, takes shot up, so the company dropped it to 70 per cent. Eight weeks later the take started to fall and it had to put the percentage back up, but it took a long time for Bass to attract those customers back.

The regular players who contribute the bulk of machine income quickly sussed out that Bass pubs were paying out less than the pub up the road and abandoned them.

"The enjoyment just wasn't there for them so they walked," said Steve. "Retailers are more thoughtful now."

Places without regular customers can get away with lower percentages as can clubs, where they tend to play to hit the big win rather than for amusement. In contrast casinos and bingo halls will pay out 90 per cent or more, a return designed to keep players inside the doors for longer. The optimum percentage for pubs, however, remains 80 per cent or just below.

That leaves 20 per cent of which the government takes about 25 per cent in tax, the machine operator takes about 20 per cent and the licensee gets the rest, some tenants sharing it with their landlord depending on the deal.

Most of that money will come from the pockets of a hard core of regular players who will probably make up only two per cent of your customers. Nevertheless, it is important to understand their behaviour.

"They are people who will sit there watching others play and lose their money," said Mark. "They will know when the machine is coming up for a big pay-out. There's a bit of science in it for them."

If you know your core players you can choose the kind of games they enjoy and make sure they know when you've got a new game in the pub. Bingo halls will publicise machine "birthdays" and "retirements", although the amount of marketing you can do in a pub is limited of course. Any advertising material must be attached to the machines themselves.

The real gains for licensees, however, can come with enticing the less regular player to the machine. That's where the siting of the machine in the pub is so important and a large chunk of the Leisure Link course is taken up by this.

"The best place for a machine is where it earns the most money," as Steve simply summed up. "Licensees can often take a table out of the bar to make way for a machine and it will give them a return on their investment. But it's often difficult to persuade them that that's the case."

It's on this question that Leisure Link finds evidence for the pub industry's failure to appreciate machines.

According to Steve, people will start by arguing why there is no room for an extra machine rather than taking a positive view and trying to create a space.

You can have too many machines of course, and they won't pay their way. But if you've got people queuing to put money in your only machine, then it's a good idea to think about where you might put a second.

Generally speaking, if there is £250 a week or more going into your machine, it's worth getting another.

Another way of maximising machine take is to change machines as their popularity starts to dip. Ideally, your operator should be monitoring take from each machine on a daily basis so you can pick the right moment. Typically, you can expect to change a machine about four times a year.

It gets more complicated than that, however. Pub groups do deals with machine operators which try to strike a balance between rent and the ages of the machines that is appropriate to the type of estate.

A company with a lot of community pubs, for instance, can stand older machines than a high street branded chain where fashion is a more important factor.

The Leisure Link course also goes deep into the financial aspects of machine management, and some of the mathematics can bamboozle the most expert.

This is certainly a school for the specialist. As a humble publican you may not need to delve into all the detail. But as with the hard core machine player, a little knowledge can bear fruit.

History of the fuit machine​

• Pre-1968​
  Gaming machines are unregulated and open to fraud. The industry is run by hundreds of shady back-street operators. Stakes and pay-outs are low and there is little interest from retailers.
• 1968​
  The 1968 Gaming Act drove out the gangsters and still governs much of the industry. Control became concentrated in the hands of a few large professional operators and games became more complex. Brewers took a greater interest and increased their influence as potential income increased.
• 1985​
  £1 coins bring the next big change, increasing machine takes overnight.
• 1990​
  The Beer Orders spawn a new breed of pub operators more open to using machines as a profit stream.
• 1994​
  The National Lottery is launched but the machines don't feel a ripple.
• 1995​
  Scratchcards offering instant wins - in effect fruit machines on pieces of paper - do hit machine takings but only for about three months. Machine players eventually consider scratchcards too hit-and-miss.
• 1996​
  All-cash pay outs end the detested tokens. Fruit machines are allowed in betting shops for the first time and 7,000 are installed in one day.
• 2002​
  The industry awaits a new gaming act as technological advance promises the next generation of fruit machines. Not much is likely to happen, however, until the government's intentions are clear.

Machine facts​

• There are 475,000 machines in the UK
• 350,000 of them are rented from operators
• AWP players wager £10bn a year
• operators, site owners, licensees and the government share £2bn of that
• the big four operators, Leisure Link, Kunick, Rank and Crown, own more than half of all rented machines
• there are still around 300 local operators.

The players​

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