MGA changes minimum RTP on slot games

MGA changes minimum RTP on slot games

Today the MGA approved a controversial change to the requirements on online slots using the Maltese license. Up until today, the rules stated that such a game can have no lower than 92% RTP if it was to be allowed in online casinos within this jurisdiction. After deliberation, the officials from the MGA decided to lower that value down to 85%. Is this a good idea? Let’s take a look at the situation and what the consequences might be.

Background information

Up until the 28th, the MGA did not allow casinos holding their license to have any online slots with a house edge higher than 8% . What this meant is that big online slot providers like NetEnt, PlayNGo or Microgaming could not develop and distribute games that would have RTP – return to player – percentages lower than 92%. At least not if they still wanted to provide their games in countries governed by the MGA.

Competitors operating in the land-based space were also tied to a limit, albeit a lower one, of 85% RTP for their slot machines. The result is that land based operators could have a margin as high as double that of the online world. The balancing factor here is that rent and maintenance for a building the size of a casino requires significant budgets. In addition, staff requirements are higher when talking about these types of entertainment businesses.

In contrast, online casinos can maintain lower costs through their entire operation cycle. Hiring programmers to build and mantain a website is cheaper than hiring a contractor to build a casino building from scratch. Game maintenance is a lot easier to automate in the digital world compared to the physical machines. Even staff requirements are lower due to the scalability computer applications can offer.

How will this affect me?

While we’ll need to see how the operators react to this change there are some aspects we can have a guess at. In their own report the MGA shows that almost no other licenses put such a hard limit on minimum slot RTP as they do. Italy is the only exception and their limit is 90%. Because of this, and the size of the market MGA governs over, what is set here is likely going to become the bottom limit. Most of the reputable game providers and operators are going to adopt these guidelines.

Remember when Play’n GO started offering many RTP variants for their games? Before long a lot of the largest casino sites in the online world switched from the 96% RTP version to the 94% version. Nowadays, it’s a challenge to find any casinos that still offer the higher RTP version. Last time we checked L&L brands, like All British Casino, still have it, but who knows how much that will last.

Given such a large drop, of 7 percent points, it would be in the best interest of online slot providers to offer even more options for lower RTPs. We could start seeing variants with RTPs or 90% or even 86% which would lead to a lot fewer players managing to cash out from their gaming sessions.

How will the operators react?

In their press release, the MGA stated that “The consultation process involved a number of industry stakeholders, namely, consultants, Business-to-Consumer operators and Business-to-Business operators. The consultation process enabled the Authority to gain a better understanding of the views adopted by the consultation participants in terms of optimal RTP percentage and possible implications resulting from the change to the minimum RTP threshold on their product offering, operations and competitive position“. Moreover “respondents welcome the MGA’s proposal to support a level playing field by aligning the online RTP percentage with the land-based sector” .

Complexity often creates confusion. We know that by now. Because of this, aligning requirements for everyone to a single value across the board makes sense. It makes it easier to understand and keep track of. Consumers that enjoy the hobby in all its forms now have an easier time aligning their expectations between the two mediums. On the other side, the legislator now also has an easier time keeping everyone in check. The games can now, theoretically, have the same mechanism in both land-based and online environments.

That said, as players we need to be careful in order for the scale to not go too far in the other extreme. This consultation showed that there were respondents who “envisaged the RTP to be as low as seventy-five per cent (75%)”. That’s a full 17% points lower, signifying a potential house edge over 3 times higher than it is now at the lowest limit.

What about land-based casinos?

This change provides a lot of flexibility to online casino operators, but what about the rest? Now, that the online and land based slot games have the potential for the same profitability on slot games, it begs the question: is it worth having land based slot games?

You can operate an online casino successfully with less staff, less overhead, less upfront costs and greater location flexibility. In the past, in exchange for this “ease of use”, online operators had to be content with a lower maximum profitability on the slot games. However, now that they have the potential of matching the revenues of their land based cousins, is there enough incentive to not move the slot catalogue entirely into the online world?

One could argue that a lot of table games are still more entertaining when played face to face. The social aspect is definitely an important one. Playing blackjack or poker at a table alongside other 6-7 people, chatting, outplaying and outwinning them is still something that doesn’t translate that well into the digital universe. But outside of this, land based casinos are left with trying to play catch-up to “standard” hotels, resorts and spa retreats. It remains to be seen if they’ll be able to play that game or whether the landscape will change.

Are casual players going to be impacted?

This is the question on all our lips, so let’s take a look. Online slot games have two main components to their RTP: the main game and the volatile features. When we refer to the main game we are talking about the part of the slot in which you spin the reels and get 3-5 common symbols (usually the lowest paying ones). The volatile features are things like Scatters, Free Spins features, jackpots, mini-games etc.

To achieve a lower RTP value, the game creators have to make a choice where to cut from.

First of all, designers could make more aggressive mathematical models for the main games. This would end up making the games have lower hit rates. We’d have fewer rounds in which we win something, making the games a bit less fun for casual players. A lot of the NetEnt games would lose their identity should this happen. Think about what Starburst would be like if you wouldn’t have some kind of winning effect almost every other round.

Secondly, if they want to keep the “feel” of the game they might decide to lower payouts for all normal symbols. Since a lot of the players are not excited about those 1x or 2x multipliers, they might get away with it without too much fuss.

Regardless of which elements above they influence, it’s the casual player who will get hit the hardest. The more dedicated players out there, playing for the big pots, will likely not feel like their game has been drastically changed. Their favourite volatile features will work as well as they always did.

Dedicated players might not be spared either

There is another option that could sting though. They could limit the volatile features. If they adjust these, the most likely outcome is that they would change the chance to trigger them. The total amount is the other lever they could pull, however the total amount usually serves as a very good marketing element. And losing that would be counterproductive.

Should this happen, the casual players will not feel a big impact. The enjoyment comes from playing the game and the fundamental experience wouldn’t really change. The dedicated players on the other hand might have to hop around different slots. With the biggest draw neutered, they would have to find out a new slot that can offer them that big win they’re searching for.

We’ll just have to wait and see

To conclude, there is little chance these changes are not going to have a significant impact in how online casinos are run. On the bright side, changes like this usually take some time to produce their effects. If game providers and operators aim to change the RTP of their games there is an entire process. They will need to change game mechanisms, mathematical models and then get these approved by certification bodies (such as GLI). Only then will they become available to the wider audience. In the end there is a chance these measures will affect core gameplay experiences. Like in the past, some decisions will amount to experiences that don’t respect players’ time and money. And in that situation, people will have to carefully take a look at what they consider acceptable and start voting with their wallets.