Understanding a Progressive Jackpot

A progressive jackpot is similar to the normal jackpot which is the highest payout for a slot or video poker. The difference is the value of the jackpot increases a small amount every time the game is played. In a typical land based casino, several slot machines are linked together to form the progressive jackpot and it can grow very quickly because of multiple players contributing to it. In the online context, all online players that are playing the progressive slots are contributing to the pool at the same time. Furthermore, the progressive slot is often available at several online casinos which are part of the same casino group, and contributions from all sites are pooled to one single jackpot, which can increase substantially over time.

The contribution to the jackpot from every play is actually part of the casino’s profit and it is pre-determined by the casino. Assuming a 5% house edge for a particular progressive slot, a $1 wager would represent a $0.05 expected profit for the casino. From this profit, the casino could be contributing one fifth of the profit or $0.01 to the progressive jackpot and keep the rest of the $0.04. Although the casino is reducing their profit by doing so, the progressive jackpot tends to attract more players and this can actually generate more profit for them.

Qualifying Requirement

Players have to take note that most progressive slots require them to wager the maximum number of credits per play to ‘qualify’ for the jackpot. This also means that you will draining your resource faster than the lower credit play that would usually last you longer. The maximum bet requirement varies for different progressive slots and players are advised to check with the casino before they wager. Otherwise, players will be truly disappointed to find out eventually that their 1 credit or 3 credit play all along does not allow them to win the jackpot at all!

Although the maximum wager is often required to qualify for the jackpot, note that all levels of credit play still contributes to the jackpot pool.

Break Even Point

As the progressive jackpot grows over time, it will eventually reach a point where the wager is equal to the payout received. If the progressive jackpot value increases above this break even point, the game becomes positive expectation for all qualifying players. The payout percentage in this scenario will be more than 100% if the player wins the jackpot.

Let’s look at the following illustration. All progressive slots have a reset value or minimum initial sum, which the jackpot will reset to and start rolling after the jackpot has been won. Assume that a particular progressive slot has a reset value of $50,000, each credit is $1 and the maximum 10 credit play is required to qualify for the jackpot. Using the same house edge (5%) and contribution to the jackpot (one fifth of profit), the casino will make $0.40 profit and contribute $0.10 for every qualifying bet. Assuming a 1 in 200,000 play frequency for the jackpot, $10 x 200,000 = $2,000,000 amount of qualifying wager is required to win the jackpot. Based on the 5% house edge, the players will get back $1,900,000 of payout and $20,000 contributed to the progressive jackpot.

The players on average would have lost $100,000, thus the break even point of the game will be when the progressive jackpot value reaches $100,000. If the progressive jackpot increases to $130,000, then the positive expectation of return will be (130000 – 100000)/100000 x 100% = 30%. Now consider that only $20,000 is contributed to the progressive jackpot, which $20,000 + the reset value is $70,000, how come the progressive jackpot manage to increase to $130,000 before a win is claimed? This is because the additional $60,000 were contributed by the non-qualifying plays from 3 credit or 5 credit wagers. Remember that only 10 credit wager can qualify for the jackpot, but there will be many other players that feel that the 10 credit wager is too much for them and prefer a lower credit bet which contributes to the progressive jackpot but not qualifying to win it.

Now let’s look at the case from the casino’s point of view. The casino has made a $80,000 (4%) profit from the qualifying players plus $240,000 profit from the non-qualifying players (remember that $60,000 contribution is one-fifth of the profit). Now taking away the initial reset value allocated, the casino has made a total profit of $80,000 + $240,000 – $50,000 = $270,000. As seen above, the progressive jackpot won by the lucky winner is totally paid by other players! This is a good example where the progressive slots can be positive expectation for the players and yet the casino is still making a profit.

Winning the Progressive Jackpot

From the player’s point of view, it will be to their advantage to start playing the progressive slot when the jackpot value has passed its break even point. However, they must hit the progressive jackpot to realize the positive expectation. Otherwise, they are probably still on the down side in the long run due to the house edge.

While saying that playing the slot after the break even point will be advantageous to the players, determining the break even point is definitely not an easy feat. There are 2 parameters you would need to know to calculate the break even point, the payout percentage and the frequency of striking the jackpot which are normally unknown to the public.

Players should also take note that even when the jackpot value increases beyond the break even point, the odds of getting the highest winning combination to trigger the jackpot is still as low as before. Lastly, since that they are many other players playing the progressive slot simultaneously, it is very likely that other players may hit the jackpot before you and ruin your plans.