Pokies warning labels give gamblers false confidence, study finds

Published:17 February 2020

Dr Philip Newall is a postdoctoral research fellow with CQUni's Experimental Gambling Research Laboratory.

Warning labels on poker machines that advise potential payout are skewing gamblers' perceptions of their chances, according to a world-first study by a CQUniversity gambling researcher.

And chances are, that’s a deliberate ploy by the gambling industry, says postdoctoral research fellow Dr Philip Newall.

The Melbourne-based researcher with CQUniversity’s Experimental Gambling Research Laboratory has found gamblers are more cautious when presented with a warning label that highlights potential losses, rather than potential winnings.

“Across the gambling sector, it’s common to see risk warnings that read ‘This game has an average payout of 90 per cent’ rather than what a gambler might expect to lose, for instance “This game keeps an average of 10 per cent of all money bet’,” Dr Newall explained.

Within the gambling sector, the positive framing approach is known as “return-to-player” and the negative framing is called “house-edge”.

“Our study presented 400 online participants with the two different warnings, and found that the gamblers presented with house-edge labels had significantly lower perceived chances of winning,” he said.

“They also better understood the mathematics involved, than those who read the return-to-player label – in fact, less than half of the participants who read the return-to-player label correctly interpreted it.”

The findings were published online in the January edition of the international journal Addiction.

“The findings illustrate what everyone already knew, that the current warning labels are confusing, possibly deliberately confusing, the way they present the glass as half-full – or even 90 per cent full!”

“But with this research, we’re the first ones to demonstrate it empirically.”

Dr Newall’s findings cast doubt on the effectiveness of existing pokies labelling requirements enforced by numerous gambling regulators worldwide, and in Australia.

Required warning labels usually refer to a high percentage “return to player”, despite the fact it takes millions of games for a gaming machine to tend towards its “return to player” setting.

“An individual gaming machine will not return a minimum value of prizes in any given period of play, but this study shows gamblers will still take a more optimistic message from the positive return-to-player language,” Dr Newall explained.

“Gamblers aren’t being protected enough, and negative framing better reflects the risks of gambling.”

“We know the average gambler is not getting 90 per cent of what they put into the machine back out, and as long as they use that number, which sounds attractive, and like a good deal, warning labels are part of the problem, and the false hope that gamblers cling onto.”

Figures from the Victorian Commission for Gambling and Liquor Regulation show Victorians lost a record $2.699 billion at the pokies in 2018/19, up $3.4 million on the previous year.

While Dr Newall’s study participants were from the United Kingdom, where he previously lived and worked, he says the findings easily translate to Australia.

In the UK, national regulator the Gambling Commission reported British gamblers lost about 1.8 billion pounds ($A3.2 billion) on pokies annually, until 2018 when the UK government introduced a 2 pound cap on bets per spin.

In Australia, Australian Gambling Statistics for 2017/2018 puts total Australian pokies losses at $12.5 billion.

“Australians are worst in the world when it comes to gambling losses, and that’s not going to change until the gaming industry is honest with us – the odds are stacked much higher than we think,” he said.

Dr Philip Newall is a postdoctoral research fellow with CQUniversity’s Experimental Gambling Research Laboratory, and based at CQUniversity Melbourne. Originally from the United Kingdom, Dr Newall found academia via an untraditional path – online poker tournaments. A professional gambler for several years, competing online and in Las Vegas tournaments, he authored The Intelligent Poker Player in 2011 and Further Limit Hold 'em: Exploring the Model Poker Game in 2016, before transitioning to gambling research. He joined CQUniversity in October 2019.