The Long, Colorful, Profitable History of Slot Machines

The Long, Colorful, Profitable History of Slot Machines

By: 
Brian Daffron
10/3/11

There have been many names for gaming machines: Liberty Bell, Operator Bell, one-armed bandit. Even “mechanical babysitters,” which is what writer Marc Cooper called them a few years ago in The Atlantic Monthly in a reference to “the wives and girlfriends of high-roller card and dice players.”

Regardless of what people call them, there is little argument that gaming machines bring in the highest amount of revenue in the gaming industry, whether they are being played on the Las Vegas Strip or off a strip of old Route 66 in Oklahoma. But how did they gain their popularity, and to whom does the gaming industry owe so much gratitude?

The answer to the second part of that question is a German immigrant named Charles Fey. A Bavarian machinist, Fey came to the U.S. in 1885 and eventually created an electrical supply business in San Francisco. However, he grew tired of this business and, in the mid-1890s, created the first successful three-reel lever machine to pay out in coins.

“San Francisco was legal for slot machines from 1894 to 1909,” says Fey’s grandson, Marshall Fey, who lives in Reno. “They were prevalent. He made a machine.… It was a wheel machine, a color wheel. He did very well with that. He was making more money with that than he was in the electrical-supply business.”

Fey says his mother was ashamed of his grandfather’s business. “My mother wouldn’t let anybody or [even] our friends know that my grandfather invented the slot machines. It was really bad. But after…gambling went all over the United States, he became pretty famous for his invention.”

Charles Fey’s machines became quite popular, taking its nickname Liberty Bell from one of the images—of the Liberty Bell—on the reels. By 1907, another slot machine manufacturer, Herbert Mills of Chicago, copied Fey’s machine. Mills’s machine, also known as Liberty Bell or Operator Bell, helped spread the popularity of the device throughout the nation. They were installed everywhere—from cigar stores to barber shops and brothels.

Nevada banned their use in 1910, and then California banned them in 1911. By 1915, legalized gambling had all but dried up throughout the United States, much the same as legal alcohol did with the onset of Prohibition in 1920.

In 1931, Nevada became the only state in the nation to have legalized gambling, and in the 1940s, slots were installed in Las Vegas’s Flamingo Hotel.
“They have had a tremendous impact,” says Fey. “The thing about slot machines is you don’t have to know the game. Your odds are pretty poor in blackjack or craps if you don’t know how to play the game, and people are kind of scared of them. [Slots are also] great for the house because of the labor factor.” In other words, they don’t require much monitoring or maintenance.

Fey, who owned the Liberty Belle Saloon in Reno with his brother Frank from 1958 to 2006, featured many of the original-style machines. He said that the basic design of his grandfather remained dominant through the mid 1980s.

One company whose designs have had a major impact on the development of slots is Bally Technologies. Raymond Moloney, who began the company as Bally Manufacturing Company in Chicago in 1932, created the Ballyhoo pinball machine, which required only a penny to play. In 1936, Bally got into the gaming industry with Reliance, an automatic dice machine, and Bally Baby, its first genuine slot machine.

By the 1960s, new designs and tweaks to the slot machine started finding their way into casinos. Many sources credit Bally for changing the game with Money Honey, the first electro-mechanical slot machine, in 1963. Money Honey and similar machines quickly killed off older machines such as the Liberty Bell. By 1968, according to their website, Bally had a 94 percent share of the Las Vegas slot market.

The 1970s brought even greater technological advances to the slot-machine industry, with the addition of video screens, random-number generators and microchips. It also saw Bally go public in 1975, becoming the first gaming company to be traded on the New York Stock Exchange. “Now, it’s almost like a video game,” Fey says about the newer slot machines. “You don’t have a handle. You’ve got a video screen.”

The 1970s also saw the gaming industry hit the Eastern Seaboard when gambling was legalized for Atlantic City, New Jersey in 1978. The popularity of slot machines expanded further when, in 1990, Mississippi legalized dockside gambling for some of its towns, and other towns along the Mississippi River, such as Caruthersville, Missouri started legalized gambling.

In 1982, Bally unveiled its first video slot machine and, in 1984, its first video poker game, whose popularity Fey partially credits for causing a decline in his own Liberty Belle Saloon’s revenue, as well as what he refers to as “bar poker”—electronic poker machines that can be played while sitting on a barstool.

Bally has now been in business for 79 years and has 421,000 gaming machines connected to its systems worldwide. All of the Atlantic City casinos use machines made by Bally, as do 28 of the 48 largest casinos worldwide.

Industry historians say the impetus for the largest explosion of gaming machines is the passage of the Indian Gaming Regulatory Act in 1988. “It started out pretty innocently where [tribal casinos] had a payout in tokens or tickets,” says Fey. “Today, Indian gaming is bigger than Las Vegas gaming.”

According to the National Indian Gaming Association, only 249 out of the 565 federally recognized tribes have gaming compacts, with the top 20 tribal gaming operations accounting for 55.5 percent of total tribal gaming revenues. Although the exact number is probably impossible to pin down, revenue from slot machines accounts for at least 70 percent of total gaming revenue in the U.S. annually. Fey says that in Nevada, slot machines have generated more than half of all casino gaming revenue since 1986.

Slot machines have been very, very good to the Thlopthlocco Tribal Town, located near Okemah, Oklahoma. The Creek tribal town—which is federally recognized and independent of the Muscogee (Creek) Nation—has approximately 650 enrolled members. Their only casino, the Golden Pony, has nothing but slot machines.

Clarence Yarholar, who is a tribal member, served as chair of the tribal gaming commission from 2003 to 2010. He says that during his tenure, the maximum number of slots in the Golden Pony hit 450, the machines earned anywhere from $5 million to $12 million annually.

Yarholar’s tenure was in the contemporary era of slots, with lights, video screens, bells and sirens adding to the action of winning. “What seemed to be exciting was having multiple choices,” he says. “You get to choose at one level—how much you want to bet or select numerous types of games. Some machines were able to have more than one game on the machine. That was also part of the excitement.”

He says that the motivation for playing slot machines varies according to what the individual is seeking. “Some say, ‘I just like the loud noise and the lights, the bells, the whistles and the excitement.’ Some say, ‘I don’t care anything about that—I just need some money.’ Their mentality is a try-to-break-the-bank-and-get-rich scheme.”

“It’s a mood-altering game,” Yarholar says. “It changes our mood from boredom to excitement. People who’ve won, they’re leaving with a smile on their face. People who have had a bad day—they’re mad as heck. They’re mad at the world.”

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