Mysteries of Megabucks unraveled

Gary Thompson

Thursday, Jan. 20, 2000 | 11:52 a.m.

I know where Megabucks is going to hit.

I got the word from insiders at International Game Technology, the giant slot manufacturer that runs the game now boasting a jackpot of about $33 million.

Since I know where it's going to hit, there are only two questions left. The first is what I'm going to do with the money.

IGT's going to give me two choices. The first allows me to take the payout over 25 years -- not 20 or 30 or any of the other permutations you've seen or heard -- but 25. That would give me a gross annual payment of $1.32 million, or a little less than $25,400 a week.

Then the IRS will demand its share. I talked with my accountant, Irene Perer of McNair & Associates, who said the money will be taxed as ordinary income.

"If you don't have any other income" -- why would she assume I'd quit my job? -- "you can figure on paying about $525,000 a year in taxes," she said.

So that will leave me with about $795,000 a year, or about $15,300 a week, after taxes from now through the year 2024.

But IGT gives me a second choice, too. I've got 60 to 90 days from the day I hit it to opt for a lump-sum payout. With interest rates where they are these days, the lump sum would be about 60 percent of the total, or about $19.8 million.

Give Uncle Sam his 39.6 percent and I'm left with about $12 million, including a nice toke for the slot people at ... well, more on that later.

And if I put that into a fairly conservative stock index fund, I ought to be able to get about 10 percent a year -- $1.2 million before taxes -- without ever touching the $12 million. And the payments won't end in 25 years.

Put the money with a buddy of mine who's getting triple-digit returns on the gaming-stock portfolio he manages, and I'll double my money each year. Option No. 2 is a no-brainer.

The final question is when it will hit. That's what my pals at IGT didn't tell me. But it's a very important part of the equation, since the odds of hitting it on one $3 pull are a whopping 49.8 million to 1.

The IGT guys did say that if I play $30 to $50 a session, the odds drop down to a few hundred thousand to 1. The winning pull is determined by a random-number generator that, well, randomly generates thousands of numbers per second that determine what symbols or blanks are displayed on the machine.

What it boils down to is that you've got to make your play at the exact split second when that RNG hits the random number that makes those three beautiful golden symbols line up on the center line. You can't time it; you've just got to be lucky.

Speaking of numbers, my boss said since he doesn't expect me to report for work the day after I hit, he wanted me to explain now how IGT and the casinos split their winnings from Megabucks play.

In the 12 months through last October, players put about $584.5 million into the 700 Megabucks machines at 145 casinos throughout Nevada. The machines paid back 89.83 percent, or about $525.1 million, to the players in the form of one big jackpot -- $21.4 million on June 6 at Caesars Palace -- and lots of smaller ones.

The payback percentage, by the way, "is what separates us from lotteries, which traditionally pay back less than 50 percent of the total wagered," noted IGT Vice President Ed Rogich.

The 10.17 win percentage for the past 12 months was lower than the theoretical average win percentage of 12 percent, which is split about equally among host casinos and IGT. Thus, casinos and IGT each got about $29.7 million of the $59.4 million the machines "won" in the 12 months through Oct. 31.

IGT uses its win to pay for the annuity funding the megajackpots, as well as advertising, system support and maintenance and for the machines themselves.

So that's about it for ... oh, you're wondering where it'll hit?

Let me share with you just what IGT spokesman Rick Sorenson told me when I asked.

"I've consulted our experts and my own personal soothsayer, and the answer is clear," he said. "It'll hit in a Nevada casino, 'cause that's where the game is played."