Video Games: Looting the Punters
Could video games fall foul of anti-gambling laws?
A DECADE ago the idea of paying real money for virtual items was strange and exotic. These days many video-game publishers build their business models around it. Some of the world’s biggest games, such as “League of Legends”, cost nothing to buy. Instead they rely for their revenue on players buying things for use in the game, such as new characters to play with or costumes to put them in.
A new twist on that model has been attracting the attention of regulators in recent weeks. “Loot boxes” are yet another type of “in-game” item that gamers buy with currency. Unlike the usual sort of purchase, however, players do not know in advance what they are buying, for the contents of a loot box are generated randomly. Sometimes they might be desirable, and therefore valuable; prized items include new gestures or “emotes” for a character, or a pearl handle for an automatic weapon. If less alluring, well, players can pay a bit more money to have another go.
If you think that sounds a lot like gambling, you are not alone. In November Belgium’s gaming commission announced that it had opened an investigation into “Star Wars: Battlefront 2” and “Overwatch,” a pair of shooters published by Electronic Arts (EA) and Activision Blizzard, respectively, that both feature loot boxes. China, where the virtual-item business model is very popular, has already passed laws restricting their sale.
Lawmakers and regulators in South Korea, Singapore, Australia and Hawaii have also made disapproving sounds. In Britain the Gambling Commission has said that publishers of games must buy a gambling licence only if the contents of loot boxes can be converted back into money. Often they cannot, at least in theory. In practice the distinction is murkier. There are plenty of grey-market websites that allow gamers to buy and sell accounts for individual games. (On one such site, for instance, punters can buy the login details for an “Overwatch” account boasting of several rare “skins”, or costumes, for $295.)
Not everyone is worried. The Entertainment Software Rating Board (ESRB), an American organisation that provides voluntary age ratings for games, says that loot boxes are not gambling, on the grounds that players always win something, even if it is of little value. But the controversy is unlikely to end, for loot boxes are a response to a long-standing problem within the video-games industry. The retail price of a blockbuster game has stayed at between $40 and $60 for over twenty years, thanks to the price-sensitivity of customers and widespread discounting of games online. Accounting for inflation, prices have fallen in real terms by a third or more at a time when production budgets have ballooned to tens or hundreds of millions of dollars for a high-quality game.
So publishers have been searching for new revenues. Many split video games into smaller chunks and charge separately for each, selling a base game for $60, then releasing extra downloadable content a few months later. Another option is to offer expensive “collector’s edition” boxes with soundtrack CDs and the like.
Loot boxes, though, cost nothing to make. Even though most players indulge only sparingly, that makes them extremely profitable. The industry also uses psychological tricks long known to makers of gaming machines. Some games announce when a player’s friends have won big, encouraging them to think they could be next. Others tweak the algorithms in various ways, such as making sure droughts do not last too long, which encourages players to keep buying.
The backlash against loot boxes is not coming only from regulators. Many players are unhappy, too. Pressure from customers this year persuaded EA temporarily to remove the ability to spend real money on loot boxes in “Star Wars: Battlefront 2”. In the end, that sort of bad publicity may prove a bigger stick than gambling laws. Laws, after all, can be complied with. But the video-games industry has spent decades trying to shed its image as an unwholesome pastime for oddballs. It has been succeeding, slowly. A public association with gambling will do that cause no favours. Better, perhaps, to simply raise prices and take the consequences.