Why a conversation around loot box regulation, responsibility, and harm needs to be happening

As the quickly all-too-common way for developers to monetize their games grows in popularity, how do we begin to think about regulating and understanding the harm that stems from this problematic form of revenue generation?

As new games approach their launch dates, it is a recurring story to see both players and game critics interrogating the way in which developers and publishers will potentially monetize their games. In recent years, this has typically taken the form of loot box microtransactions — and in some more recent cases combining these microtransactions with other monetization strategies. The conversation surrounding these boxes typically tends to focus on on the contents of the boxes — will they contain gameplay content or just cosmetics? Will you be able to get a leg up in multiplayer experiences? Can I experience the full game without purchasing a single one? — and past debates have examined the ethics or morals of exploiting “whales” to fund games. However, a discussion is needed which interrogates the exploitation and harms of this monetization model on consumers. In addition, we should begin to consider how we might regulate and create a form of social responsibility for publishers who choose to monetize their games this way.

The landscape of the video game industry has — and always will be — changing, just as consumers and the economics that surround the industry change as well. What was once dominated by the simple notion of paying full-price for a full game experience has evolved to a multitude of difference ways to make money from games, such as subscription models for continuous updates, cash shops for freely accessible games, downloadable packs for “extra” content, freemium experiences for those who like what they see, and loot boxes for those who want a little something extra or exclusive. It should be unsurprising then to see the combination of these different strategies used to generate revenue as studios attempt to adjust to new markets and models. While we can only speculate on the reasoning behind some of these decisions — trying to make as much money as possible versus trying to make enough money to fund continued development of current and new games — the fact of the matter is that we have found ourselves in a situation where a current monetization model is inherently exploitative and potentially harmful to its consumers.

So how do we confront these loot boxes? There has been a debate about whether these loot boxes are in fact gambling ever since their first inception. While the ESRB may not consider them to be gambling, they unequivocally are and considering them not to be due to a technicality is a tone-deaf interpretation of their function and history. Loot boxes, for the most part, have their history in Gachapon (ガチャポン), an activity that is regulated in Japan due to the potential harms from this form of gambling. The main arguments that loot boxes are not gambling rely on the fact that players always receive something in return for their gamble. If a casino were to always give me at least $0.01 and tell me I was not gambling, I don’t think I’d be satisfied with that response. So, why should I be satisfied with a lack of regulation and responsibility from developers simply because I will always get something out of these boxes? Alternatively, that since we have had these systems in place for awhile — in the form of collectible card games (CCGs) — with no regulation or debate surrounding gambling. However, simply because something has not been regarded as gambling in the past does not mean that we cannot — or should not — have the conversation now. While it could be debated that these loot boxes do not fit the perfect mold of traditional gambling, they should be considered as a form of gambling and therefore the harms and regulation of these loot boxes should be considered.

The loot boxes themselves take advantage of many “real life” gambling tricks — and make no mistake, this is by design. Most notably is the use of a virtual currency (such as credits or coins) to purchase these loot boxes, where first you must exchange your real life currency for this virtual currency, helping to disassociate yourself from the cost of these boxes. In addition, the loot boxes rely on what is referred to as the “gambler’s fallacy” — the idea that something is more likely to happen to you eventually the more you fail to gain what you want — however, this goes against the whole notion of random number generation. This idea is encouraged, however, through the use of tactics such as Blizzard’s Pity Timer — though even it can function improperly.

The more concerning dimension associated with this connection between loot boxes and gambling is the potential for individuals (most notably, minors) who could potentially develop patterns of problem gambling behaviours. Openly acknowledged as a public health concern, problem gambling can range from the inconsequential to the chronic, it is roughly considered to be any type of repetitive gambling that leads to (or worsens) recurring negative consequences. These consequences can range from financial issues, addiction, physical or mental health issues. In addition, problem gambling can have impacts on connected individuals — such as family members, employers, neighbours, and communities. Specifically, problem gambling has been associated with mood disorders, bankruptcy, suicide, and long-term family suffering. Previous research has also noted that problem gamblers often have difficulty distinguishing their gambling behaviours from gaming itself, especially if both come from the same source. These loot boxes can potentially have serious harms for players, all the while exploiting patterns of problem gambling behaviours for the sake of profits with no responsibility or regulation on the part of the developers. This issue is even more concerning when you consider that since they are unregulated, these loot boxes can be purchased by minors, possibly building the foundation for future and more damaging problem patterns.

It is because of these harms and risks that gambling in casinos, or through video-lottery terminals in bars and restaurants, is regulated. Just this year, China regulated that video game developers must release the odds of their loot boxes — a practice that is common and regulated for casinos and other gambling venues. In Japan, certain Gachapon styles of gambling are illegal or heavily regulated for social and mobile games. There’s no question that regulating gambling in games — especially those that are online — would be difficult to implement. Promisingly, the subject is starting to be broached internationally. China is only partially successful in their regulation — only affecting the Chinese servers and builds of the games. Regulation does not need to be debilitating for developers, however, it should make them take responsibility for this monetization model that exploits their consumers. An easy one: acknowledge that these loot boxes are a form of gambling and may cause harms to players in purchasing them. Or, provide resources for players who may think they are exhibiting problem gambling patterns. Perhaps accounts should have a form of age-verification required before loot boxes can be purchased with real-life currency to avoid minors developing problem gambling behaviours early. More extreme forms of regulation might see caps on monthly spending for loot boxes or limitations on what can or can not be included in these loot boxes.

Loot boxes are here to stay. There is no question about this. How do we then begin to confront the problematic dimensions of these boxes: their harm, their exploitation, and the lack of responsibility taken for this? While consumers have been taught that they have power in their purchases, to choose not to support a game because of how they monetize it, or choose to support a game that does loot boxes right, these loot boxes will still show up in games and continue to exploit and harm individuals. The conversations we should be moving towards, then, should be about how we deal with these boxes. This includes confronting the harms they cause, potentially to minors, and how to mitigate and reduce these harms. How can we think of regulating these loot boxes while still allowing for game developers and publishers to support and make the games that they want to make? How do we reconcile the economic exploitation of these boxes with our desire for consistent content and development? While the conversation surrounding “what’s in the box” is an important one to have, maybe our attention should shift to “what is this box” and what does that mean for how we move forward in thinking about regulation and their consequences.

Matthew Perks is a Ph.D. student at the University of Waterloo. His research focuses on games culture and industry. This includes monetization strategies, economic shifts within the industry, and the growing role of content creators. He can be reached on twitter here: @perks_matthew

Game studies PhD student @UWaterloo. Research and yelling on the socio-economics of the video game industry. 🏳️‍🌈✨🎓 he/him