Hooked on Loot Boxes

In today’s video game industry, many companies try to sell players in-game content. Whether it be a personalized skin that’s purely cosmetic or an add-on item that increases the strength of a player’s character, players are persistently being marketed the newest and greatest items.

After recently finishing Nir Eyal’s book, Hooked, I wanted to write an article that applies what I learned in his book to a real-life example to better understand how people get hooked on certain games. I had skimmed through several of Eyal’s articles on Medium before but never really had a good foundation of what his Hooked Model was. Upon finishing his book, I now have a better understanding of how people get hooked on the products they use.

In this article, I want to discern how gamers get hooked, not just to video games, but more specifically to a newer trend in the industry — loot boxes.

Hooked by Nir Eyal — Photo by webdagene (source: Flickr)

What are Loot Boxes?

In video games, loot boxes (also known as loot crates or prize crates) allow players to receive a random assortment of virtual items. The items can vary from visual modifications or customizations of a player’s character to ways to change the level or attributes of that player’s character.

The idea of a loot box dates back nearly 150 years. Cigarette cards, first produced in the 1870s as a way to stiffen flimsy cigarette packs, contained baseball cards, as well as other collectibles. The idea of not knowing what prize might wait inside proved to be an enticing gimmick.

An example of one of the early cigarette cards that came with cigarette packs, meant to hold the packs intact. (source: Dave’s Vintage Baseball Cards)

We see variations of this concept everywhere. The golden tickets in Willy Wonka’s Charlie and the Chocolate Factory or the trading card packs sold in every collectibles store are just a few examples.

With the rise of electronic forms of entertainment, loot boxes made their way into video games, starting with single-player and then expanding into massively multiplayer online games.

In the past decade, games started using randomized loot boxes for two reasons.

First, game developers realized they could thwart illegal downloading of their games by making games free-to-play but doing so required a new monetization model. Loot boxes are part of a strategy to get players to pay-up.

Second, game developers found that by offering games as a service as opposed to requiring an upfront payment, they were able to maintain a more consistent cash flow, funding future games.

However, in recent years, loot boxes have become more controversial as players and governments have associated them with gambling. Because most loot boxes provide randomized results, players are unable to predetermine what the odds of obtaining specific items. As a result, some gamers suspect companies manipulate them into spending money on purchases, which are more likely than not, worthless.

The rationale behind why people buy loot boxes. (source)

Introducing Nir Eyal and The Hooked Model

From a behavioral level, to understand how gamers and players get drawn into this model, we have to take a look at Nir Eyal’s Hooked Model. Behavioral designer and serial entrepreneur Nir Eyal conceived of the Hooked Model and describes it in his 2014 book, Hooked: How to Build Habit-Forming Product, as a framework for understanding how certain products keep users engaged.

The Four Steps of the Hooked Model by Nir Eyal

There are the four phases of the Hooked Model — a trigger, an action, a variable reward, and an investment.

1. Trigger

Triggers are defined as some type of internal or external actuator that prompts a behavior. Triggers can take the form of an external stimulus, such as a marketing campaign with flashy graphics, or they can be more subtle, such as one friend’s word of mouth referral of a new game or application to another.

A screenshot from Quake Champions, a free-to-play game that contains paid boxes, which must be paid for by an in-game currency that can only be purchased with real money (source: ARSTechnica)

Internal triggers, on the other hand, are a form of internal stimulus that drives users to perform particular actions. They can manifest as a variety of emotions and embed themselves into our daily routines, eventually causing us to develop persistent habits over weeks and months of repeated usage. In order to identify a user’s internal triggers, companies have to understand the underlying pain points and emotions that a user encounters when he or she performs a specific set of actions to accomplish a specific task.

Examples of External vs Internal Triggers from Nir Eyal’s book “Hooked: How to Build Habit-Forming Products” (all icons from Flaticon.com, credit to the respective creators)

In the case of video games, companies start with external notifications such as mobile notifications, emails, and sales to drive player usage and purchase of their in-game products. Over time, video games companies want players to associate these external triggers with certain emotions such as boredom to turn infrequent play into habits.

Good game designers know their customers’ internal triggers. When users are stressed or bored, they will often turn to video games to restore their emotional equilibrium. When users get frustrated by a difficult level and are extremely close to beating it, video games are aware of that emotion and offer a paid power-up to help gamers alleviate their frustration.

Video games now have to drive gamers to action, which is the next step of the Hooked Model.

2. Action

Eyal describes the Action Phase of the Hooked Model as the minimum amount of work the user needs to do get relief. The action is the behavior that is done in anticipation of a reward. As an example, in the case of most social media networks such as Facebook or Twitter, all a user needs to do is open the app and view an item on their news feed to complete the intended action. Similarly, for gamblers at a casino, all they need to do is pull a lever to get to their reward.

B.J. Fogg, a behavioral scientist at Stanford University, developed a theoretical model that helps explain whether or not a particular behavior will be followed.

Fogg’s Behavior Model (source: Growth Engineering)

According to Fogg’s behavior model, a user’s behavior is a function of that user’s motivation, their ability in performing that behavior, and whether a trigger is present. If one of the variables is missing or lacking, users will fall below the theoretical action line, thus not performing the action.

How do most video games make it easier for gamers to take action? To increase motivation when gamers start a game, some developers initially set the odds of winning better items to be higher in order to create the façade that future boxes will also contain the same level of rewards. However, doing so is unsustainable for the development company because if players only get rare items, then they will be less inclined to spend real-world money on the game. To tackle this issue, less ethical games decrease the odds of obtaining rare items after the few first boxes to get gamers to pay for additional boxes.

For example, in the case of Bungie’s Destiny 2, players discovered that developers purposely throttled the amount of experience points players would get after the first few initial times a player finishes an activity. The reasoning for implementing this system is so that players will not grind the game to win all the remaining items, thus rendering the game less interesting and making it less likely for players to continue playing. The following quotation from Kirk Hamilton, a reporter from Kotaku, discusses the motivation behind Bungie’s decision to modify their existing system.

“[The development company behind Destiny 2] wants players to feel like they’re making progress more slowly in order to encourage them to spend money to get [loot boxes] faster.” (source)

Similarly, games sometimes provide starter packs or a set amount of in-game currency so that users can take that first action without having to expend much effort or money. For example, Yu-Gi-Oh Duel Links and several other free-to-play games provide users with enough coins to complete their first purchase without having to spend real-world currency. By providing this incentive and making it easy for gamers to take the first initial action, all of this buildup leads to the next step of the Hooked Model, the variable reward.

In the case of Yu-Gi-Oh Duel Links, players start the game with a starter box and a set number of gems that they can use to spend on in-game booster packs. The game also uses the psychological tactic of scarcity (Purchase Limit: 1) to make users believe that the one-time special deal of $2.99 contains unique items not found in the free packs.

3. Variable Reward

The third step of the Hooked Model is the variable reward phase, which is when users are rewarded for solving a problem or performing an action. This phase reinforces the action that’s taken in the previous phase. Results from a study conducted by Stanford Professor Brian Knutson determined, startlingly, that the part of the brain that becomes stimulated and is responsible for most of the pleasure we receive is not activated when a reward is received, but in anticipation of it.

The nucleus accumbens, highlighted by the red dot, is the part of the brain associated with pleasure (source: Neuroscientifically Challenged)

For humans, this induces higher levels of stress but also keeps us on edge. The variability that comes along with most successful products ensures that we never know what to expect. More often than not, the odds of winning or losing are unannounced, because knowing beforehand is less interesting and will likely detract from the novelty of winning a variable reward if users know what they’ll get in advance.

Most video game designers keep this in mind when building their games, and we see it everywhere in today’s gaming models, but especially when it comes to loot boxes. If you take a look at the following animations, you’ll notice a common theme among all of them. You’ll realize that all of the opening animations have some sort of delay. This minuscule delay in how the rewards are unveiled adds that tiny bit of extra excitement and makes anticipate and even yearn for the actual prizes.

COD WW2’s supply drops (loot boxes) are a bit underwhelming compared to those of other games. The animation is instantaneous and users have no clue what the rarity of an item is until a card is flipped and the color is shown.
Opening a loot box in Overwatch shoots the rewards into the air, where the color of the coins denotes their rarity. However, users don’t know exactly what item they’re getting, so the excitement gets amplified when the coins turn into the actual rewards.
Hearthstone, another Blizzard game, does a really nice job of allowing players to figure out the rarity of an item when hovering their mouse over a card. This is another example of providing that extra layer of excitement when opening a new pack.

The variable reward phase of the Hooked Model is akin to pulling a slot machine and trying to figure out what you’re going to win. Slot machines are designed to fixate gamblers through the slowing down of the different reels as the machine approaches the end of a turn. This buildup and anticipation is part of the appeal of the feeling of opening boxes with variable rewards.

Companies have to continue nurturing players’ interest and get them to reinvest in new offerings. That leads us to the next and final phase of the Hooked Model — the investment phase.

4. Investment

The final stage of the Hooked Model is the investment phase, in which players complete an action that makes them more likely to use a product in the future. These investments can come in a variety of forms, ranging from the more psychological (such as emotional commitment and social capital) to the more material (money and personal data).

These investments make users more likely to come back to the product because they load the next trigger of the Hooked Model and also store value for the user, thus improving the product the more a user interacts with it.

A psychological bias called the, “escalation of commitment” helps explain why people are reluctant to abandon a game given their prior investment. Examples of investment that make it more likely for a players to keep playing include the number of hours logged, the amount of money spent, and the number of friends on the platform.

Take for example most progression-based mobile puzzle games, such as Candy Crush Saga. Players start with five lives and only lose lives when they are unable to complete a level. Most players can get through the first few levels without much difficulty. However, by deliberately making the first few levels easier, the game’s designers allow players to play for longer during the first few times they open the app. By doing so, players become more acquainted with the game and are less willing to give up because they’ve already invested so much time into it.

The more time people invest into a game or product, the more willing they are to pay. (Source)

To make players more likely to invest in power-ups and loot boxes, video game companies can use a variety of tactics (such as artificial scarcity or concealment of odds) to make it seem like the items they are selling are novel or unique, compelling users to buy them before they’re off the market.

An example of a limited time offer from Star Wars Commander, a free-to-play strategy game for mobile with in-game purchases. (source)

Once a player invests, either through an in-game purchase or other actions, the Hooked Model repeats itself when another external trigger is presented or an internal trigger is innately prompted.

Ethical or Not?

Are loot boxes tantamount to gambling? Various agencies and groups are starting to take legal actions against loot boxes. The Netherlands passed a law in early 2018 ruling that certain loot boxes could be construed as gambling. In December of 2017, China’s Ministry of Culture passed a set of rules forcing multiplayer games that offer loot boxes to disclose the odds of winning particular rewards. In the United States, bills have been introduced by state legislators with the hope that the Electronic Software Rating Board (ESRB) will step in and implement regulations that require either full disclosure of drop rates, acknowledgment of the addictive nature of such purchases, or restrictions on certain age-groups.

So what’s next for the game industry? Many companies have migrated from one-time game purchase business model to a freemium model with purchasable in-game content making loot boxes all the more attractive. It appears government agencies will begin requiring greater transparency and more ethical practices. In addition, some players are beginning to complain about particularly slimy strategies and warn other players. Loot boxes are still an ethical gray area, but consumers have the power to vote against these practices by holding back their wallets.

Thanks for taking the time to check out my article!

If you liked this article, drop a few claps and recommend this article to your friends. I’d love to hear your thoughts on loot boxes and the current state of the gaming industry. Thanks to Nir Eyal for sharing his book with the world and taking the time to help me edit this article.

If you’re interested in what I write about or want to connect with me, feel free to follow me on Instagram or add me on LinkedIn.

Derek Mei