Play or Prey: Regulating Predatory Microtransactions in Video Games
Executive Summary
With the continued proliferation of the gaming industry, more and more (vulnerable) people are exposed to predatory tactics in microtransactions. Through the bright flashing lights, suspenseful music, and deceptive reward patterns, microtransactions like loot boxes are ensnaring children, adults, and even the elderly into an addictive, gambling-like spending cycle. Such addiction will often lead to depression, anxiety, financial issues, and other problems in the affected party. This alone warrants serious discussion, but these microtransactions are also damaging to the games themselves, detracting from the experience even of gamers who do not purchase microtransactions, whether they are locked out of content, pestered with in-game ads, or even directly disadvantaged compared to those who buy microtransactions. Banning microtransactions or gutting them would likely put many game developers out of business, depriving all gamers of new games and content; conversely, a consumer-only approach would leave countless gamers vulnerable to the tactics employed by game studios.
To address this growing issue requires a dual approach: first, target consumer behavior through spending limits, purchase time-outs, forcing the display of real currency (as opposed to in-game), and more. Second, require equity between the content that is purchasable and earnable in-game, i.e. any item that can be purchased for real money must also be reasonably attainable through normal gameplay. Combined, these measures would significantly protect consumers from predatory microtransactions.
1.1. Microtransactions & Consumer Impact
With the gaming industry showing continued growth and no signs of slowing, game design studios continue to prey on their users using microtransactions. While they may seem relatively harmless, microtransactions are carefully designed to 1) elicit a reward in the user’s mind, 2) entice users to want to keep spending, all while they 3) detract from the overall experience of the game. Loot boxes and similar microtransactions are especially heinous — designed to emulate slot machines at a casino, the loot boxes offer users a chance to receive a desirable item for a small purchase price. Of course, rarer, more desirable items are much less common as to make sure that users keep the loop going. “Some gamers have even stated that the rush of pleasure or disappointment that comes from opening a loot box is highly addictive, and it may incline them to spend more money” (Wesley Okereke 67.) Isolated from whether the presence of microtransactions and loot boxes is harmful to games, instilling this addictive feedback loop in gamers is very problematic.
This is especially scary considering the games’ targeted demographics of younger adolescent children and the studios’ measures to increase the addictiveness of in-game purchases. Game designers implement “special animations within the loot box when a rare item is potentially being drawn, dramatic music, prize-wheel spinners, and other functions designed to increase the suspense of opening a loot box” (figure 1)(Okereke 69.) These design elements increase the suspense and anticipation, make it seem as if rarer rewards are more likely, and significantly increase the addictive feedback loop of purchases. This is exacerbated by the fact that it is almost impossible to find a video game today withoutmicrotransactions. A study conducted in 2019 estimated that 71.2% of played Steam games have loot boxes, and 85.89% of Steam games have cosmetic microtransactions (Zendle, Meyer, Ballou.) With such a large percentage of games relying on microtransactions, millions of vulnerable people will inevitably be exposed. According to Statista, about 24% of gamers as of 2022 are aged below 18 years — so a vast proportion of gamers are young children who can be much more vulnerable and susceptible to influence. In fact, while the proportion of gamers who purchase microtransactions has risen to ~20% as of 2020, over 40% of gamers purchase at least one microtransaction per week (Colagrossi, Worldpay). This is indicative of problematic gaming behavior, in which gamers are lured into gambling-like reward patterns, and it is poised to continue proliferation as microtransactions become more and more common in video games (see figure 2). So, much like physical gambling, engraining a gambling-like reward pattern in gamers’ minds at such a young age could lead to severe consequences down the road (addiction, depression, etc)
1.2. Impacts on the Games
On top of the adverse effects on consumers, microtransactions often damage the game’s overall experience, with paywalls blocking the most desirable cosmetics, some of the strongest skills and items, and even large chunks of playable content and characters. In the past, the $60 price of video games encompassed the entirety of the playable content and cosmetics, where a player would have to dedicate time, effort, and focus to playing through the game. Today, because of microtransactions and the free-to-play (F2P) model, players are encouraged to simply pay for the content they want and to unlock the characters, skills, cosmetics, etc., that would otherwise be rewarded for time, effort, and skill. In some games, all items will be earnable in addition to the option to purchase items directly through microtransactions. Even in these games, where all items are earnable through regular play, the required time and effort are often so extreme (thousands of hours) that a reasonable person could not obtain items without microtransactions. Not only is this harmful to the game’s experience, but it removes perhaps the most beneficial aspect of gaming — the delayed reward achieved through time and effort.
1.3. Consumer Self-regulation
The current regulatory approach to microtransactions is hands-off: consumers can, at their discretion, purchase any microtransactions in any quantity and at any time without regulatory intervention. Under this approach, consumers have free reign over all aspects of their personal consumption choices in video games. This seems logical and sufficient. However, as more and more game studios (heavily) integrate microtransactions into their games (figure 2), more and more users will inevitably be exposed to and purchase microtransactions. But, there is evidence that this system works, with the notorious example of Battlefront II, in which EA released a new game using the same name as the beloved Star Wars: Battlefront II of the early 2000s. Unlike the original, this game implemented microtransactions in every feasible way one could think of, with even the most beloved Star Wars characters locked behind paywalls. Fans and gamers reacted, and there were large protests of the game — it is estimated that EA lost around $3.1 billion in stock value following this chain of events (McCaffrey 3.) Consumers can regulate game studios and their use of microtransactions by simply not purchasing them or not playing the games where microtransactions are present. This is evident in the plateauing of pay-to-win microtransactions shown in figure 2. However, while much of the audience for the Battlefrontgame was in their late teens and early 20s, a substantial portion of microtransactions specifically target younger, more vulnerable audiences. Additionally, another study showed that around 70% of respondents were aware of the price and implication of their purchase, with the most common reasoning being to “increase level of enjoyment” (Gainsbury). Games like Battlefront II which require an in-game purchase just for enjoyment are to blame — obviously, under this system, kids and other vulnerable groups are free to engage in any microtransaction gambling scheme at their leisure, and games even require microtransactions just for enjoyment.
2.1. A Common “Solution”
A widely supported solution is to outright restrict the use of loot boxes, paywalls, and other microtransactions that may prey on vulnerable users. Since loot boxes and other microtransactions are specifically designed to elicit a reward in the brain, they are adorned with bright flashing lights, presented in ornate crates with long unboxing times, and include countless other tricks to increase the reward (in-brain, not in-game) from a purchase. So, would restricting the use and sale of these microtransactions prevent harm to these groups? Well, yes, but the externalities of such an approach would be detrimental to gaming studios and, by extension, to gamers. The shift to microtransactions in the 2010s was not unneeded. Games had been achieving less and less revenue from sales alone, and studios were not able to put out a product of high quality while also making a profit. The solution for many was microtransactions, free-to-play, and other similar models. These gaming innovations extensively diversified a game’s revenue streams while providing an engaging way to interact with the game (engaging, not necessarily healthy!) Today, the removal or even severe reduction in microtransaction purchases from video games would likely put many studios out of business, depriving gamers of the games themselves. In fact, in 2020, revenues from microtransactions eclipsed total revenue from game and downloadable content, or DLC, sales (Statista.) Also, such regulation would need to be targeted at specific instances of microtransactions to be effective, but there is such a diverse array of microtransactions that this is infeasible. Considering pay-to-win microtransactions, loot boxes, DLCs, skins and cosmetics, and all the other implementations of microtransactions, and the difference among the games themselves, there is too much variety to protect consumers efficiently and adequately.
2.2. The Variability Problem
The vast variance in the types of microtransactions in video games is perhaps the most severe roadblock to enacting meaningful regulation. On the one hand, there are child users who actively gamble using “skins” (in-game character cosmetic customization), there are Season Pass and DLC content that is not inherently addicting but can detract from the game experience, there are pay-to-win microtransactions that taint the entire game experience, and there are types of microtransactions that fall into or between any of these examples. The face of videogame monetization is constantly in flux, and as such, targeted regulatory measures are hard to agree upon — so regulating videogame monetization must rely on a breadth of varying implementations.
2.3. Step 1: Maximum Spending Limits
To start, allow users to set a maximum microtransaction spending amount on an account basis. Currently, “microtransaction systems do not currently impose any limits on player spending, making it possible in theory for a player to spend an unlimited amount of money on loot boxes” (Kinnunen et al. 2016). Currently, players may lose track of their quantity of purchases, which is especially easy when buying multiple low-priced items ($1-$5 typically), leading to large amounts being spent at one time. Setting a maximum spending limit would reduce overspending on microtransactions. Implementing a purchase limit is straightforward and would have minimal effects on studios’ bottom lines. It would allow parents and guardians to restrict their children or other users from purchasing potentially absurd amounts of in-game items without altering the games themselves.
2.4. Step 2: Real Currency Only
Also a part of this approach is requiring in-game purchases to alwaysbe displayed in real currency. Currently, in-game currencies are essentially unregulated, and most are denoted in denominations far higher than real currencies. Virtual currencies also vary from game to game and can even change within the same game; additionally, as shown in figure 3, purchases of in-game currencies almost always provide incentives for larger purchases of currency (more currency per dollar, in-game discounts, special items, etc.) Combined, these can disguise the actual value of the in-game currency and items and influence gamers to spend more and more. To rectify this, simply require all microtransactions in-game to be displayed in real currency. This simple transparency measure will likely increase a player’s awareness of how much they are spending and help reduce overall spending.
2.5. Step 3: Purchase Timeout
Lastly, part of this approach is the purchase time limit. Due to the repetitive, chance-based nature of many microtransactions, it is exceedingly common for gamers to make long strings of small transactions — before losing sight of how much they are actually spending (King, Delfabbro 170). This is promoted by the microtransactions themselves, since loot boxes offer the chance to get a desirable award, players are encouraged and incentivized to keep purchasing until such a reward drops. Implementing a cool-down time on purchases would alleviate much of this harm. Such a timer would force gamers to take a breather and reassess — like the advice to sleep on a potential purchase decision, even a 30-minute timer before another purchase can be made would likely significantly decrease the quantity and frequency of in-game purchases as gamers have time to consider what they are paying for.
Tying together: Consumer behavior approach
Combined, these three measures would greatly increase consumer awareness of microtransactions and how much money they are spending while also preserving the important revenue stream for studios and the option to purchase microtransactions (as many gamers love to). However, there are multiple problems with this approach. Firstly, forcing the use of real currency in-game would break countless in-game currency systems, even for those not purchasing microtransactions.
Also, this consumer-centric approach does nothing to curb the predatory nature of many microtransactions. Since consumer choices are still their own, such measures would leave countless children and gamers vulnerable to the addictive microtransactions in games. They simply ignore, bypass, or even remove these measures (through game modifications, “mods”). While the discussed steps may be necessary for gamers’ protection, they are insufficient to adequately regulate microtransactions in video games.
3. Ensuring the Protection of Gamers — Recommendations Part 2
How can a regulation target the microtransactions while preserving them as a vital revenue source for studios, while not detracting from the game’s overall experience? The solution is to mandate the equity of rewards between purchasable items/loot boxes/cosmetics/etc. and those same in-game rewards unlockable through normal progression. This would require games to have all items, cosmetics, skills, etc., attainable within average, reasonable progression within the game. This means that the player who spends real currency on microtransactions is not conferred any unique, exclusive, or otherwise unobtainable item/skill/cosmetic/etc. that cannot be earned by a non-paying player. This intervention would require a system of determining the reasonableness of attaining a specific reward — I propose using hours played. Under this system, an item that can be earned from a $10 loot box should be otherwise obtainable through regular efforts (i.e., non-paying.) “Normal efforts” consider total game time, cost of the item as a microtransaction, and the rarity and power of the said item. For example, it would be regarded as unreasonable to have an overpowered item require 1,000 hours of playtime that is otherwise purchasable for $10 — a $10 item may require 20 or 50 hours of playtime while being considered reasonable. This would also require a clear distinction between a game’s price and the price of any DLC. Obviously, full-scale DLCs that add new gameplay, story content, maps, etc., should not necessarily be earnable in-game given the extensive development time required that is akin to developing an entirely new game; this implementation would reserve game studios’ right to charge for additional DLC content while prohibiting the inclusion of (otherwise non-earnable) content purchasable through microtransactions.
This approach would ensure that no gamer must feel left out or disadvantaged due to the availability of a microtransaction. Any gamer can earn any item through their mettle — similarly, any gamer can earn any item through a higher-cost but instant microtransaction. This would significantly reduce the incentive to purchase microtransactions. There are some shortcomings; of course, many gamers would still prefer the quick and easy route of simply purchasing the items for real money. Additionally, the legal distinction between a game and that game’s DLC and microtransactions is very hazy; game studios would revolt at the idea of providing new content, whether that’s entire story campaigns or just a weapon skin, for free, and there would be much debate over the differentiation between DLC content warranting an additional purchase (because the content is indicative of an entire game in and of itself) and content that would be required to be earnable in-game.
3.2. A Wholistic Regulation of Microtransactions
As such, the most thorough and complete regulation of microtransactions in video games would implement the consumer behavior limitations discussed in 2.3–2.5 and the requirement of equity between in-game earnable items and purchasable items. Together, these approaches target both the cause of and the reinforcement of microtransaction purchases by targeting the incentives of these purchases and the designed reinforcement of the purchase loops. Though regardless of the measures taken to regulate microtransactions, something must be done to protect gamers and consumers as gaming and microtransactions in gaming continue to proliferate around the world.
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