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Loot boxes: An industry at war with itself over a technicality

2018 in Review: The evidence says loot boxes are gambling, but the law is still catching up

Video games won't send your child running into the warm embrace of literal Satan, nor will they turn them into a violent maniac thirsting for human flesh, but there is a growing body of evidence pointing toward something far more pernicious -- something which could result in genuine and lasting damage to both the industry and its biggest fans.

It could be nothing other than loot boxes, of course, and the industry has found itself in the frightening position of once again sparking moral panic. After many long years, we have moved past the pointless debate around violence and video games, and begun to show the world what a diverse and creative medium games can be.

But it's now been roughly 16 months since Middle-Earth: Shadow of War left this ugly mess on our carpet, and Star Wars Battlefront II bounded gleefully into the room, grounding it into the very fibres. When the controversy broke, it did so with such thunderous intensity that state senators began drawing comparisons to smoking ads from the '80s, and even pegged the game as little more than a "Star Wars-themed online casino".

"It's a dark day indeed when you find yourself agreeing with the Daily Mail"

Since then, regulatory bodies around the world have taken notice, their fruitless efforts to understand something so arcane leaves them lumbering slowly towards conclusions that struggle to fully grasp the issue; companies like EA and 2K Games defend their right to facilitate underage gambling in sport games; and furious consumers fail to acknowledge the harsh realities AAA development that lead us here in the first place.

Casino comparisons course through the debate, with fear-mongering controversy-mill the Daily Mail running ungainly but effective headlines like: "Video game 'loot boxes' that use the same tactics as casinos to part people with their money are encouraging children as young as 13 to GAMBLE".

It's a dark day indeed when you find yourself agreeing with the Daily Mail, but after covering this issue extensively for the past year, it's difficult to view loot boxes as anything other than a form of gambling.

While there's a number of mitigating factors and technicalities which certain publishers have employed to eschew responsibility, even the more innocuous loot boxes share psychological mechanisms commonly found within gambling.

For the unfamiliar, these are: variable ratio reinforcement schedules; gameplay experience such as sensory feedback; entrapment systems designed to encourage further spending; and ready, constant availability.

Loot boxes rarely fail to meet the psychological definition of gambling, even when they do not meet the legal definition.

Again, for the unfamiliar, the psychological definition of gambling has five core criteria as developed and defined by Nottingham Trent University psychologist Mark Griffiths: the exchange of money or items of value; an unknown future event determines the exchange; the outcome is at least partly determined by random chance; it's possible to avoid loss through non-participation; and winners gain at the expense of the loser.

It could be argued that because the user always receives a prize, they never technically lose, but that ignores the matter of player-ascribed value.

"We do not consider loot boxes to be gambling ... We believe that loot boxes are more comparable to baseball cards"

ESRB president Patricia Vance

How you define gambling is important and this is where government legislation around the world has fundamentally failed to understand the potential risks presented by loot boxes. In every gambling commission response thus far, with the exception of Belgium, loot boxes have been let off on a technicality -- it must be possible to exchange the contents for real-world monetary value.

Despite 16 gambling authorities signing a letter stating publishers must "ensure that features within games, such as loot boxes, do not constitute gambling under national laws", that caveat persists, and so loot boxes remain broadly unchallenged.

What legislators and authorities repeatedly fail to understand during examination is that the real-world value of items is largely irrelevant. The Belgian Gaming Commission has been the only authority to consider player-ascribed value in its assessment of loot boxes, finding that: "Value can be defined as the degree of usability. Specifically, items that the player finds useful or nice and for which he pays money".

A frequent argument used to dismiss concerns that loot boxes constitute gambling are comparisons to collectable card games or even Kinder Surprise Eggs. In a letter to US state senator Maggie Hassan, Entertainment Software Rating Board president Patricia Vance stated: "We do not consider loot boxes to be gambling ... We believe that loot boxes are more comparable to baseball cards, where there is an element of surprise and you always get something."

However, as Dr David Zendle and Dr Paul Cairns of York St. John University and University of York told me, rhetoric like Vance's was "out of date" and "bit of a distraction".

"It focuses people on similarities between loot boxes and physical collectable card games," Zendle and Cairns said in an email. "But it glosses over the differences. And there are lots of differences between loot boxes and physical CCGs. For example, one important difference may be related to velocity and volume: Players can buy loot boxes a lot more quickly than they can buy trading cards. And they can easily buy them in much larger quantities."

"Sometimes, even if two things look similar, the important things are the differences - not the similarities"

Dr David Zendle and Dr Paul Cairns

Aside from physical, real-world barriers when purchasing booster packs, Zendle and Cairns noted that any surface-level comparison between loot boxes and trading cards is "essentially a moot point".

"This link remains potentially harmful, regardless of how like physical card packs they are in other ways," they said. "Sometimes, even if two things look similar, the important things are the differences - not the similarities."

Earlier this year, Zendle and Cairns conducted a survey of over 7,000 gamers on behalf of the Australian Environment and Communications Reference Committee as part of an investigation into loot boxes. Their findings supported evidence presented in an academic journal article by Aaron Drummond and James Sauer titled 'Video game loot boxes are psychologically akin to gambling', and found "important links between loot box spending and problem gambling".

In fact, Zendle and Cairns found the more severe an individual's problem gambling, the more they spent on loot boxes.

"The relationship we observed was neither trivial, nor unimportant," reads their assessment submitted to the ECRC. "Indeed, the amount that gamers spent on loot boxes was a better predictor of their problem gambling than high-profile factors in the literature such as depression and drug abuse."

After five months investigating the issue, the ECRC committee published a 90-page report and advised the Australian government to undertake a comprehensive review of loot boxes. While the report recognised that loot boxes "are not a homogenous entity", and there are a variety of ways in which loot boxes can be acquired, it still brought the discussion back around to the legal caveat of real-world monetary value.

Many other international government bodies are considering loot boxes right now, the most notable recent addition being the US Federal Trade Commission. While there is an almost universal concern that the mechanic often bears an uncanny resemblance to gambling, that caveat of being able to cash out persists, and neither Zendle or Cairns could be sure when -- if ever -- we might reach consensus regarding legislation.

The perils of gambling addiction are well-documented, and there's plenty of anecdotal evidence around problem spending on video game microtransactions. It only stands to reason that loot boxes, designed specifically to evoke the illicit thrill of rolling the dice would exemplify the worst of both worlds.

"Persisting with shady behaviour just because it's not technically illegal doesn't just set the bar low, it kicks it into the dirt"

Recent projections from Juniper Research suggested that loot boxes could drive the digital games market to be worth $160 billion by 2022. Research author Lauren Foye even noted: "By monetising the random generation of items, developers are effectively encouraging a form of in-game gambling, extending both the lifecycle and engagement of games titles to their audience."

A source at EA told me that internal projections for loot box revenue from a AAA game were anywhere between $70 million and $200 million. With numbers like that, it's hardly surprising the publisher would rather gear up for a legal battle against Belgian regulators than set a precedent and remove loot boxes from its games in the region.

But where does this leave us? And, more importantly, where are we heading? From a legal perspective, the Belgian decision is the most important, as it represents how malleable definitions can be. Of course, for developers and publishers it's a headache, but even the International Game Developers Association has taken a stance against the industry's application of loot boxes.

Executive director Jen MacLean recently called for an industry-wide commitment to not market loot boxes to children, to disclose the odds of receiving different rewards, and to launch a campaign to educate parents.

The industry has been at war with itself over this for a year now. Many regulators have found that loot boxes don't quite legally constitute gambling but, without failure, raised concerns over how much they resembled the act.

Perhaps the industry should ask itself if a legal caveat is enough to justify continued use of loot boxes. The scientific evidence supports a view that loot boxes are "psychologically akin to gambling" and government authorities have raised concerns about the "increasingly blurred lines" between games and gambling, but publishers wilfully ignore the issue unless their hand is forced.

Is corporate responsibility really too much to ask for when foisting gambling upon kids? Persisting with shady behaviour just because it's not technically illegal doesn't just set the bar low, it kicks it into the dirt.

Regardless of legal definitions, the evidence clearly indicates that loot boxes are linked to harmful behaviour; if you're concerned about the negative effects of gambling, you should be concerned about loot boxes. Just because it's not technically illegal, doesn't make it right.

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Latest comments (10)

Klaus Preisinger Freelance Writing 7 months ago
Are games products which aspire to be art, or a habit to be kicked eventually? The answer may differ depending on the developer or publisher.
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Alex Game Designer & Developer 7 months ago
Can someone let me know why the amount of loot boxes one is able to purchase at a given moment (the velocity as stated) is a factor in determining the features of psychological gambling? Sure I can buy a thousand loot boxes if I want, but can't I also buy a thousand pack of baseball cards if I wanted?
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Klaus Preisinger Freelance Writing 7 months ago
Can someone let me know why the amount of loot boxes one is able to purchase at a given moment (the velocity as stated) is a factor in determining the features of psychological gambling?
Because of a cultural concept called moderation in which you do not religiously occupy one extreme or the other, but believe in things having a tipping point beyond which things have to be reevaluated. This idea literally drives all legislation concerning maximum allowed concentrations of something in some other thing, e.g. lead in water, chlorine in chickens, or alcohol in your blood while driving.

Which is a scary thought for a business driven on the most heaviest of users, but nonetheless a rather universal societal norm no amount of whataboutism will prevent.

Especially trading card games cannot only be reduced to the way money is exchanged for cards to work out the similarity to loot boxes. One mustn't ignore the highly visible social dimension of kids trading cards among each other in a social and reciprocal way. Those are two things parents want to encourage, hence they give the more shadier part of collectible card games a pass. Most loot boxes neither have these nor other socially redeeming features, hence they are looked at more negatively.
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Anthony Gowland Director, Ant Workshop7 months ago
Probably not? Unless it's a very big shop. And even then, there is social friction (in the sales assistant looking at you like you're an idiot) that doesn't exist in online gambling.
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If loot box mechanic is immoral in games, then it is immoral in trading cards, CCG's, coin-operated bubblegum and toy machines etc. Some of those have been around for more than a 100 years, but ofc it becomes a problem only when it is included in video games. And politicians and officials seem to exclude all those others and focus only on video games. Because, well, video games are bad.
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Ian Griffiths Product Owner, Hutch7 months ago
The evidence definitely doesn't say that loot boxes are gambling and neither does the law, as of now.

Currently the lack of evidence of any problems despite loot boxes being used by tens of millions of players is fairly deafening but I'd rather hear about new evidence than the same regurgitated arguments again and again. As they've been brought up it's time to smack them back down again.

The research cited in this article, and I'm confused as to why third hand data of a transcript of a debate about a study is linked rather than the actual study itself, can be found here - https://psyarxiv.com/7ntjk/ 'Video game loot boxes are linked to problem gambling:Results of a large-scale survey' by David Zendle and Paul Cairns of the University of York. This study sourced its participants from Reddit and had to discard about 20% of the participants, those that did respond did so in a self-reported survey. The results showed some correlation where being a self-reported problem gambler explained just under 40% of the variance in spend on loot boxes. Not trivial by any means but also not conclusive and at most we can see correlation, we don't have enough information about causation but it's definitely enough to warrant further info. One thing that really did bother me about the study was that it talked about the ethical implications for developers, if we're serious about measuring this stuff then these studies need to be objective I would basically take this one with a massive pinch of salt giving that implicit anti-loot box bias and the sourcing of participants.

I think that the AAA industry has experimented with Loot Boxes, gotten a little greedy in the eyes of the consumer and are now reeling a bit from it. Most of the big publishers are moving away from Loot Boxes, certainly for titles that begun dev after the whole SW BF 2 thing. I suspect there will always be an assumption that devs and publishers have an insatiable cupidity from the gamer audience especially with rising costs and a demand to find new avenues to generate revenue. There are more effective ways to make money than loot boxes and there are no concerns of being called 'gambling' in them.

If we think that Loot Boxes are affecting people then we need to understand the problem before we take measures that go too far and needlessly clamp down on something people enjoy. Things like telling the player drop rates, that there are loot boxes in the game, a purchase or order history, 16+ age ratings, these don't seem like absurd or particularly harmful restrictions that the industry could self-impose.

I am curious though, what's more damaging to a child, a loot box or games with content like this?
https://youtu.be/l5RtLpp9ZpY?t=180 (warning graphic violence in a video game) we know that parents certainly aren't enforcing age ratings. I certainly know which one out of loot boxes and games like this I wouldn't want my kids to see. Remember, just because it's legal doesn't make it right.

(Note - all my own opinions, I'm not responsible for external content)

Edited 2 times. Last edit by Ian Griffiths on 12th December 2018 8:54pm

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Ian Griffiths Product Owner, Hutch7 months ago
Can someone let me know why the amount of loot boxes one is able to purchase at a given moment (the velocity as stated) is a factor in determining the features of psychological gambling?
They can't because it's not a qualifier for gambling. You can buy one lottery ticket or a million, the first one wan't not a gamble because you can purchase more.

What they may be able to point to is that the ability to purchase frequently, if they are addictive, would be more likely to tip into the area of problem spending.

We seem to be concerned about children learning about gambling, whether buying loot boxes or simply 'earning' them in a game. If we are indeed worried about this then we should be equally worried about MTG Booster packs, other TGC and the best selling toys, L.O.L. Surprise!
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Yuri Bialoskursky Senior Designer, PerBlue, Inc7 months ago
One mustn't ignore the highly visible social dimension of kids trading cards among each other in a social and reciprocal way. Those are two things parents want to encourage, hence they give the more shadier part of collectible card games a pass. Most loot boxes neither have these nor other socially redeeming features, hence they are looked at more negatively.
That's not completely true though...there are a multitude of active communities that specifically socialize around the collectible content of these games, not to mention any number of pack opening videos out there that attract views. Just because the socialization isn't as visible as "kids trading cards among each other", doesn't mean that it doesn't exist or make it more shady.

Edited 2 times. Last edit by Yuri Bialoskursky on 13th December 2018 4:09am

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Yeah, what Ian Griffits said. Games have been demonised for decades, chance mechanic in them is just the latest excuse for politicians and officials who like to act like they are on a moral high ground.
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Alex Game Designer & Developer 7 months ago
@Anthony Gowland: I would say to this one can hop online and buy ten thousand baseball cards with no social friction if they wanted. Both in this case and loot boxes, you don't know what you are getting within a certain constrained domain, although I suspect games come under such heavy fire because they have large feedback systems that give the user rewards and losses as their main drive to play the game. Online shopping may have dark patterns to get you to buy something but the strength of feedback is not as moving as games can be. The feeling of loss and reward can be pretty heavy to a player who has built a certain class of character and takes the game seriously as an extension of self in a competitive scene, but another could just casually be surprised by a nice skin they get in a box. The former is a deep drive that games do well at and that is why I think they can be so affecting.

Edited 3 times. Last edit by Alex on 13th December 2018 2:35pm

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