The UK Minister for Digital and the Creative Industries has disputed that loot boxes constitute gambling, and is keen to avoid uninformed regulation against them.
Margot James MP came before the Commons committee at UK Parliament today as part of the continuing inquiry into immersive and addictive technologies -- and loot boxes dominated much of this afternoon's hearing.
One committee member asked for James' thoughts on loot boxes -- "or, as EA rather bizarrely called them, 'surprise mechanics'," he added -- saying that since the publisher spoke to the committee two weeks ago, he and his colleagues have received correspondence from several gamers claiming the monetisation mechanic is a form of gambling.
He also pointed to stricter rules in the Netherlands and Belgium that have seen loot boxes banned in those regions, and asked if the UK's regulatory bodies "need to catch up and recognise that loot boxes are in fact gambling?"
"Loot boxes are a means of purchasing items, not an additional financial reward. They can't be traded offline for money. I don't think it is true to say loot boxes are gambling"
James said there were "a number of assumptions" in his question she didn't agree with, observing that Belgium and the Netherlands have different rules for offline gambling that have influenced their approach to online. While she refrained from going into specific detail, promising to follow up on this later, she stressed that a key difference is the UK's gambling laws largely revolve around whether something is a game of pure chance.
"The fact that other European countries have taken action I think is much more to do with them taking their offline gambling laws online, and our gambling laws are different," she said.
"I would also contest the assumption that loot boxes are gambling. I don't think the evidence I've read from your committee's hearings would support that assumption either. Loot boxes are a means of people purchasing items, skins, to enhance their gaming experience, not through an expectation of an additional financial reward. And also, more importantly, they can't be traded offline for money. So I think there are big differences, and I don't think really it is true to say loot boxes are gambling."
When the committee member then asked if she was unconcerned about loot boxes, James said: "I didn't say that."
She elaborated: "If evidence were presented to me that loot boxes are a gateway to problem gambling, then I would be concerned by that. I think that with the gaming community, you're talking about large numbers of young people -- by no means exclusively young, of course. Gaming is a pleasure enjoyed by all age groups. But with particular reference to young people, I think we have to vigilant and if evidence does emerge that loot boxes can be a gateway to problem gambling, then we need to take that seriously and we do need to take some action.
"But I don't think the evidence is really there yet. There are not many studies -- that's not to say we shouldn't be initiating more research... [But] you need the evidence as a justification for taking action, particularly if you're talking about regulation."
Another committee member cited the work of Dr David Zendle, who identified links between loot boxes and gambling, although James warned that even Zendle would say his work was correlational.
"We must be careful. We can't necessarily assume that because there's a correlation between A and B that there is a causal link. Those two modes of research are different and I think we should respect that."
James assured that there is an ongoing dialogue between her department and the Gambling Commission -- a body that, according to a committee member, said loot boxes bear a close resemblance to games of chance and therefore gambling. (The Commission later told GamesIndustry.biz that there was no link to gambling)
The committee then questioned whether James' department was being complacent and waiting for something to happen before it would act.
"You used the words 'close resemblance' and I think that is probably where we're at," James said. "We're looking at links, we're looking at evidence that is emerging. It's quite a young area of research. We are not complacent, we're looking at this very closely... But I do think it's important that before regulation and action of that nature is attempted, we get a better understanding of the root causes of the sort of problems you're alluding to.
"If we're talking about problem gambling, that can at its worst become an addiction. But by treating one aspect of addiction -- namely whether you're addicted to loot boxes or gaming or alcohol or whatever it is -- if you're only going to treat the actual symptom, you may well be missing an important part of the underlying problem that is driving that behaviour. So I do think it's important that we don't just sit back and wait for evidence; we lean forward and look for evidence, but we are dispassionate and objective."
The conversation expanded to encompass addiction to gaming and excessive time spent playing, with references to the recent classification of 'Gaming Disorder' by the World Health Organisation. James emphasised that the "general view among specialists" is that only 1% of gamers have such a problem.
"I would not sit here and be in denial that some people can have a very, very serious problem -- and you have heard from experts who have shared with you the symptoms that can give forth," she said.
"You need the evidence as a justification for taking action, particularly if you're talking about regulation"
"We're not just sitting around and waiting for evidence, we are scrutinising the evidence. I did say that I thought it was strange there was so little in this area. Gaming has been a big business for a long time -- a good 20 years -- and there hasn't been a lot of evidence in this area and I think there should be more research."
When asked further about the WHO's Gaming Disorder classification, James agreed the industry should take this very seriously, although stressed there is controversy around it given that "even at WHO level, they acknowledge there's a need for more research."
"But it's something games companies should take seriously and there are a variety of ways they could introduce support for their userbase, to alert excessive screentime on one game. I would see that as a reasonable response to the concerns this definition has given voice to."
The committee suggested that the UK should perhaps take a leaf out of Southeast Asia's book, where time limits have been introduced to protect children (in particular) from becoming addicted to video games.
James stressed that when talking about something that is potentially addictive, it's important to be aware of three factors: the individual and their propensity to become addicted, the environment they are in, and the particular nature of the potentially addictive item or substance. In the case of Southeast Asian markets, the environment -- both societal and familial -- is very different, with much more emphasis on academic success "to the exclusion of all else."
"I hear, anecdotally, reports from some families in that part of the world who are actually relieved to see their children do some gaming, because otherwise those children would do nothing but study for their exams because they are so focused on those goals to what might be considered an obsessive degree," she said. "In those cultures, gaming can be considered a relief."
She also stressed much of the research about addiction to games comes from Southeast Asia, "which underlines the need for more research here."
James told the committee that addiction in the UK comes under the remit of mental health, and the government has added an additional $2 billion to the NHS budget specifically for this area -- money she hopes can be spent on research, hopefully with some dedicated to exploring the possibility of gaming disorder.
"I don't think it's good enough to create a game and wash their hands of the potential consequences. But that's certainly not the attitude of many of the gaming companies that cross my path"
"At the moment, there is a paucity of research that is done in this country, which I think holds the field back and holds treatment of people back. But I think it's good we are seeing this extra investment into mental health."
The discussion returned to the notion of gambling in games, arguing that loot boxes and the role chance plays in them still evoke the emotions of gambling in young children, even if there is no prize or monetary value they can take out of the game.
"I think a lot of people who play games would regard the fact there is a lot of skill involved [in games] and it isn't purely a game of chance, so I would take issue with the way you have interpreted the definition in terms of chance and extrapolated it to the gaming environment. I take issue with that."
She later accepted that there are differences between cosmetic-only loot boxes, and ones such as FIFA Ultimate Team -- an example offered by the committee -- that affect your performance in-game.
"I can see that some might be potentially more dangerous in terms of that correlation with propensity to gamble and the emergence of problem gambling," she said.
However, James said that her biggest concern about loot boxes is not about gambling, but whether "children or young people are spending money they don't have in excessive quantities in order to make online or in-game purchasing."
"If young people have a propensity to gamble, I can accept that if they were excessive game users that loot boxes could bring that out, could potentially illicit from them a greater enthusiasm for using loot boxes which could lead to other problems."
The committee referred to its hearing with Epic Games and the global concern around Fortnite's potentially addictive quality, and James agreed that some of the games companies that have been involved in this inquiry did give the impression that they only cared whether a game was successful or not, rather than the impact the games have on their userbase.
"That's not really an attitude that can prevail in this industry over the medium term, because some of their products are so successful that they can cause people to spend such an inordinate amount of time on them that sleep and other normal daily activities are sacrificed," said James.
"When that impairs their ability to work or study or socialise offline, then we have a problem. So I don't think it's good enough to create a game and wash their hands of the potential consequences. That is certainly not the attitude of many of the gaming companies that cross my path. But I do think that's a problem with some of them."
"Companies are sitting on a great wealth of data and if they're not sharing it, perhaps it's time they did -- or at least learn from it themselves"
She agreed that games companies have a responsibility to "learn from the data they're collecting" and that there are "various measures they could reasonably put in place," such as the time limits previously mentioned (although she stressed she was using this as a possibility, not advocating it). And, again, she emphasised the need for more studies.
"I would caution against the assumption that it's only the industry that should be investing in the research," James said. "As a government, we need to be satisfied that there's an independence in the research that's garnered or commissioned and I think there's a role here for public funding.
"But definitely the manufacturers should be collecting data, and in time if they are coming into scope of the online harms regulator then they will be expected to have a duty of care to their userbase. And I think most reasonable people think they do have a duty of care even with or without regulation, and that's what we'll be looking for them to demonstrate over the next 18 months before the [online harms] regulator comes into existence."
She continued: "I share your concern about companies sitting on a great wealth of data and if they're not sharing it, perhaps it's time they did -- or at least learn from it themselves. One of your colleagues earlier said that gaming is several years behind gambling in relation to protecting the vulnerable, and if that is true, that is lamentable and the industry has a job to do."
Finally, a committee member specifically expressed concerns about the freemium business model -- a model that, as they see it, gives companies a financial incentive to encourage excessive playtime as this increases the chances of them spending on in-game purchases.
"That model you've just described can give rise to those sort of commercial objectives, I would definitely agree with that, but it doesn't always," said James. "With a more mature company, they should be seeing the benefits of demonstrating a care for their userbase in the way they you've outlined.
"It's like any industry. There are some companies who have this short-term view that the more time you spend on my [product], the more money I make. That is not true of all companies in the sector or indeed of any other sector. There are companies who have a longer term, more responsible attitude to their customer base compared with other companies who have a short term and more aggressive commercial view of their userbase. And the latter need to be brought into line."