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Is it time to retire virtual currency? | Opinion

The industry doesn't want to curb loot boxes, but it could address some concerns by giving up another consumer-unfriendly tactic

There's been a lot of focus on loot boxes of late, with the US Federal Trade Commission scrutinizing the issue in a day-long workshop last month and the UK Parliament's Digital, Culture, Media and Sport (DCMS) Committee recommending that loot boxes be regulated under gambling law and banned from being sold to children.

And when the press talks about this focus, we often just refer to it as "the loot box debate," but it's actually a much broader issue than that for the industry. A less catchy but more accurate description might be "the exploitative monetization debate." Because while loot boxes draw plenty of criticism from players, press, and politicians, the pushback against them has spread to a larger collection of tactics broadly viewed as unsavory.

As bad a reputation as loot boxes have, virtual currency helps enable many of their most objectionable excesses

For example, Senator Josh Hawley introduced "loot box" legislation in May that would also ban pay-to-win mechanics in any game played by children, including charging people to bypass cooldown timers, selling items that could ease progression, or selling competitive advantages in a multiplayer game. (As an update, that bill was referred to committee and has not progressed since.) And at the FTC workshop, there was a fair amount of discussion about virtual currency, because it is in many ways intertwined with what gets people riled up about loot boxes.

So perhaps we can curtail this legislative interest in loot boxes not by cracking down on the boxes themselves (a difficult task and one the industry has repeatedly signalled it has no interest in), but by changing how we handle some of those ancillary tactics that combine with loot boxes to form the Disreputable Industry Avengers some politicians are so keen on disassembling.

I suggest publishers look at virtual currency -- perhaps the Hawkeye to loot boxes' Hulk -- and seriously consider just how essential it is to their business. Because as bad a reputation as loot boxes have, virtual currency helps enable many of their most objectionable excesses. Loot boxes draw people's ire for obfuscating what players are buying, but virtual currency similarly hides what they're paying.

For one, there's no set exchange rate. Even if a game sells its virtual currency at an easily graspable conversion -- let's say $1 equals 1 FunBuck -- it's common for games to give players bonus amounts or discounts on larger purchases that muddy the conversion. It's also common for them to let players accrue some amount of virtual currency through gameplay. Both of those are presented as nice perks or bonuses for the player that on the surface allow them to purchase things for less real-world money, but they make the actual cost of any given item something that's difficult to pin down, and highly variable by user depending on how much they value their time.

As National Consumers League VP John Breyault told the FTC during the loot box workshop, figuring out how much anything in virtual currency games actually costs is "a lot of cognitive load on the user."

The math on virtual currency can get messy in a hurry

The math on virtual currency can get messy in a hurry

In the same session, ESA general counsel Michael Warnecke explained the industry's use of virtual currency, saying publishers have a few reasons for it. First, it helps avoid credit card transaction fees on a plethora of low-value purchases. Second, it would be annoying for players to have to repeatedly confirm individual in-game purchases. Finally, it helps preserve a game's narrative integrity. These points merit a bit of examination, as they represent the industry's clearest on-the-record reasons to embrace virtual currency as it has. And as arguments to justify undermining a consumer's ability to make an informed purchase decision, none of them is compelling.

On credit card transaction fees, I don't see any reason publishers and storefronts couldn't simply bundle purchases made within a certain time frame, much the way Apple does with iTunes and App Store purchases. And if they have to swallow the fees on stand-alone $0.99 purchases every now and then, oh well. Businesses have expenses, and it's up to them to price their products to account for that.

As for Warnecke's suggestion that it would be annoying to repeatedly go through the purchase process, that's true. But avoiding annoyance is not an acceptable justification for what politicians and parents are viewing as unethical business practices. However, that point does speak to how much less friction there is when paying with virtual currency. You don't need to enter your credit card information. You don't need to go to a standardized storefront UI. Depending on the game, you don't even need a confirmation dialogue to affirm that you intend to spend this ersatz currency that cost you real-world money.

This is one of the more concerning aspects of loot boxes and microtransactions to me, because the usual friction points in a transaction are opportunities for a customer to consider whether they really want to spend this money, and whether the amount they are spending is a fair exchange for what they're receiving. Purchasing decisions like that can be hard enough when you're waiting in the checkout line of an actual store, holding a tangible thing in your hand and looking at the clearly labelled price tag. When impulse buys are completely non-refundable and constantly just two taps away -- when buying things is so trivial it enters into "honest mistake" territory -- it may be time to consider that perhaps a bit more friction is called for.

One thing we constantly hear from publishers defending their monetization schemes -- right after "Some games go too far, but we do our monetization the right way" and "We want to be respectful of our players" -- is "We want our users to be happy they spent money on our game." And there's some truth to that. No publisher wants their players to feel burned by the transaction. But it doesn't take an in-depth examination of the gaming populace to find evidence of buyer's remorse and people who resent the monetization schemes embedded in their games. If you put some friction back into transactions -- make them feel more like a discrete purchase and less like a continuation of gameplay -- you might cut down on that negative sentiment surrounding your game. And considering the disproportionately loud noise a vocal minority can kick up online these days, even a modest decrease in the actual number of upset consumers could have a significant muffling effect.

Warnecke's final explanation for the industry's use of virtual currency -- to preserve narrative integrity -- is as absurd as it is damning.

"Say you had a game set in Ancient Egypt and you wanted to buy a chariot for a big combat that was going to come up, and you went to the marketplace in Thebes," Warnecke said. "You would not want to be buying a chariot for $2.50 US. It would be a little bit jolting and a little bit odd, so instead a publisher will make it with a historically appropriate monetary currency, such as a deben of copper, which would fit in more with the game."

In short, game makers don't want to break a game's immersion in order to have players make a purchasing decision because it would be "a little bit odd." And that's an absolutely valid creative position. But if you honestly want to hold your narrative integrity as sacrosanct, the simple way to do that is to not ask the player to make a real-world purchasing decision within your story in the first place.

Do you want to spend the day converting actual money to Helix Credits to Drachma to figure out what this costs, or do you want to save the world?

Do you want to spend the day converting actual money to Helix Credits to Drachma to figure out what this costs, or do you want to save the world?

Using virtual currency to keep from breaking immersion is an indefensible compromise. It says the industry wants players to keep making purchasing decisions, but not as paying customers soberly assessing the value of what they're buying against their discretionary income for the month. The industry would prefer they make the exact same real-world purchasing decision while engrossed in the fantasy of a glorious hero a mere deben of copper away from saving the day. (And while I'm certain people aren't so simple as to entirely confuse the game for reality, I would also suggest people aren't so simple as to see something selling for $99.99 and think it's significantly different from something selling for $100, or to buy a brand of soda because the ad had an attractive person in it. And yet…)

"Many of the games employing these tactics are popular with children, who are already ill-equipped to understand the basics of money"

To recap, it's hard for players to know how much they're spending thanks to virtual currency, they often don't know what they're spending it on thanks to loot boxes, and companies are designing their games to have players make real-world purchasing decisions without thinking about their real-world situation. Throw in the way these games are designed as treadmills people can run on for years and throw unlimited amounts of money at, and it's very easy to lose track of not just how much any individual purchase is costing you, but how much you're spending on a game in total. (Recall the FIFA player who was "gobsmacked" to discover that he spent $10,000 on Ultimate Team over two years.)

Keep in mind that many of the games employing these tactics are popular with children, who are already ill-equipped to understand the basics of money. A survey of parents published last year showed that on average, their children didn't understand the fundamentals of money until the age of 10, by which they mean the fact that money was not infinite, and that it had to be earned and saved and budgeted. Now consider that with loot boxes and virtual currency, games are also requiring children to have a functional knowledge of algebra and statistics in order to comprehend the value proposition, and it becomes easy to see why there might be some legitimate grounding to parents' and politicians' concerns.

"But how many kids that young are really playing these games," you might ask. And may I say, astute reader, that is a very good and fair question. But as the DCMS hearings showed, it's a question publishers refuse to answer.

Like so much of what "the loot box debate" is about, virtual currency is not inherently unacceptable in and of itself. But the ways this seemingly innocuous practice interacts with a host of other industry trends right now -- and the way trade groups, platforms, and publishers have had to be dragged kicking and screaming to taking the slightest action on any of them -- makes the industry look, in a word, scummy.

Games are increasingly leaning into monetization schemes that are a black box to players, intentionally depriving them of all ability to make an informed purchase decision. At the same time, analytics and tracking of player behavior mean the exact ways people play games and what makes them spend money have never been more transparent (or profitable) to developers. There's an information asymmetry here that needs to be adjusted, if not eliminated entirely.

The industry has made it clear that it has no intention of giving up loot boxes, so any push for self-regulation to stave off government interference will need to come from another part of the equation. Taking away the industry's insights into what their players are doing would make loot box comparisons to baseball cards and Kinder Eggs considerably more valid, but player tracking has too many legitimate uses and benefits for players and developers alike to consider broadly curbing it. But the mystery around what players are paying? That absolutely can and should change.

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Latest comments (11)

Cisco Lopez-Fresquet Lead Programmer, Spellblade StudiosA month ago
This opinion is based upon a lack of understanding of what a currency is, and what its role in an economy/marketplace is.

If you don't offer a real-world -> virtual-world exchange method, the real-money traders will set one up for you.

If there isn't a virtual currency that can be spent/traded in the game economy, players will find workarounds -- the SoJ rings in Diablo II are the classic example.

Why? Because these currencies fulfill a need, and this is "free market capitalism" at work.

Now, the original poster gets one thing right .. having a premium INTERMEDIATE currency that can only be purchased with $$$ does the playerbase no favors. But unless the game contains no in-game currency at all and disallows player trading, trying to keep players from buying in-game gold with real-world cash using this proposed ban is silly and counterproductive.

Edited 2 times. Last edit by Cisco Lopez-Fresquet on 20th September 2019 7:19pm

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Eddie In Product Manager - Games, Mobile, Boss Fight EntertainmentA month ago
@Brendan Sinclair: I feel like we've been through these topics before in the comments section of one of your podcasts a while back. It's like we never had that exchange!
it's hard for players to know how much they're spending thanks to virtual currency
It's pretty damn clear how much you're spending, the fact you spent $10 doesn't change whether there is a virtual currency or not. You're also reminded with a purchase confirmation each time you spend. The player signs off every time a purchase is made.
For one, there's no set exchange rate. Even if a game sells its virtual currency at an easily graspable conversion -- let's say $1 equals 1 FunBuck -- it's common for games to give players bonus amounts or discounts on larger purchases that muddy the conversion.
I don't suppose you calculate that going to work costs exactly $1.32 in gas and calculate how much extra ketchup you got in the 20% more bottle at Costco. The conversion is clear. 4000+1000 VBucks for $53.49 in your example. Each user will spend their VBucks and then weigh their purchase against what they got - 4 skins, 6 dances and a partridge in a pear tree for $53.49, worth it or no? It's not about the currency, it's what you get with it. For folks who don't like purchasing currency, I'll try and monetize them with a bundle that contains discrete items against a real world currency amount.

Your position on virtual currency seems to be that it's anti-consumer. Virtual currency are typically designed for the non-spending user to participate in the premium economy. Otherwise, the gap between spenders and non-spenders gets even wider. Virtual currencies are also a way to reward users in a generic, granular way to appeal to as many players as possible.


Finally, I feel you were being disingenuous when you brought up age verification:
"But how many kids that young are really playing these games," you might ask. And may I say, astute reader, that is a very good and fair question. But as the DCMS hearings showed, it's a question publishers refuse to answer.
Meanwhile, Epic admitted to not verifying players' ages for Fortnite, placing responsibility solely on the platform holder.
Epic didn't refuse to answer. They answered the question. Game companies don't collect ages, in fact, AFAIK it's illegal to collect personal identifiable information like this. If the government wants to make it a legal requirement to collect player ages, then it'll be REALLY easy to monitor/restrict/disable purchasing from underaged players. About age verification, if only there were institutions that verified all of its users' ages using government issued IDs. The game industry could totally use that information to verify adult accounts on its platforms.... like CREDIT CARDS!!! Oh wait...

Edited 1 times. Last edit by Eddie In on 20th September 2019 9:20pm

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James Barnard Founder / Developer, SpringloadedA month ago
In the race to the bottom that is mobile,-

- if I want customers to get things that have a value of $0.05 without having to get out their credit card each time virtual currency make sense

If I want to reward a player for watching an advert with something that allows them to progress without the need to spend money (for example in countries where credit card penetration is low, or for people who just don't want to spend) virtual currency makes sense...

If I want to just drop free currency for players during games so they feel they can still progress - virtual currency makes sense... (And I see that as a reward for playing, rather than a way to confuse people, about how much they are spending seeing as everyone gets that currency regardless of whether they spend or not)

It's a model, just like a subscription to an mmo or a service like apple arcade, or walking into a shop and buying a game and it's yearly updates, a virtual currency is no different from topping up your credit on a pay as you go phone.
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Show all comments (11)
Klaus Preisinger Freelance Writing 30 days ago
At the point at which you decide to pay money for an in-game item, immersion is irrevocably lost, whether you sugar coat it with historically accurate coins or not.

It is the act of creating a temporal disconnect between the moment of using your credit card and the moment of converting that game credit into an actionable game item that makes the difference. If strange conversion rates obfuscate the exact value, then that is also part of the design. And it is this place where all arguments about video games being art go to die and games become commercial kitsch, artistic maybe, but far from art. But what if I disconnected the art from the game and displayed it at a museum, you may ask. Well, that is the tragedy of something that could have been.

The old argument of "only cosmetic" needs merely to be looked at from another angle, which is "it is only most options for attaining an in-game expression of individuality", to be revealed for what it is. Pinpoint accurate targeting of a demographic's vulnerability. We have seen patents to optimize how purchasable skins are put straight into the view of people who are targeted by the algorithm to be the next players to monetize. Creating an economy build on negative emotions such as greed and envy. Never ending PR soundbites suggesting ignorance of all these things to reach the gaming bliss that was ruined by modern monetization. A cycle of abuse of players that seems unsustainable hoping for the generational turnover to create the next generation of people none the wiser.

That is the existential thread video games face. That by optimizing how to take from players, games lost the ability to give back to players. And I do not mean the financial exchange of money for character skins. I mean the emotional exchange between product and consumer headspace. That is out of whack, completely in some places. If you still wonder what makes Nintendo different, look there for answers.
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Ian Griffiths Product Owner, Hutch29 days ago
I'll just echo Eddie's point here, he's quoting you and I'm quoting that:
Brendan:
Meanwhile, Epic admitted to not verifying players' ages for Fortnite, placing responsibility solely on the platform holder.
Eddie:
Epic didn't refuse to answer. They answered the question. Game companies don't collect ages, in fact, AFAIK it's illegal to collect personal identifiable information like this.
As far as I understand it, and I'm not a lawyer or an expert and this is just my opion, COPPA legislation says you need a parent's consent to gather data on anyone under the age of 13 and under some circumstances you must delete that data, you also need to have reasons for collecting and holding onto such data. Most games played by this demographic simply won't collect the data because, well, they don't need to, to run the service.
https://www.ftc.gov/tips-advice/business-center/guidance/childrens-online-privacy-protection-rule-six-step-compliance

GDPR has similar rules around data protection with 7 main principles which include minimising the amount of data recorded, being clear about what it is used for and ensuring the use of the data is limited to what you need it for. To reiterate, I'm not a lawyer so I can't give any actual advice on COPPA or GDPR and this is just my opinion. https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/principles/#targetText=The%20GDPR%20sets%20out%20seven,Data%20minimisation

It's absurd that politicians want us to report on the behaviours of our players when they made laws that effectively prohibit us from reporting that information to them because it's not a necessary part of our business. And let's be entirely clear, aggregated or not we would still need permission and it would still go against GDPR's principles.
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Ennio De Nucci Game Designer 28 days ago
This is descending into ridiculousness to be honest
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Eyal Teler Programmer 28 days ago
I agree that a little more friction would help. At one point my son bought a few things in DCUO with virtual currency, not understanding that there was anything special about it. I couldn't get a refund because Daybreak doesn't support refunds for virtual currency. The son of a friend of mine had a much more severe issue with Fortnite on the Xbox, which was a large amount of real money spent (he did get a partial refund). My daughter once bought games on the Amazon Android app (I got a refund). Point is, in some cases it's just too easy to okay things and get them charged, but this has nothing to do with virtual currencies, just with companies trying to make it easy to buy.

Still, I agree with the other posters here. Virtual currency is a completely reasonable mechanism that is often introduced by the players themselves. Complaining that the varying exchange rate is a cognitive load is like claiming that sales are a cognitive load because suddenly your $60 can get you four games instead of only one. Obviously it's something that modern humans just can't deal with.
At the point at which you decide to pay money for an in-game item, immersion is irrevocably lost
True, but immersion is also lost when you choose how to upgrade your character in an RPG, when a loading screen happens, when a tutorial image appears, when the game announces that you got an achievement, or any other place where the user interface comes into focus, where you are for a moment the player, not the character. Immersion is easily regained. There are plenty of such moments in games, and there's nothing particularly bad in this respect when it comes to buying in-game items.

Edited 1 times. Last edit by Eyal Teler on 23rd September 2019 12:50pm

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Ian Griffiths Product Owner, Hutch28 days ago
@Ennio De Nucci: How it is descending into ridiculousness? What in particular are the ridiculous elements of this discussion?

If people want to tackle subjects like this we need to do so in the relative detail required. This isn't just a - here's what I think and therefore it's true, if people want to criticise practices then it's right that those claims are challenged with voracity. That's all that is going on here.
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Ennio De Nucci Game Designer 28 days ago
@Ian I don't think we should address each and every opinion that is raised on the matter.
The loot box debate is a real issue that needs attention from all parties and the hypothesis - raised by scientists, consumers , journalists and developers - warn us of a potential harm in relation to actual behavior disorders.
To extend the debate to virtual currencies, 'too aggressive' or 'exploitative' monetization techniques, mixing it with the notion of virtual currencies (which should have been named more precisely Hard Currencies in the article, as noted in the comments) is a step too far and to me looks like proper rage against certain business models, which can do no good to anyone in the game industry.

What's next?
Banning free to play games entirely?

This I find ridiculous, there is an underling message in the article that making more money and using techniques to sell digital goods should not be acceptable in videogames (while considered fine and normal in every other business?).
So instead of debating how to prevent children and vulnerable players to fall into unhealthy habits, we ended up discussing the ethic of selling digital goods in its whole.

I would be fine if the critic was addressed to consumerism in its entirety, including everything that can be bought and sold (and everyone that employs specific techniques to sell).
This critique of consumerism limited to videogames... it's ridiculous.
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Robin Clarke Producer, AppyNation Ltd28 days ago
Virtual currency is essential to many games as it gives a (much) finer-grained way for players to determine their level of investment than premium or MTX. Which in turn makes completely new kinds of games practical.

It makes it practical for F2P games to offer a balanced experience to free players. Battle Royale games that need to populate thousands of servers aren't going to have a player base if they can't give players who don't want to pay real money for cosmetic items relevant reasons to stick around.

It doesn't "undermine a consumer's ability to make an informed purchase decision". Quite the opposite in fact. A game that does not present a consistent and understandable value proposition will not keep players around for long.

The industry isn't going back to selling $60, ship-it-and-move-on games to hobbyists. I think it's good that we examine the pros and cons of different monetisation models, but a trade paper leaping to brand every model that is even hypothetically open to exploitation as 'unethical' comes across as neither well-informed or constructive.
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Ian Griffiths Product Owner, Hutch28 days ago
@Ennio De Nucci: I see, and I agree!
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