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Watch Out: Video Games May Be Turning Into Gambling

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Posted on: February 5, 2018
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This is due to an industry-wide move to offer players in-game purchases. There are many kinds of items you can buy in today’s video games. One common type is an “item box,” which is also known as a “loot crate.” You don’t buy the loot crates directly, of course. First, you purchase in-game currency (often in the form of “gold” or “tokens”) and then you use this virtual cash to buy your loot crate.

The catch is that your real-world money is being used to buy virtual goods that are often awarded randomly. Which looks a lot like gambling.

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While gamers understand that software development isn’t cheap and that it takes money to maintain the servers which allowing them to battle their friends online, the trend towards what’s known as “microtransactions” may be the bridge too far in terms of what they’ll accept. Many gamers now feel the industry views them as nothing more than a piggy bank being nickeled and dimed with things like bonus downloadable content (which you have to pay for, in order to get the complete game), “Season Passes,” and now loot crates.

All of which could eventually lead to calls for industry regulation on Capitol Hill.

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With the Christmas shopping season upon us, non-gaming readers might be surprised to discover that the $60 you spend for a video game may not be the final amount you spend on it. In fact, it might be just the beginning.

With many of the biggest game titles now having production budgets equaling those of blockbuster movies, publishers are doing all they can to turn games from being one-off purchases into revenue-producing platforms. That’s where microtransactions come in.

They began with paid downloadable content, or DLC. With DLC, developers continue adding onto a game after the version which was initially purchased. Gamers are then asked to buy either “character packs” (where new playable characters are added to the game’s existing roster) or “story expansion packs” (which add hours of new experiences to the game).

This DLC scheme morphed into “Season Passes,” where gamers are asked to pay for all DLC upfront (often at initial purchase) with a promise the publisher would maintain game content for another year or two. Those who don’t buy Season Passes could still get the DLC, but often much later than early adopters and at a higher price.

Now has come the era of the loot crate, whose origins can be traced back to “Free to Play” games on cellphones and Facebook. You’ve heard of a friend who put hundreds of dollars into a simple game such as Candy Crush or Farmville. Those were microtransactions.

Loot crates first appeared on console games in BioWare’s Mass Effect 3. Players could buy largely cosmetic items, such as pieces of armor or new designs for weapons. More recent games like Blizzard’s Overwatch offer gamers only randomly-determined cosmetic changes. This would mean gamers could receive things like alternate or seasonally-themed costumes, in-game emotes which let you “strike a pose,” or even pets for their characters.

This cute addition to games is now big business for developers. One industry estimate is that one-third of all gaming revenue in 2016 came from microtransactions. Blizzard’s parent company, Activision, reported making over $3.6 billion through in-game content sales from Overwatch and the Call of Duty series. Electronic Arts told its shareholders they made over $1.68 billion in 2017 from microtransactions. Ubisoft, creators of the Assassin’s Creed series, reported it made more revenue in 2017 off microtransactions than actual digital games sales.

Naturally, all this nickeling and diming has created resentment among gamers. But loot crates are different. They aren’t traditional transactions because the randomness creates artificial scarcity and hides the true cost of what’s being purchased.

And remember: There is no such thing true randomness with computers. Which means that the loot crates pay off not “randomly,” but occurring to a predetermined probability scale created by the seller but hidden from the buyer. Like a slot machine.

Videogame publishers counter with three arguments. First, if you don’t want to buy it, you don’t have to. Second, every item found in a loot box can be found through the game’s natural progression, it would only take the application of a player’s time. Finally, very few of the items obtained from loot boxes affect gameplay.

The industry’s internal watchdog, the American-based Electronic Software Rating Board (ESRB) backs that view, telling IGN in October it did not consider loot boxes gambling:

While there’s an element of chance in these mechanics, the player is always guaranteed to receive in-game content (even if the player unfortunately receives something they don’t want). We think of it as a similar principle to collectible card games: Sometimes you’ll open a pack and get a brand new holographic card you’ve had your eye on for a while. But other times you’ll end up with a pack of cards you already have.

Should there be any gambling or gambling related mechanics in a game, ESRB assigns one of two as part of the rating: “Simulated Gambling” (player can simulate gambling without betting or wagering real cash or currency) and “Real Gambling” (player can actually gamble, including betting or wagering real cash or currency). If there is any real gambling in a game or app it will always receive an Adults Only rating.

And all of that held true until EA released Star Wars Battlefront II earlier this month.

Battlefront II is the second in a series of massive-multiplayer online (MMO) games EA has released since securing the Star Wars license in 2013. It was a highly-anticipated game where much of the marketing focused on its single-player storyline where gamers found themselves not playing as fan-favorite heroes such as Luke Skywalker, but as a brand-new character fighting for the “evil” Imperial Forces against the Rebel Alliance.

On the surface it sounded great, until players joined the public Beta and found that the multiplayer—where gamers would be spending most of their time—was an absolute mess. Players quickly noticed character skill progression was based on using an in-game item called “Star Cards.” While players received Star Cards through grinding away, the only way to get the best Star Cards was through the purchase of in-game loot crates bought with “crystals,” the in-game currency.

How do you get crystals? Why with real money of course.

Suddenly Battlefront II was deemed “Pay to Win” by the gaming community. It’s one thing when loot crates give you a new costume. It’s another when they dictate game-play balance.

Since EA closed the Beta, it’s been fighting a losing public relations battle. The publisher quickly announced changes to character progression, lowered the in-game cost needed to unlock popular characters (such as Darth Vader), and shut down all microtransactions on the eve of the game’s release.

But even as EA stumbles through Battlefront II’s controversy, they may have unintentionally ushered in an era of industry regulation.

Earlier this month, Belgium’s Gaming Commission began an investigation into the Overwatch and Battlefront II loot crates systems—and on Tuesday it ruled that that loot boxes do count as gambling. A similar commission in the United Kingdom launched by an online petition drive found no wrongdoing. However, government officials have promised to “keep the matter under review.”

Other petitions have demanded the ESRB reverse its designation on loot crates which has garnered signatures from around the globe.

While any Belgian fines these companies face would be minimal, if other nations follow suit the domino effect could disrupt the industry. The ESRB and its international counterparts would almost certainly declare any game with loot boxes as “Adult Only” games, which could put a damper on sales.

And if you think loot-crate investigations could never come to America, you’re crazy. All it took to jumpstart the 1993 Senate hearings on violent video games was for the 9 year-old son of a Joe Lieberman staffer to ask his parents for Mortal Kombat that Christmas.

How difficult would it be to find someone who’s spent their way into bankruptcy buying loot crates to headline a similar hearing? Or to dig up parents whose child has maxed out their credit cards trying to get a certain item or skill set?

Whether they want to admit it or not, the video game industry needs to get a handle on this self-created problem. They need to do as they did in 1994 and regulate themselves to an acceptable standard. Otherwise Washington bureaucrats could well do it for them.

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