By Keegan Vulgamott
New-age gaming monetization promotes unregulated gambling to minors, misleads youth, and creates young gambling addicts. The industry should move to a different form of revenue, or the government and consumers need to take action.
The current landscape of gaming monetization is filled with microtransactions and loot boxes. Loot-boxes are a mechanism in games where players spend real-world money to obtain randomized virtual items, currency, or other equipment that often comes with advantages over players who opt not to spend money on these systems, and the probability of obtaining sought-after items is usually unknown.
“If you’re making people spend money on your loot boxes, that’s kind of proving that the loot boxes by themselves aren’t satisfying enough,” says Travis Eubanks, a first-year simulation and game design major at William Peace University. “It is a bit dangerous for kids to develop that habit.”
Gambling is defined as taking a risky action in the hopes of a specific outcome. If the definitions seem similar, it’s because they’re practically the same. The only difference between the two is the lack of regulation for the former and transparency within these different forms.
Before the 1980s, when home consoles stole the show, feeding coins into arcade machines was the primary source of revenue for the gaming industry. Consoles changed that, and game sales took over rapidly, forcing companies to adapt or get left behind, according to Aldis Sipolins of Adeia Blogs. This trend of new money-making strategies forcing companies to adapt has held true to the current day and caused the lootbox disease to take over major gaming companies’ monetization strategies.
Microtransactions came next; paying for a full game created revenue, but selling people more content in a game they enjoyed provided even more profits with far less downside. Elder Scrolls IV: Oblivion paved the way for cosmetic microtransactions in games and is partially to thank for the micro-transaction mega farm that is Fortnite, according to Sipolins.
Elder Scrolls introduced one of the earliest forms of microtransactions in the form of horse armor. Players were not only willing but enthused to spend money to have their virtual horses look more appealing. This separation and status given to certain willing players has evolved, and now Fortnite, a free-to-play game, is projected to make over 5.6 billion in revenue according to Josh Howrath at Exploding Topics.
Gambling in games has been prevalent since the first form of monetization, players inserting coins to get the chance to engage with a game, but it wasn’t until the 2010s that loot boxes became a major issue. Loot boxes and other gacha mechanics saw their success after games like Team Fortress 2 and Overwatch introduced these mechanics, where players would obtain special keys to unlock cases or boxes that had a chance to let players obtain high-value items.
This cycle expands on a compulsory loop that taps into individual players’ dopamine release systems and encourages them to keep spending money for the chance to ‘win’ a more valuable item.
“Emerging research suggests that loot box purchases and similar gambling behavior among children or teens can lead to problem gambling later in life,” said Jason Osbourne in an article about Loot Boxes on Forbes. “These activities seem fun and harmless, potentially normalizing risky behavior.”
The government restricts lottery purchases to 18-year-olds, but the problem with loot boxes is the access given to impressionable children who aren’t aware of the circumstances and probability of gambling. Regulations for this kind of gambling haven’t been made yet, and companies are taking full advantage by creating more lootbox content at the expense of young minds.
Belgium was one of the first countries to take control of the situation by declaring that loot boxes constituted gambling and threatening companies that continued to offer them. Electronic Arts (EA) responded by stopping the sale of its virtual currency there. Other countries like the Netherlands, China, and the United Kingdom have all taken action against this pandemic in gaming.
The United States, however, has done little to stop the spread of this disease domestically. Hope came in 2019 when Senator Josh Hawley introduced a bill to regulate pay-to-win microtransactions and sales of loot boxes. Since then, the bill hasn’t seen any movement, and unethical gaming practices have made the industry billions at the expense of young minds.
“The purchasing of loot boxes with real-world currency is asserted to have produced 15 billion US dollars for the video game industry in 2020,” said Whitney DeCamp in a paper about post-pandemic lootbox consumption by minors.
The main problem with government intervention, especially in the United States, comes down to precedent. Not so much the precedent already prevalent, but the establishing precedent that a bill would have on the gaming industry and others providing services.
“Loot boxes mimic a slot machine in Las Vegas and should, therefore, be regulated as gambling,” says Konvoy. “However, unlike slot machines, you still receive something of value (vs nothing) when you buy a loot box.”
Hawley’s bill, on the surface, had great roots in regulation and peace of mind, but it has some glaring holes that could hurt the gaming industry.
“This bill sets up a dangerous precedent for merchant liability for online transactions across almost every industry,” says Konvoy. “The regulations set forth in Senator Hawley’s proposed bill would inevitably lead to a merchant being liable for letting that credit card be charged without verifying that the purchaser is over 18.”
Creating a verification system across games that would undoubtedly verify an age would be great, but it would serve as a huge barrier for game developers and other industries regarding online transactions. The sole responsibility falls on the consumer, and in a free market, we need to stay in control. If this precedent were established, it would undoubtedly remove another freedom that we hold.
Simply stopping the sale of loot boxes or introducing regulation doesn’t solve the underlying problem.
The gaming industry, like any business industry, will always attempt to make the most amount of money with the least amount of money spent. That’s why loot boxes are so popular; they’re addictive and don’t cost companies as much as creating more game content. It also generates more revenue than cosmetics because the desired ones end up costing players more over time and generate gambling addicts.
Transparency is the most optimal form of government action. People, especially young and impressionable people, should be educated on the actual odds of winning. Whether breaking even or getting a top prize, odds need to be readily available and more or less forced on the consumer.
Some other government action could include limiting or discouraging the use of loot boxes. The main thing we need to be aware of is the ripple effects throughout other industries. Some games do use loot boxes well, by either not allowing the use of real-world currency or by being transparent already, and they shouldn’t be penalized for the mistakes of others.
Here at Peace, simulation and game design majors are at the forefront of breaking into the industry. They need to pick a side and find an ethical way to generate revenue from games they develop. Game designers have to start making more ethical choices when it comes to revenue, and doing so will create a wave within the industry to move to better practices.
At the end of the day, the responsibility falls on our shoulders. As gamers, game creators, future or current parents, and consumers, we need to hold companies accountable for their actions. Until regulations are made in the gaming industry or companies move away from these predatory practices, we need to educate today’s youth on the implications of their actions.