This article is written by ARSH SINGH of Army Institute of Law, Mohali
Video games have grown faster and have become better than anyone imagined, as of 2019 in USA alone it was said to be $140 billion dollar a year business[1]. In terms of revenue the video gaming industry is bigger than worldwide box office, music streaming and album sales, the NFL, NBA,MLB and the NHL combined.[2] Red Dead Redemption 2 made $725 million dollars in its opening weekend. Gaming has become a cultural force unlike anything since the creation of television, in fact the 2014 tournament of League of Legends drew more viewers from America alone than Game 6 of the 2015 NBA finals[3].
It is a huge understatement to say that the business is booming and yet companies and corporations keep trying to find new and better ways to increase their profit margin and in an attempt for the same ‘loot boxes’ were created to maximize income for the company. This system has seen its fair share of highs and lows from being celebrated to being demonized as we see it today but loot boxes were the fruit which we got from the seed that was laid many years before in the form of ‘micro transactions’. This article will be an attempt to see the history behind loot boxes, micro transactions and analyze how they went from a money making strategy to a menace which caused a worldwide investigation in the practice of gambling in video games.
History
The first ‘loot boxes’ to appear were actually not in a video game but in fact could be seen in cigarette boxes over a 100 years ago. These cigarette boxes had cards which together would form a set, anyone to complete the set would be the lucky winner of a grand cash pool, and this entire concept is the bedrock of loot boxes and to a certain extent even micro transactions in video games. After the fall of big tobacco this system in itself became a hugely profitable business in the 90’s promoting everything from baseball cards to Pokémon cards. Collecting cards became a hobby and passion as well. It went from being a financial commodity to a social commodity and boomed to become a $2 billion dollar business at that time. This served as an inspiration to video game creators as they saw it as an opportunity to keep players engaged in the game for longer periods of time and in general increase footfall for the game.
One of the first video games to use loot boxes was a Japanese game called Magic: The Gathering, although loot boxes were not monetized at this point. The recent version of loot boxes and micro transactions is seen in games like Mass Effect 3 and Diablo 3 both coming out months apart from each other in 2012. Since then many games like FIFA, Anthem, Fortnite etc have adopted this model of loot boxes. It is imperative to note that loot boxes cannot function without in-game currency, which was also first majorly introduced in Diablo 3. Games like these set down the idea that loot boxes are a commodity for consumption and built an entire economy around it. This eventually caught so much attention and had such a large scale impact that professors from various Ivy League universities studied the growth of the game to better understand our economy in real life.
The Success and Failure of Loot boxeS
When seen closely it can be seen that loot boxes have become a hybrid of the older system and the monetized system. Earlier loot boxes offered extra perks and better abilities to the player who was ready to spend time in the game and chug in more and more hours daily, and then a shortcut was created whereby by spending real money you could purchase loot boxes. This is the area where people started feeling discontented with video games as someone who spent time and effort to better their game could easily be beat by others who were willing to spend money to improve performance. Getting better guns in a FPS or more skills in an RPG could make all the difference to change the direction of the game, at the same time companies and developers did not alter this system. This was because they could see their profits being doubled and sometimes even tripled than what they had initially anticipated.
Initially, the only way a game made money was by selling more and more copies but with loot boxes video games became a sort of living entity that could continue to make money for a developer years after release. Case in point, Diablo 3 even after 8 years of release stands to be the 10th most profitable AAA game of all time.[4] Fortnite generated $2.8 billion in revenue 2018 and reported that 70% of its players regularly purchase loot boxes.[5]
The system was clearly working so why did it get so much flak over time? The answer lies in another video game, Star Wars Battlefront 2, in this game the frustration caused by in-game purchases and loot boxes escalated to a point that it was universally hated and even boycotted by consumers around the world. This frustration came to a boiling point and finally exploded when this highly anticipated game transformed into a pay to win concept. After this fiasco video games learned that pushing loot boxes down the throats of consumers is not a good idea but were also not ready to give up the insane amount of profits that they were making, hence they came by a hybrid where purchasing loot boxes was a possibility, it wasn’t a necessity to win as the loot boxes made difference in cosmetics and nothing more.
However, what no one saw coming was the reaction of governments in response to the loot box system and how this seemingly harmless game would launch a global investigation into this money making strategy.
Parental Concerns and Legislative intervention in relation with gambling
The general accepted definition of gambling across the world is -
“Gambling is staking or risking something of value with an expectation of reward’’ and while purchasing a loot box a player puts in real money with an expectation to receive randomized items. It resembles the system used by gambling slots in casinos and elsewhere. This coupled with the complaints of parents that their kids could not stop playing because of this system and its increasingly damaging psychological effects made legislative intervention inevitable.
Video games are addictive by design but the added incentives for staying in the game longer made people start talking about video games as former alcoholics and drug addicts talked about their addiction.[6] Rightfully so people started making the connection between this system and patterns of substance abuse where you get small hits of dopamine for free and before you know it you are stuck in an all consuming web.
The entire money making process for free to play games like Fortnite and PUBG are loot boxes and in game transactions. Looking at this many governments intervened and passed legislations to regulate these mechanisms. Countries like Belgium[7] and Netherlands[8] have already outlawed loot boxes and a bill for the same is pending for the same in the US Senate, it can be said that things are changing drastically and big gaming companies like Square Enix, Electronic Arts and Nintendo have started pulling their products off the shelves because of these decisions. United Kingdom however said that it could always be said that the items were worth the money that was spent on them and hence did find loot boxes to be illegal.[9]
In India gambling has been defined in the case of Charnes v. City Opera House[10] where it was held that:
“gambling” means risking any money, credit, deposit, or other thing of value for gain contingent in whole or in part upon lot, chance, the operation of a gambling device, or the happening or outcome of an event, including a sporting event, over which the person taking the risk has no control.
According to this definition it seems that loot boxes could be considered as gambling but unfortunately gambling is a state matter and all states have different laws for the same. Until today the states have failed to show any solidarity on the matter and the Central Government has been silent on the same.
ConclusioN it is clear that loot boxes can be a fun part of the game by giving players the opportunity to buy new skills, guns, skins and many other thing which they may not get by simply playing or completing a game. Loot boxes are surely an added excitement and pleasure for many players but this kind of pleasure is what can and does lead to addictive behaviorism like the ones we see in the case of substance abuse.
Players get hitched to loot boxes, buying more and more of them, not being able to resist the temptation much like an alcoholic or a person addicted to drugs. When it comes to gambling, the behavior like betting money on loot boxes or blindly using money to buy loot boxes without knowing the content in them can easily be considered as gambling. However, when the question comes to legality it is a very complex matter, because as stated by the UK government the contents of the loot box may be worth its price and why should one intervene in the profits of a company when it is so widely accepted by its users- the gamers. The governments can then choose to ignore this issue completely or reject it entirely as putting a cap on what can be considered as a loot box or how many loot boxes per games can be allowed would be very difficult to monitor and maintain.
Links Used
2. https://theconversation.com/gambling-loot-boxes-in-video-games-could-be-conditioning-children-107667
6. https://www.dartconsulting.co.in/market-news/global-video-gaming-market-forecast-2022-mobile-segment-major-source-revenue-gaming-market/#:~:text=Technology%20Market%20Research-,Global%20Video%20Gaming%20Market%20Forecast%20for%202022%20%E2%80%93%20Mobile%20Segment%20is,Revenue%20in%20the%20Gaming%20Market&text=The%20video%20game%20industry%20is,of%20%24139%20billion%20per%20year.
8. https://cricketprediction.com/gambling/gaming-loot-boxes-understanding-their-legality-and-impact/
[1]https://www.dartconsulting.co.in/market-news/global-video-gaming-market-forecast-2022-mobile-segment-major-source-revenue-gaming-market/#:~:text=Technology%20Market%20Research-,Global%20Video%20Gaming%20Market%20Forecast%20for%202022%20%E2%80%93%20Mobile%20Segment%20is,Revenue%20in%20the%20Gaming%20Market&text=The%20video%20game%20industry%20is,of%20%24139%20billion%20per%20year. [Accessed 19 Sep. 2020]
[2]https://www.investopedia.com/articles/personal-finance/071415/how-nba-makes-money.asp#:~:text=Key%20Takeaways,about%20%248.76%20billion%20in%20revenue. [Accessed 19 Sep. 2020]
[3]https://www.sportsmediawatch.com/2015/06/nba-finals-ratings-highest-fourteen-years-most-watched-since-1998-warriors-cavaliers-abc/#:~:text=The%20six%2Dgame%20Warriors%2FCavaliers,(10.5%2C%2017.8M).[Accessed 19 Sep. 2020]
[4]https://www.cbr.com/diablo-3-going-strong-8-years-later/ [Accessed 18Sep 2020]
[5]https://www.businessofapps.com/data/fortnite-statistics/ [Accessed 20 Sep 2020]
[6]https://www.theverge.com/2019/2/19/18226852/loot-boxes-gaming-regulation-gambling-free-to-play [Accessed 21 Sep 2020]
[7]https://www.gamingcommission.be/opencms/export/sites/default/jhksweb_nl/documents/onderzoeksrapport-loot-boxen-Engels-publicatie.pdf [Accessed 20 Sep 2020]
[8]https://in.ign.com/star-wars-battlefront-sequel/124405/news/the-netherlands-starts-enforcing-its-loot-box-ban [Accessed 20 Sep 2020]
[9]https://www.pcgamer.com/uk-gambling-commission-says-again-that-loot-boxes-arent-gambling/ [Accessed 20 Sep 2020]
[10]773 P.2d 546 (1989).
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