As many of you are likely aware of by now, loot boxes are a game mechanic that allows
players to purchase in-game content but in a randomized manner, similar in fashion to
card packs for trading card games.
In recent years the concept has spread through large parts of the international video game
industry and has generated a lot of controversy - both from players and governments.
In late 2017, EA was involved in a major controversy over loot boxes in their game: Star Wars:
Battlefront II.
EA intended to implement a complex micro transaction system, involving multiple different types
of in-game currencies, as well as loot boxes.
Adding insult to this was the fact that iconic characters such as Darth Vader and Luke Skywalker
were locked out by default and could only be unlocked through dozens of hours of grinding
or by spending real money on the loot boxes.
An EA spokesperson explained the team's philosophy behind these unusual requirements on Reddit,
stating: “The intent is to provide players with a
sense of pride and accomplishment for unlocking different heroes.”
They further clarified that their decision was based on data gathered from the open beta
and they would make future adjustments based on customer feedback.
This subsequently became the most downvoted Reddit comment of all time with 668,000 downvotes.
Finding the tide of popular opinion turning against them, EA temporarily removed micro
transactions from the game in November 2017, saying:
“We hear you loud and clear, so we’re turning off all in-game purchases.
We will now spend more time listening, adjusting, balancing and tuning.
This means that the option to purchase crystals in the game is now offline, and all progression
will be earned through gameplay.”
In April, EA later added micro transactions back into the game, but only for cosmetic
items which won't affect gameplay.
However, the controversy heavily affected the game’s success.
Battlefront II fell millions of units short of EA’s initial sales goals - a situation
they blamed on the loot box controversy.
But, the controversy had a much graver effect than simply missing sales targets.
Due to the events, many government officials began to raise concerns over loot boxes' legality.
For instance, U.S. Senator Maggie Hassan, a member of the Senate Commerce, Science and
Transportation Committee, has asked Federal Trade Commission nominees if loot boxes merit
attention, and has written to the ESRB requesting them to review the issue.
Also, in Hawaii, there has been legislation proposed to label games which contain loot
box mechanics and even to ban selling such games to those under 21.
And so today, as part of the general regional differences side of the channel, we'll be
taking a look at how different countries around the world have so far began to regulate loot
boxes and some of the differing views from government officials across the globe.
We begin with Belgium where the Belgium Gaming Commission investigated Star Wars: Battlefront
II, FIFA 18, Overwatch, and Counterstrike: Global Offensive and concluded that all except
Battlefront II were in violation of Belgium’s gambling restriction laws.
Battlefront II, however, was only cleared because the developers took the loot box mechanic
out of the game prior to investigation.
In a press release, Belgian justice minister Koen Greens said:
“We have already taken numerous measures to protect both minors and adults against
the influence of, among other things, gambling advertising.
That is why we must also ensure that children and adults are not confronted with games of
chance when they are looking for fun in a video game.
" Furthermore, the press release calls loot
boxes a violation of Belgian criminal law and called for developers to cease the practice.
Green threatened games that did not comply with fines of up to €800,000 and five years
in prison.
However, so far industry response has been rather quiet and criminal charges have yet
to be filed.
The situation remains ongoing, though, and this is something that could possibly change
in the future.
We next come to China which has required developers to disclose the drop probabilities of virtual
items ever since May 2017.
To summaries, the law requires that companies list the odds of loot boxes and similar mechanics
and maintain public records of those odds for government inspection.
The Chinese government has also put strict limits on how loot boxes can be implemented.
Loot boxes cannot be purchased with real or virtual currency and the items inside must
be available by other means, such as direct purchase.
Companies such as Blizzard have taken steps to comply with this law, but, they have also
been able to find some workarounds.
For instance, in Overwatch, Chinese players are able to obtain loot boxes as a "free gift"
for other in-game purchases.
Thus, the fact that the loot boxes are not being sold directly is enough to circumvent
current regulations.
Next in our list is Japan, which has banned a loot box style mechanic known as “complete
gacha”.
A Gacha game is a game that uses mechanics similar to gachapon machines: a type of capsule
toy vending machine.
There are many types of these Gatcha games available in Japan but currently only complete
gacha games are restricted.
These games are distinguished by a mechanic were players have to buy items through a randomized
system to assemble into even rarer items.
While local industries have complied with this ban, other forms of gatcha games are
still completely legal, and continue to be financially successful.
Many, such as Fire Emblem Heroes and Fate/Grand Order have also become financially successful
worldwide.
Moving back to Europe, the Netherlands has put strong restrictions on loot boxes.
Specifically, in April 2018, loot box mechanics that require no skill and whose in-game items
hold market value outside the game were found to be in violation of the Betting and Gaming
Act by the Netherlands Gaming Authority.
In June 2018, the Netherlands then forced Valve to discontinue item trading and Steam
market place transfers in the Netherlands for two games: Counter Strike: Global Offensive
and Dota 2.
Valve issued a statement that while they do not agree with the legality of the decision
they had no choice but to comply.
Netherland officials have also argued for the homogenization of regulations concerning
loot boxes across the European Union.
An official from the Netherlands Gaming Authority explained to gamesindustry.biz that:
“Every European regulator has its own laws and regulations.
We now want to work together and act together.”
West of the Netherlands, the UK has yet to put any regulations on loot boxes.
However, this is not true for the Isle of Man, a UK dependency.
In 2016, the Isle of Man Gambling Supervision Commission set criteria under which loot boxes
would be considered an illegal form of gambling effective January 1st 2017.
Tony Jones from the Isle of Man Department of Economic Development clarified these regulations
to Eurogamer, explaining: "Our Gambling Supervision Commission (GSC)
considers an activity to be licensable if: 1: There is an element of chance (which there
may be in the case of loot boxes because it may be random which items are in the box.
Other elements of chance could be re-spawn locations, wind speed and direction etc depending
on type of game); 2: There is a prize in money or money's worth
(which there may be in the case of loot boxes, depending on the contents) and;
3: The activity is performed on Isle of Man infrastructure.
If these three scenarios are fulfilled then the GSC would consider it to be gambling and
a company offering the activity from IOM infrastructure would require a gambling license.
Offering the activity from IOM infrastructure could include registering the players and
hosting the game.”
Furthermore, Isle of Man regulations explicitly consider in-game materials such as skins and
weapons as falling into the category of “money’s worth” or goods that are arguably worth
real money.
The law goes much further than similar European laws, like those previously mentioned, and
considers any element of chance, including things like re-spawn locations, as possibly
being related to gambling.
However, it is not clear what the territorial scope of these regulations are.
At present it does not seem like the law is affecting international corporations such
as Valve and no charges currently appear to have been filed over the issue.
Regardless, the Isle of Man’s regulations seem to have attracted some attention in the
United Kingdom.
Daniel Zeicher, Labour MP for Cambridge, has asked the Secretary of State for Digital,
Culture, Media and Sport about adopting the Isle of Man’s regulations on loot boxes.
Despite this, the government mirrors the view of the UK Gambling Commission who ruled loot
boxes are not a form of gambling back in November 2017.
The Gambling Commission expressed that: "Where prizes are successfully restricted
for use solely within the game, such in-game features would not be licensable gambling,
notwithstanding the elements of expenditure and chance."
This means that as long as the loot boxes' items are kept within the game and can't be
exchange for real life money or 'money's worth', then it can't be classed as gambling.
Over in Australia, there are a number of officials who have also expressed dissatisfaction with
loot boxes.
The Government E-safety commissioner has warned against loot boxes, describing such games
as having “gambling elements,” and the Victorian Commission for Gambling and Liquor
has also ruled that loot boxes are gambling and suggested that games that include them
receive an automatic R rating.
However, these statements have yet to result in actual regulation.
And, to jump back to the US, as previously mentioned, Hawaiian lawmakers have attempted
to introduce legislation that would prohibit sales to those under 21 and require labeling.
However, aside from this, there has already been numerous other legislation introduced
to regulate loot boxes.
This includes a California bill that would require games to have warning labels, an Indiana
bill asking the attorney general whether they “prey on children” and a Minnesota bill
requiring the disclosure of odds.
But as of now none of these bills have passed and so far have had trouble gaining support.
There are also some forms of self regulation and industry standards in places.
Most recently, this has included North America's ESRB rating system, who, following the Battlefront
II controversy, adjusted its rules requiring games that contain micro transactions to be
labeled as containing “In Game Purchases”.
This has however been criticized by some, though, for included all forms of micro transactions,
including things like season passes and, thus, doesn’t help to hone in on the perceived
issues with mechanics like loot boxes.
In a previous statement, an ESRB spokesperson also clearly expressed that the organization
doesn't see loot boxes as gambling, stating: “ESRB does not consider loot boxes to be
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.”
The Apple iOS store has also decided to step in on the issue, adding new rules back in
December 2017 that say: "Apps offering “loot boxes” or other mechanisms
that provide randomized virtual items for purchase must disclose the odds of receiving
each type of item to customers prior to purchase."
This is similar to the region-wide regulations already implemented in China and it will be
definitely interesting to see how this change affects consumer purchasing habits.
Of course, it seems only logical to suspect that if a player was able to see how low some
of their chances to receive certain items were, that they wouldn't try as much.
However, despite some players distaste for the practice, loot boxes are currently very
lucrative for publishers.
Activision Blizzard, for instance, reported that nearly half its yearly revenue comes
from micro transactions, which covers loot boxes, sales of DLC and in-app purchases
It remains to be seen how publishers would react to seeing their profits cut by such
large amounts if further regulation was implemented.
This is an area that is continuing to develop worldwide.
It also appears that some companies may have learnt from Battlefront II and, rather than
government regulation, are promising to use moderation when it comes to these elements
in the future.
At E3 2018, EA apologized again for Battlefront II's issues and also announced that the upcoming
Battlefield V will have no loot boxes and no premium passes.
Bioware also expressed similar sentiments for their upcoming game Anthem, saying:
"We are going to have some cosmetics and vanity items that you're going to be able to purchase,
but you're always going to know what you're going to buy before you spend any money on
it.
So no loot boxes and no ability to pay for power."
What are your thoughts about loot boxes and how do you feel about how they are currently
regulated in different countries around the world?
Let us know your thoughts in the comments below and please consider subscribing if learning
about regional differences and other ways games are changed around the world are something
that you are interested in.
Until next time, thank you for watching.