What are loot boxes?
A loot box is a mystery box within a game, containing unknown items which could be useful to players. Boxes can be accessed through gameplay, but the gamer can also take a shortcut by paying for a box with real-world currency. Until the box is acquired, the items inside remain a mystery. Although the wider community may be unfamiliar with loot boxes, they have been an integral part of gaming for more than a decade. Japan has already introduced legislation to curb their use and scope.
Loot boxes have proved very alluring for many game participants, increasing the novelty value and adding an element of surprise. For game developers, they have also been a way to help monetize what are often free games – although paid loot boxes are also available within more traditional console games as well. Each purchase is typically small, hence they are known as ‘microtransactions’.
The system has been very successful for the industry. In a multi-billion-dollar industry that is growing fast, it is estimated that around a third of turnover is a result of microtransactions including those for loot boxes. For several years, experts have raised concerns over the mechanism of loot boxes. As a system of random reward, there are parallels with gambling which may pose a hazard to the many young gamers that play these games.
It is the random and unknown nature of loot boxes that sets them apart from other types of in-game purchase.
What did the report find?
The report reveals a significant limitation regarding a lack of data. Until now, very little research has been done on the effects of loot boxes, especially on children and younger gamers. For this reason, much of the report relies on the conjecture of industry experts and academics regarding possible links between loot boxes and gambling. At this time, no causal link has been identified.
The report also makes the distinction between types of loot boxes, highlighting those with the greatest potential for harm. An example is a box that can be opened multiple times if the desired item was not obtained. This has been likened to the mechanism of a slot machine, which is the commonest form of online gambling.
Online Slots More Transparent Than Lootboxes
Another aspect that raised concern is the relative probability of finding certain items, which is often not revealed by the game designers. This can encourage players to open more boxes in the hope of finding an item, when the true chances are very small. The report authors note that some games have made moves towards transparency in this regard.
Loot boxes are often compared to casino games, however, there are some important differences. The most obvious one is the age group of customers. While loot boxes were offered to teens and pre-teens, casinos only accept players over 18 or 21 in some cases. Loot box can resemble free spins promotions, but as noted above, for individual slots payout rates are known and well documented by independent parties. Not so for loot boxes.
The issue of price point is also investigated, revealing that some items could require a spend of up to €150. Since each transaction is relatively small, the player may not be aware of how much they are paying out on the boxes.
Finally, the report identifies one characteristic of some loot boxes that could potentially be a more significant concern. This is the concept of ‘value conversion’, whereby the player can use the contents of the loot box and convert it to in-game currency or even real-world money. Some researchers identified examples of popular games where the value of a loot box can potentially be converted to something with value in the real world. However, in no case was this an intended part of the game design, and was only made possible via unauthorized third parties.
What were their conclusions?
Since there is still no clear evidence for how loot boxes can affect behavior, the report firstly recommends that more investigation is needed. There may be a correlation between loot box spending and problem gambling, but if there is causality it is as yet unclear which direction it moves in.
Thus far, studies have revealed that the majority of loot box designs present minimal problems. Some were linked with an increase in screen time, although whether this is materially significant remains unanswered. Under current legal guidelines, very few loot boxes could be classified as a form of gambling.
Issues arise when there is a problematic element to the design of the loot box. Various problem designs have been identified, such as time-limited offers, the conversion of real currency to virtual tokens or credits, and offering bundles that make true value more difficult to discern. Additional factors include the streaming of loot box openings and unauthorized trading. Finally, some loot boxes require a special key to open them, which must be obtained or purchased separately. When there is a key, it means that the player was not initially aware of the full cost of purchasing the loot box.
Regarding young gamers, the report concludes that perceived concerns may be exaggerated. The majority of children receive parental supervision on spending, and most appears to be controlled and limited. As stated previously, more work is required to establish whether loot boxes could encourage more overt gambling behavior in children.
At present, most EU member states do not classify loot boxes as a form of gambling. The Gaming Regulators European Forum (GREF) states that legislation is the responsibility of each individual member state. The Netherlands and Belgium are the only two countries to ban loot boxes on the grounds that they constitute unauthorized gambling.
The report concludes that the video game industry must be compelled to comply with certain regulations. These include better labeling about in-game purchases, and restricting advertising that targets minors. The most significant regulatory requirements are to do with transparency regarding the mechanism and value of loot box acquisition and content. It also notes that some game developers are voluntarily moving away from the loot box model, towards clearer and less chance-based systems of in-game purchase.
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