"We must self-regulate loot boxes before it's too late"

The global games industry must get together and agree on measures to protect vulnerable consumers from loot box mechanics in video games.

Speaking at a panel session at a behind-closed-doors event hosted by legal firm Wiggin (chaired by GamesIndustry.biz), one games development specialist said that self-regulation must happen quickly, because Government legislation will be like a "sledgehammer" to the games business.

Earlier in the day, a leading IPO specialist said possible incoming legislation could hurt the games industry's capacity to attract investment, akin to the challenges faced by the gambling industry, which has been heavily taxed by Governments around the world.

The panel acknowledged that by the strict letter of the law, loot boxes are not classed as gambling in many major territories. However, consumer groups have provoked MPs to put pressure on regulatory bodies to look closely at the issue and work out whether something may need to be done - including updating the legal definition of gambling.

The experts dismissed Belgium's ban on loot boxes as 'media attention seeking', but said that Australia's recent study into loot boxes and their psychological impact could potentially pave the way for future legislative action.

However, the panel felt that if the industry was to impose its own rules, it could yet deter regulatory involvement.

"The UK games industry united around age ratings, and it should do again to self-regulate loot boxes before it's too late," said Gamesbrief's Nicholas Lovell, who also advises multiple studios on loot boxes.

One potential issue, however, comes in defining what a loot box is, and there were some clear uncertainty around certain edge cases. An example given was whether an item in Pokémon Go, which encourages random Pokémon to appear, could be classed as a loot box as it can be paid for with real money and the outcome is uncertain.

Suggested measures to curb formal regulation included incorporating a 'kids mode' onto devices to prevent in-app purchases, the requirement to publish drop rates, plus raising the age ratings on games that use certain loot box-like mechanics. Lovell also suggested identifying customers that are spending excessive amounts, and delivering messages to them about the level of investment they have been making.

The panel agreed that recent rhetoric from the ESA and other trade bodies 'is not helpful', because although the comments may be legally accurate, the statements misjudge the mood of politicians and the marketplace.

However, one executive speaking to GamesIndustry.biz after the panel told us that: "Self-regulation is too late. The sledgehammer is coming whether we like it or not."

All attendees at the conference were speaking under Chatham House rules, so names and companies have been removed under those restrictions - unless otherwise agreed.