Loot box disclosure fines are a joke | This Week in Business

Earlier this week, we reported that European ratings board PEGI made an example out of Activision Blizzard and Plaion for leaving some key information out of their submissions for Diablo Immortal and a limited-edition release of Hunt: Showdown, respectively.

Specifically, the publishers neglected to mention that their games contained randomized in-game purchases, or as they're more commonly called, loot boxes.

Now, this is serious business, right? We all know how big a deal this is, especially given the legislative efforts around the world that view loot boxes as an unregulated form of gambling often targeting children.

And if there's one thing we keep hearing from the industry, it's that everybody is taking this seriously.

QUOTE | "The games industry takes its responsibility to players very seriously and acknowledges that some people are concerned." – A UKIE spokesperson, in response to the mental health director of Britain's NHS calling for a ban on loot boxes because it was "setting kids up for addiction."

QUOTE | "We take seriously the issues raised in the UK Parliament's Digital, Culture, Media and Sport Committee report, but strongly disagree with its findings…" – The Entertainment Software Association tells UK legislators to get stuffed for suggesting that loot box sales to kids should be banned.

QUOTE | "We strongly believe that our games are developed and implemented ethically and lawfully around the world, and take these responsibilities very seriously." – An EA spokesperson responds to a 2018 Belgian regulatory ruling that loot boxes in games like FIFA and Overwatch violate gambling legislation.

I mean, PEGI and its North American counterpart the ESRB take this so seriously they coordinated their big step forward in addressing loot box concerns, both announcing on April 13, 2020 that they would begin informing people when games were selling randomized items.

I have no idea why it took years of consumer, legislator, and health professional complaints to get them to do even that much, but at least it was done, right? Because as we have established, the industry takes these concerns seriously.

And the ratings labels are an absolutely essential part of that. The industry's go-to defense on a number of issues is that it gives parents and consumers the information they need to make their own decisions, and the tools they need to enforce those decisions.

Violent games? The packaging clearly had an M-for-Mature label on it, sir.

Kid spent thousands on Ultimate Team packs? Each system has parental controls to impose spending limits, ma'am.

Pre-teen got sucked into helping make white supremacist mass shooting recreations as part of a child labor scam? PEGI already changed Roblox's rating from 7+ to a literal exclamation point, partner.

Granted, there is no ! in PEGI's FAQ about what the labels mean, but it effectively communicates the general sense of alarm you should have here, friendo.

It doesn't seem to matter what new horrors are happening in games so long as the industry can tell people they were warned about it ahead of time and anyone who really cared could probably have done something to curb it with parental tools anyway.

But if that's the position the industry's going to take, it's kind of crucial that those tools work, and that the labels telling people what's in the game are accurate.

It's such a big deal for the industry that after The Elder Scrolls 4: Oblivion was re-rated M for Mature in 2006 after an initial release with a T for Teen rating, the ESRB promised its own fines of up to $1 million for incomplete disclosure during the ratings process, which would be about $1.5 million today when accounting for inflation.

Has anyone ever actually had to pay that much?

QUOTE | "ESRB cannot publicly discuss submission materials or fines. We can however confirm that we have issued fines for inaccurate or incomplete disclosure… ESRB takes enforcement very seriously, and we maintain that it is an essential component of our self-regulatory mission." – The ESRB's response to our inquiry about disclosure fines.

You see? "Very seriously."

So of course when Activision Blizzard and Plaion deprived PEGI of the information it needed to properly inform parents, it was understandably time to bring the hammer down.

STAT | €5,000 (about $5,380) - The fine PEGI issued to each company.

€5,000.

Five thousand euros.

STAT | $48.9 million – The amount of money Diablo Immortal made in its first 30 days of operation, according to Appmagic data. And that was after Apple and Google took their 30% cut.

STAT | 4 minutes, 45 seconds – The amount of time it took Activision Blizzard to bring in the €5,000 to cover its fine for not disclosing Diablo Immortal's loot boxes to PEGI (if Appmagic's data is accurate).

That fine doesn't even qualify as a slap on the wrist. I'd call it playful roughhousing but it's not even rough enough. Figuring out the logistics of how to pay that fine and then handling the paperwork to have someone in accounting send the money out likely represents a bigger burden on Activision Blizzard than the monetary loss.

But maybe I'm being too harsh. Maybe PEGI just has some kind of rules or regulations preventing it from laying down the law here.

QUOTE | "First Breach: 5,000 to 20,000 Euro Fine" – PEGI's punishment for a "Level II: Serious" code of conduct violation on first offence, as detailed on the ratings board's website.

It seems like €5,000 is actually the minimum fine here, but this particular instance might fall through the cracks of the group's rules. The closest applicable example of a Level II: Serious violation is negligence to disclose things "which would have lead [sic] to the assignment of a higher age rating to that product than the rating actually displayed on the product when sold to the public." (It seems PEGI didn't even take the Code of Conduct seriously enough to give it a proper proofread.)

Given that Diablo Immortal and Hunt: Showdown did not receive new age ratings, one might assume this violation belonged in the "Level III: Administrative/Operational" category, where a first offence carries a fine of up to €5,000. However, the examples of disclosure violations there specifically state that they apply "when discovered before release of the product," and that clearly wasn't the case here.

"Providing consumers with the information needed to make their own decisions is at the heart of every industry argument against government interference"

So either PEGI is considering these offenses to be not serious (as in not Level II: Serious), or they are considering them Level II: Serious, but not serious enough to be worth anything more than the most laughably minimal punishment available to them.

By the trade groups' own logic, this should be an outrage. The ratings systems are the backbone of the industry's self-regulation efforts, and providing consumers with the information needed to make their own decisions is at the heart of every argument made against government interference.

If we're really serious about giving parents and players everything they need to make an informed decision, the punishment for denying them such information needs more teeth. And since loot box odds disclosures so often stop differentiating at anything "less than 1%," I would suggest a 1% fine on revenues to be a good place to start. That would put an appropriate fine for Diablo Immortal at about $1 million for its first two months on the market, and $5 million more if it kept up the same pace over the rest of the past year.

The reason we won't see anything like that is the industry just doesn't take seriously the concerns parents, legislators, and players have regarding loot boxes, and that becomes more clear the deeper you look into this.

Why didn't Activision Blizzard tell PEGI about Diablo Immortal's loot boxes, especially since it appears to have told the ESRB about them, and it even confirmed before launch the game wouldn't be released in the Netherlands and Belgium because of local laws around loot boxes?

If it was trying to keep them hidden, there are certainly better ways to do it that would start with – off the top of my head – not telling people about them.

So it was probably an honest mistake, but a very sloppy one nonetheless. It's the kind of sloppy mistake you make when you just don't care enough to do the job right, when the consequences for messing up are not front of mind, when it's something you just don't take very seriously. And it seems a whole lot of people throughout the industry aren't taking loot box concerns seriously.

STAT | 29% - Out of 100 random games known to have loot boxes, researcher Leon Xiao found only 29% of them were properly labelled as containing randomized purchases on the Google Play store.

But what about the platform-mandated odds disclosures that represent the industry's most substantial self-regulation on this topic to date?

STAT | 64% - The percentage of top-grossing UK iPhone games with loot boxes that actually disclosed odds to users in 2021, according to research by Xiao and his colleagues.

It's worth noting that publishers rarely have problems with the way they report violence in their games, possibly because violence is such a key part of why game ratings exist in the first place. After all, the ESRB's very founding was an ugly compromise with legislators after companies like Nintendo and Sega spent US Congressional hearings on game violence sniping at each other rather than taking seriously the concerns of parents and lawmakers almost 30 years ago.

Also, violence tends to be very obvious from even a cursory glance of gameplay, whereas free-to-play business models are opaque by design. For that dig above about free-to-play games seeing anything less than 1% being the same, I first went looking for Diablo Immortal's loot box odds disclosures because they've been mandated on the App Store since 2017.

I couldn't find anything on Diablo Immortal's official website, and there isn't anything on the store pages for the game, either. So I had to download it and see for myself. From there, I had to play far enough through the tutorial for the in-game store to unlock, and then had to spend a few minutes clicking everything to find where the actual odds disclosures are listed.

QUOTE | "When a 5-Star Legendary Gem drops while using a Legendary Crest. Quality drop rates are:

• 5-Star (Quality 2): 75%
• 5-Star (Quality 3): 20%
• 5-Star (Quality 4): 4%
• 5-Star (Quality 5): 1%" – Diablo Immortal's in-game loot box odds disclosure.

Now let's say you're a parent whose child has asked you if they can play Diablo Immortal. The above odds disclosure is probably gobbledegook.

And between the multi-gig download and the tutorial and the poking around in the nooks and crannies of the game's menus, it's gobbledegook you have to devote a half hour of your life to finding out.

And you still probably don't know what the hell Gems and Crests and the different quality tiers of 5-Star things mean, how important they are to the actual gameplay, or how the game drives players to purchase them.

Diablo Immortal is a big enough game that you can find plenty of explainers of the monetization out there, but you aren't going to find them clearly laid out on an official site because once again, the industry does not care about substantively addressing people's loot box concerns.

But what about Hunt: Showdown? I'm actually not convinced that game even has loot boxes.

The game's official site mentions supply crates with randomized items, but those are only available through a Twitch promotion and you can't buy them; you only earn them by watching Hunt: Showdown streamers.

The official Xbox.com store page for the game mentions some DLC that includes various amounts of the "Blood Bonds" in-game currency, but no indication as to what they're for. It also has an ESRB rating descriptor for "In-Game Purchases (Includes Random Items)," but looking up the Hunt: Showdown listing on the ESRB's own website only gives the standard descriptor for in-game purchases, with no mention of random items. Seems sloppy!

A purportedly official Hunt: Showdown Wiki page (which is not among the nine official channels for information linked on the game's website) tells me that Blood Bonds can be used to clean weapons or unlock legendary skins, but it sounds like you can choose which legendary skin to buy. You can earn random legendary skins by "prestiging," but it doesn't appear that buying a bunch of Blood Bonds helps a player to prestige in any meaningful way unless cleaning weapons is absolutely key to advancement in the game, which I – as a person with no prior familiarity with the game just trying to get up to speed – cannot reasonably know.

(This gets to another question: How much distance do you need between the in-app purchase and the random mechanic in the game design before a game needs the label? Loot boxes that can only be bought with virtual currency is pretty clear, but what about random loot drops earned for completing levels and virtual currency that can only buy a modest power-up to help get through those levels?)

I reached out to Hunt: Showdown developer Crytek through their press email earlier this week to ask about the fine and whether the game has paid loot boxes; they didn't get back to me.

It should not take someone with my experience with games and my access to press channels this much effort to figure out something this basic about a game. Especially when I haven't actually figured out anything beyond the haphazard and shoddy way the industry communicates to parents and players what they can expect from a game.

The games industry has historically had many problems with secrecy, from what games are in development to how much they cost to make, how much money they bring in, right down to the names of the people working on them.

So as monetization methods have grown increasingly complex in the past couple decades, the industry has simply continued as it always has, revealing as little as possible about its business to the outside world.

I'm sure part of that is just an instinctual leaning toward secrecy as The Way Things Are Done, but it's also doutblessly deliberate because these companies know a lot of free-to-play monetization is overtly sleazy when you drag it out into the light.

The last thing they want is to give ammunition to a bunch of judgy outsiders. Or as that ammunition is known to responsible companies, "transparency."

In light of all that, these €5,000 fines are pitiful, but they're also perfect.

They accurately represent just how little the industry really cares about loot box concerns, about enabling parents and consumers to make informed decisions, about the harmful knock-on effects of designing bottomless engagement pits and ruthlessly optimizing every last aspect of them to extract the maximum amount of money from the handful of players who prove most vulnerable to their psychological tricks.

Because that? That's one thing the industry really does take seriously.

The rest of the week in review

QUOTE | "Minors are especially susceptible to these addiction-enhancing elements of game design. The experience of acquiring surprise rewards and the associated excitement of uncovering unexpected in-game items holds a strong appeal for minors and reinforces their desire to keep playing and keep getting rewards." – A class-action lawsuit filed earlier this month against Nintendo, accusing the company of using dark patterns and loot boxes in Mario Kart Tour to get kids hooked on the game.

STAT | 74% - Of the 10.2 million enforcement actions Microsoft took in the Xbox ecosystem in the last six months of 2022, nearly three-quarters of them were simply squashing bot accounts.

STAT | 27 years – The time between Bungie's last Marathon game, 1996's Marathon Infinity, and the announcement of its new Marathon game during Sony's PlayStation Showcase 2023.

STAT | 23 years – The time between the original Mission: Impossible TV series ending in 1973 and the Tom Cruise film franchise began in 1996.

STAT | Almost 600,000 – The number of PSVR 2 headsets Sony sold in the first six weeks of the headset's launch, a little bit above what the original PSVR managed in 2016.

QUOTE | "You look at Smash Bros, for example, the base roster is 64 selectable characters, how many have darker skin? You’ve lost 40 right there, because none of them do. How many are not animals? You lost 22 more. And the only thing you’re left with is Ganondorf and Mr Game and Watch. So, you get little kids like me, who are like, 'Which character looks like me? The one who is evil incarnate or Mr Game and Watch'." – Protodroid Delta developer Adam Kareem explains why it was important for him to make the game's cast deliberately different from the industry norm.

STAT | 22.1% - How much of US physical game sales were made up of M-rated titles in 2022, according to Circana figures. That's up from the 15% level of the mid-'00s, but down sharply from the 35.1% M-rated games reached in 2018.

QUOTE | "In my opinion, 3-5 years or until [cloud gaming] hits critical mass – 25% to 30% of gamers – and perhaps seven to ten years until it becomes the dominant way to play." – In our round-up of analyst assessments of cloud gaming, Midia Research's Karol Severin gives us a prediction to follow up on In the May 2033 edition of 10 Years Ago This Month.

QUOTE | "For the first time, you and your TV are going to have a relationship." – 10 Years Ago This Month, Microsoft opened the Xbox One reveal event with a very weird promise.

QUOTE | "In light of current economics and the industry’s market realities, after reviewing our strategic priorities, Kabam has made the difficult decision to reduce its workforce by 12 percent." – Kabam confirms a round of layoffs.

QUOTE | "This decision was not made lightly, as we deeply value our talented and dedicated employees." – Crypt of the Necrodancer developer Brace Yourself Games confirms a round of layoffs. The studio did not say how many people were laid off but one former developer put it at roughly half the studio, or around 20 people.

QUOTE | "Sega is in a healthy financial position and remains fully committed to supporting and investing in Relic Entertainment and the franchises it is responsible for, including the critically acclaimed Company of Heroes series." – Sega wants you to know everything's going great and that this week's round of layoffs at Relic was mostly just for funsies. (I mean, they did call it a "necessary restructure" but given their financial health and a determination to support the studio, one would think they had some other options besides putting 121 people out of work.)

QUOTE | "This is business, and I know shareholders and other stakeholders expect me to win every battle. This was a big one. And we didn't win this one, but I'm sure we will win many of the future battles." – Embracer Group CEO Lars Wingefors talks about a $2 billion deal that fell through the night before the company reported its most recent earnings.

STAT | 4 months – How long Focus Entertainment CEO Sean Brennan held that role before tendering his resignation last week.

QUOTE | "A lot of things in games are not about making the hit or getting it right, a lot of it is luck. Anyone who tells you otherwise is bullshitting. There are people who will never have luck, and that might be you. And there are people who will get lucky on their first try, and that might also be you. You can't control this, all you can do is your best." – In a Reboot Develop talk, Rami Ismail offers 10 tips for indie developers, among them "Be luckier."