Loot boxes: An industry at war with itself over a technicality

Video games won't send your child running into the warm embrace of literal Satan, nor will they turn them into a violent maniac thirsting for human flesh, but there is a growing body of evidence pointing toward something far more pernicious -- something which could result in genuine and lasting damage to both the industry and its biggest fans.

It could be nothing other than loot boxes, of course, and the industry has found itself in the frightening position of once again sparking moral panic. After many long years, we have moved past the pointless debate around violence and video games, and begun to show the world what a diverse and creative medium games can be.

But it's now been roughly 16 months since Middle-Earth: Shadow of War left this ugly mess on our carpet, and Star Wars Battlefront II bounded gleefully into the room, grounding it into the very fibres. When the controversy broke, it did so with such thunderous intensity that state senators began drawing comparisons to smoking ads from the '80s, and even pegged the game as little more than a "Star Wars-themed online casino".

"It's a dark day indeed when you find yourself agreeing with the Daily Mail"

Since then, regulatory bodies around the world have taken notice, their fruitless efforts to understand something so arcane leaves them lumbering slowly towards conclusions that struggle to fully grasp the issue; companies like EA and 2K Games defend their right to facilitate underage gambling in sport games; and furious consumers fail to acknowledge the harsh realities AAA development that lead us here in the first place.

Casino comparisons course through the debate, with fear-mongering controversy-mill the Daily Mail running ungainly but effective headlines like: "Video game 'loot boxes' that use the same tactics as casinos to part people with their money are encouraging children as young as 13 to GAMBLE".

It's a dark day indeed when you find yourself agreeing with the Daily Mail, but after covering this issue extensively for the past year, it's difficult to view loot boxes as anything other than a form of gambling.

While there's a number of mitigating factors and technicalities which certain publishers have employed to eschew responsibility, even the more innocuous loot boxes share psychological mechanisms commonly found within gambling.

For the unfamiliar, these are: variable ratio reinforcement schedules; gameplay experience such as sensory feedback; entrapment systems designed to encourage further spending; and ready, constant availability.

Loot boxes rarely fail to meet the psychological definition of gambling, even when they do not meet the legal definition.

Again, for the unfamiliar, the psychological definition of gambling has five core criteria as developed and defined by Nottingham Trent University psychologist Mark Griffiths: the exchange of money or items of value; an unknown future event determines the exchange; the outcome is at least partly determined by random chance; it's possible to avoid loss through non-participation; and winners gain at the expense of the loser.

It could be argued that because the user always receives a prize, they never technically lose, but that ignores the matter of player-ascribed value.

"We do not consider loot boxes to be gambling ... We believe that loot boxes are more comparable to baseball cards"

ESRB president Patricia Vance

How you define gambling is important and this is where government legislation around the world has fundamentally failed to understand the potential risks presented by loot boxes. In every gambling commission response thus far, with the exception of Belgium, loot boxes have been let off on a technicality -- it must be possible to exchange the contents for real-world monetary value.

Despite 16 gambling authorities signing a letter stating publishers must "ensure that features within games, such as loot boxes, do not constitute gambling under national laws", that caveat persists, and so loot boxes remain broadly unchallenged.

What legislators and authorities repeatedly fail to understand during examination is that the real-world value of items is largely irrelevant. The Belgian Gaming Commission has been the only authority to consider player-ascribed value in its assessment of loot boxes, finding that: "Value can be defined as the degree of usability. Specifically, items that the player finds useful or nice and for which he pays money".

A frequent argument used to dismiss concerns that loot boxes constitute gambling are comparisons to collectable card games or even Kinder Surprise Eggs. In a letter to US state senator Maggie Hassan, Entertainment Software Rating Board president Patricia Vance stated: "We do not consider loot boxes to be gambling ... We believe that loot boxes are more comparable to baseball cards, where there is an element of surprise and you always get something."

However, as Dr David Zendle and Dr Paul Cairns of York St. John University and University of York told me, rhetoric like Vance's was "out of date" and "bit of a distraction".

"It focuses people on similarities between loot boxes and physical collectable card games," Zendle and Cairns said in an email. "But it glosses over the differences. And there are lots of differences between loot boxes and physical CCGs. For example, one important difference may be related to velocity and volume: Players can buy loot boxes a lot more quickly than they can buy trading cards. And they can easily buy them in much larger quantities."

"Sometimes, even if two things look similar, the important things are the differences - not the similarities"

Dr David Zendle and Dr Paul Cairns

Aside from physical, real-world barriers when purchasing booster packs, Zendle and Cairns noted that any surface-level comparison between loot boxes and trading cards is "essentially a moot point".

"This link remains potentially harmful, regardless of how like physical card packs they are in other ways," they said. "Sometimes, even if two things look similar, the important things are the differences - not the similarities."

Earlier this year, Zendle and Cairns conducted a survey of over 7,000 gamers on behalf of the Australian Environment and Communications Reference Committee as part of an investigation into loot boxes. Their findings supported evidence presented in an academic journal article by Aaron Drummond and James Sauer titled 'Video game loot boxes are psychologically akin to gambling', and found "important links between loot box spending and problem gambling".

In fact, Zendle and Cairns found the more severe an individual's problem gambling, the more they spent on loot boxes.

"The relationship we observed was neither trivial, nor unimportant," reads their assessment submitted to the ECRC. "Indeed, the amount that gamers spent on loot boxes was a better predictor of their problem gambling than high-profile factors in the literature such as depression and drug abuse."

After five months investigating the issue, the ECRC committee published a 90-page report and advised the Australian government to undertake a comprehensive review of loot boxes. While the report recognised that loot boxes "are not a homogenous entity", and there are a variety of ways in which loot boxes can be acquired, it still brought the discussion back around to the legal caveat of real-world monetary value.

Many other international government bodies are considering loot boxes right now, the most notable recent addition being the US Federal Trade Commission. While there is an almost universal concern that the mechanic often bears an uncanny resemblance to gambling, that caveat of being able to cash out persists, and neither Zendle or Cairns could be sure when -- if ever -- we might reach consensus regarding legislation.

The perils of gambling addiction are well-documented, and there's plenty of anecdotal evidence around problem spending on video game microtransactions. It only stands to reason that loot boxes, designed specifically to evoke the illicit thrill of rolling the dice would exemplify the worst of both worlds.

"Persisting with shady behaviour just because it's not technically illegal doesn't just set the bar low, it kicks it into the dirt"

Recent projections from Juniper Research suggested that loot boxes could drive the digital games market to be worth $160 billion by 2022. Research author Lauren Foye even noted: "By monetising the random generation of items, developers are effectively encouraging a form of in-game gambling, extending both the lifecycle and engagement of games titles to their audience."

A source at EA told me that internal projections for loot box revenue from a AAA game were anywhere between $70 million and $200 million. With numbers like that, it's hardly surprising the publisher would rather gear up for a legal battle against Belgian regulators than set a precedent and remove loot boxes from its games in the region.

But where does this leave us? And, more importantly, where are we heading? From a legal perspective, the Belgian decision is the most important, as it represents how malleable definitions can be. Of course, for developers and publishers it's a headache, but even the International Game Developers Association has taken a stance against the industry's application of loot boxes.

Executive director Jen MacLean recently called for an industry-wide commitment to not market loot boxes to children, to disclose the odds of receiving different rewards, and to launch a campaign to educate parents.

The industry has been at war with itself over this for a year now. Many regulators have found that loot boxes don't quite legally constitute gambling but, without failure, raised concerns over how much they resembled the act.

Perhaps the industry should ask itself if a legal caveat is enough to justify continued use of loot boxes. The scientific evidence supports a view that loot boxes are "psychologically akin to gambling" and government authorities have raised concerns about the "increasingly blurred lines" between games and gambling, but publishers wilfully ignore the issue unless their hand is forced.

Is corporate responsibility really too much to ask for when foisting gambling upon kids? Persisting with shady behaviour just because it's not technically illegal doesn't just set the bar low, it kicks it into the dirt.

Regardless of legal definitions, the evidence clearly indicates that loot boxes are linked to harmful behaviour; if you're concerned about the negative effects of gambling, you should be concerned about loot boxes. Just because it's not technically illegal, doesn't make it right.