ESI Gambling Report: Loot boxes, let’s define gambling

Loot boxes have attracted some unwanted attention regarding its likeness to betting, but can the virtual consumable be classified as gambling?

Loot boxes have been the subject of a vast scrutiny across multiple nations. From enraged fan bases to government legislators – the question of in-game microtransactions being a gateway to underage gambling still remains at large today.

With a recent report forecasting loot boxes and skin gambling to yield a $50 billion expenditure by 2020, however speculative or uncertain that may be, the heat is on for some answers regarding the ethics of microtransactions. Should purchasing loot boxes be deemed a form of gambling? Let’s take a closer look in this week’s ESI Gambling Report.

Microtransactions

In this context, a microtransaction is an in-game financial conduct using real-world money in exchange for virtual goods. Games with integrated marketplaces offer players add-ons to their gaming experience; commodities such as maps, alternate game modes, weapon/player cosmetics and other customisations are all common additions provided, but for a price.

Virtual items are offered for cash while other titles prompt you to redeem real-money for a virtual currency used in the marketplace. This is where the lines of value become blurred according to a strongly opinionated article published by Rolling Stone, “we can become manipulated, blinded, and marketed to in as many ways as one can imagine”. 

V-Bucks

For some, virtual currency is seen as a way to mask the true cost assigned to these purchasable commodities; in Epic Game’s breakaway hit Fortnite for example, players cash in money for ‘V-Bucks’ to be spent in-game. While players may spend a couple thousand V-Bucks quite leisurely, they are likely totaling receipts of those initial purchases. A typical practice is for games to offer bonuses alongside larger virtual bundle buys, incentivising players to spend more money for supplemental currency, a tantalising offer.

Prevalence & history

As of the last five years or so, we’ve seen a rampancy of loot boxes across a multitude of titles; some of the more popular games including, but not limited to, Rocket League, FIFA, PlayerUnknown Battlegrounds, and Fortnite all boast their own adaption of the loot crate. The loot box presence in multiplayer games may be a recent phenomena but its roots can be traced back quite far.

Credit: Dave’s Vintage Tobacco Cards

From as early as 1870, manufacturers of cigarettes began including “tobacco cards” in packaging as a way to stiffen flimsy cigarette packs; at first the cards were blank, but as time went on, manufacturers began printing everything from actors and actresses to famous baseball players on the cards. The tactic was deployed as a strategy to build consumer loyalty – cards were later released as sets, which enticed collectors to attain the entire batch. Similarly in the UK, there has been Panini and Merlin offering Premier League football sticker albums with with packs on sale for a number of years, and the popularity saw trades become commonplace on playgrounds nationwide. This trend was seen in other popular card games like Yu-Gi-Oh and Pokemon where packs contained random cards from a larger collection – often these packs guaranteed at least one rare or better card, attracting buyers to roll the metaphorical dice on them. It would only be a matter of time before video games attempted to mirror this concept as a major source of revenue.

Fortnite would be the strongest modern example – despite being a free-to-play game, their in-game store netted $126 million (£90,094,410) in February. Bluehole’s battle royale counterpart, PUBG, was shy of that number ringing in at $103 million (£73,648,605) in February; key difference being that PUBG retails for $30, which speaks volumes towards Fornite’s in-app purchases being a central driver of its revenue. It’s safe to say Fortnite and PUBG’s popularity has been astounding thus far – it’s reported roughly one-third of PC gamers are playing one of the survival shooters while exhibiting breathtaking statistics such as a concurrent player count of 3.4 million.

Loot Boxes

At the height of this discussion is the loot box: a generalised term for a consumable virtual artifact that yields an entirely randomised selection of items from simple avatar customisations to game-changing competitive edges.

Luck boxes, loot crates and booster packs (other naming variations) are typically awarded to players through gameplay from netting achievements in the game or bought in a marketplace. There are a few gray areas when it comes to loot boxes though, first and foremost, their spoils are random. With the possibility of players depositing real-money for an unspecified chance at winning a virtual good, loot boxes can very easily be compared to a slot machine in this sense. It’s noteworthy that the odds of obtaining a single, specific item considerably lessen as more common goods are unlocked through loot crates –  this gambit was so alarming that the practice (known as “complete gacha”) was banned in Japan by the Consumer Affairs Agency in 2012. One of the largest loot box criticisms is that rewards may offer players sizable in-game advantages, creating a pay-to-win attribute where competitions are based less off skill, and more off wealth.

Skin Gambling

Counter Strike: Global Offensive (CS:GO) has become practically synonymous with skin gambling and it’s posing a serious threat to minors. These weapon cosmetics are acquired through both gameplay and loot boxes with value assigned to them in communities depending largely on rarity. Weapon skins in the Steam marketplace can range from a few dollars to a couple thousand, one CS:GO skin fetched an impressive $10,000 (£7,106).

Dragon Lore skin originally fetched £7,106

Steam’s marketplace trading erects some serious implications alongside of it in the form of third-party platforms facilitating skin betting on esports matches and other casino-style games. Despite a large rollout of class-action lawsuits in 2016 aimed at curbing skin gambling sites, an undeniably large gambling precinct still remains at large today.

A 2017 study conducted by the Gambling Commission highlighted that 11% of 11-16 year olds in the UK had gambled with skins – that percentage accounts for around 500,000 children that had participated in underage gambling before the age of 15. Whilst we’re a little skeptical over this figure, even 1% means tens of thousands of children at risk. While this is a massive legal and ethical plight, Steam’s response to the rampant skin betting in CS:GO has been far from harsh enough in some eyes. Regulation of skin gambling would require fundamental changes on behalf of Steam to the marketplace, disabling the ability to exchange skins with other users could be one solution.

Steam developers, Valve Corporation

An overview of the current skin gambling conflict would be incomplete without mentioning one key detail: Steam receives revenue from marketplace exchanges by imposing a tariff on top of every transaction. For each exchange, a user is charged a “Steam Fee” as high as 15% on CS:GO proceedings going right in the pockets of Steam’s developer, the Valve Corporation. Juniper Research predicts that without further preventative measures, skin wagers will exceed $1 billion by 2022 – a potential $300 million bonus for Valve. Again whether this figure is realistic or not we’re far from certain, but a fraction of it would still mean a handsome windfall. Not to insinuate that Steam supports skin betting, but they’re certainly not suffering as a repercussion of it.

Addressing the issue

We are starting to see some serious action being taken across the globe in an effort to obstruct damages instituted by the recent loot box craze. The Dutch Gaming Authority recently announced its examination into ten popular games possibly infringing upon Dutch gambling laws. The gaming authority has given developers a deadline of June to adapt these in-game features threatening to fine or even ban the games entirely. Hawaii lawmakers went as far as to put forth a pair of bills that, if pass, will regulate the sale of video games with “gambling mechanisms”. The bills, SB3024 and HB2727, were prompted by the “predatory mechanisms” present in Star Wars Battlefront 2; the action shooter possessed a pay-to-win loot box structure that was too big to ignore.

The necessity to gamble on loot boxes to achieve momentum in the game was so blatant that it enlisted an unparalleled myriad of infuriated fans to voice their frustrations in November of last year. Most notably, one aggravated redditor’s post prompted a response from an Electronic Arts that resulted in the most downvoted comment in Reddit history. The uproar sent developers into a state of turmoil – EA’s new Chief Design Officer Patrick Söderlund recently addressed loot boxes in an interview with Verge admitting “We got it wrong”.

Children are a focal point of this discussion being especially susceptible to the allure of loot boxes; in about every instance, packs burst with vibrant colors, rousing sound effects and coaxing music. In short, they’re exciting and design to encourage you, especially young people too, to purchase more of these consumables. The similarity of uncorking a loot crate is astoundingly comparable to the ambience fashioned in Las Vegas casinos in this sense. Several other countries such as the NetherlandsGermany, and Sweden are looking into potential loot box governing as the issue continues to spark major concern among elected officials. Belgium is the latest nation to join this list – the Belgian Gaming Commission announcing yesterday loot boxes would be considered gambling and therefore illegal. A statement from the Minister of Justice, Koen Geens, reinforced Belgium’s rigid stance on the matter, citing harsh penalties for publishers such as “a prison sentence of up to five years and a fine of up to 800,000 euros”. 

Verdict

With microtransactions being somewhat of an umbrella term including multiple parts, defining it as outright gambling wouldn’t be at all accurate.

From the top, marketplace transactions that clearly define the virtual good alongside the price tag can’t be constituted as gambling considering there is no risk or unpredictability involved. Whether believing the exchange of real-money for virtual currency in these marketplaces is a shady or misleading exercise is exclusively a question of opinion; regardless, converting cash for virtual coins still isn’t gambling, at least not yet. Now, as we delve deeper into this, and into luck boxes – the virtual treasure chest, so to speak – gambling concern becomes more of a reality. Values of loot boxes are typically clearly stated, however, the commodities received are all randomised – taking on a more casino-esque shape. It’s simplest to compare the makeup of loot boxes to slot machines – you deposit money for a chance at winning something.

CS:GO Weapon Skins

As for the skin gambling market in CS:GO, well, that almost seems self-explanatory. Weapon skins hold real-money value, plain and simple; although its face value may fluctuate, the skins should be considered a currency. There is a striking likeness between cryptocurrency and skins; both are comparatively a type of volatile electronic currency. Arguing against the difference in betting with either crypto or skins would be a tough quarrel to defend.

As more and more officials begin to catch wind of loot boxes, it’ll be interesting to see how both regulators and game developers respond.