A previous article discussed loot boxes as microtransactions and the purpose they serve in gaming. While this view may offer something in terms of answering why we have loot boxes, this does not offer much perspective as to whether or not we should have them in the first place. Regrettably the conversation does not seem to have moved beyond a comparison to gambling that seems disingenuous and does not follow the more interesting threads such a discussion presents to us. In this post I’d like to address the topic of gambling and its regulation in gaming. This is a deviation from the originally stated plan at the end of the previous post. This current post is to address gambling mostly to be able to move on to a broader discussion of how games optimize for certain things and the effects it may have on us in follow up articles. If you aren’t particularly interested in the gambling question, I’d recommend skipping this one.
A test for gambling
One essential feature that emerges from both popular and legal definitions of gambling is betting. There is a spectrum of skill in terms of gambling, ranging from slot machines (pure probability) to a chess match in the park (pure skill), but the risk of money or an item of value on some contingency is constant through them all. There are likely some gradations for gambling as well. For instance, charity 50/50 events (purchase of tickets for which a winner receives half of all revenues), POGs, and Magic with ante all caused some consternation among my Salvation Army attending family (the fear that Magic might turn me to Satan worship also meant I could not have black cards in my deck too, but that had nothing to do with gambling anything but my soul) but were ultimately deemed to be fairly innocuous and comparable exemptions for most of these cases exist in law. For this reason it seems most productive to use betting as the measure against which we will evaluate potential gambling activities, with a secondary consideration as to severity to prevent us from saying anything too ridiculous.
From this it seems that the ESA’s (and later PEGI’s) release is sensible and consistent: loot boxes are not gambling since a player is assured to get an object of value, even if it’s not one that they wanted. This is more or less the CCG (Collectable Card Game) way of looking at loot boxes in recognizing that the intent of the buyer may be to get a specific item, but that the commitment of the booster pack is to offer a random draw from a distribution and that the nature of the purchase is not re-evaluated based on the value to the consumer.
A common objection to this view is to point out the resale value of physical cards as opposed to digital goods which do not have a resale value (or whose resale value comes in the form of a prohibited activity such as selling an account). While this is a seductive thread to follow, there are two problems with it. First, the resale of a given physical product depends on there being a reasonably liquid market for it, which is why POGs don’t provide any return on the original investment, and why your landlord will not accept a Black Lotus card for rent. At best we can say the expected value of the contents of the pack discount the listed price (so if a booster pack costs $5 and the expected value of its contents are $1, then the price you make your decision on is $4 assuming you intend to sell your cards after you’re done with them and they retain their value) and we don’t seem to be arguing that it is the price of loot boxes that make them gambling. Second, this value on physical goods seems to be smuggling individual tastes into a policy recommendation that applies to all. An individual purchase decision will be driven by a player’s private valuation of the product and whether or not it is equal to or greater than the asking price. I may individually assign no value to digital goods, but then, all this really tells me is that I won’t buy loot boxes, DLC, video games, operating systems, apps, music, or movies (unless you really think people are buying these for the boxes and discs). Given that there are complaints of content being locked behind a paywall or the game being pay to win, it seems more reasonable to assume that the average gamer does find some value the contents of a loot box.
When the ESA says that loot boxes are not gambling because the player receives something of value, they are pointing out the difference between a wager (heads you get the money, tails I keep your money) and an exchange for goods or services (I will give you X if you pay me Y). Some goods and services do involve uncertain values: art, mortgages/real estate, insurance etc. and these are distinct from gambling. While there may be a case for the regulation (self or otherwise) of loot box systems, it is inappropriate to attempt to make it by equating loot boxes with gambling and then use the existing regulatory framework to solve the problem.
Against the measure of betting it is reasonably straightforward to see that loot boxes are different from gambling, and so it raises the question as to why this particular line of attack has gained such currency. It is not necessary to equate loot boxes with gambling to be opposed to them, just as it does not follow that rejecting this comparison implies support for loot boxes. The principal appeal of this strategy seems to be that it uses existing mechanisms to address the perceived problem, especially since ESRB ratings already contain guidelines regarding gambling. However, this feature is less appealing on investigation. First, while most discussion seems to surround assigning an M (17+) rating to games containing loot boxes, the existing guidelines assign the most restrictive rating, AO (18+), to games that involve gambling with real currency. The AO rating is comparable to the NC-17 rating for motion pictures in that this rating has the consequence of limiting where the product can be published and how it can be advertised. This restriction does not come from the ESRB but rather from the reactions of various outlets to the rating. Specifically an AO rated game cannot be streamed on Twitch, will not be permitted on a Nintendo, Playstation, or Xbox console, and will not be carried at certain retailers. These guidelines can be changed, but this means that part of the initial appeal for the policy of loot box regulation through ratings is an illusion and so the policy should justify itself over alternatives that would require changes of a similar magnitude.
A deeper concern I have with this recommendation is the disconnect between the claimed severity of the problem (children being taught to gamble) and the efficacy of the solution. The broad perception of these ratings systems seem to be that they are either a tool to keep socially conservative politicians happy while presenting the fewest impediments to buying our games, or at worst are a minor inconvenience when trying to get games underage. While anecdote can only get us so far, one does not need to look far to find examples of gamers who have been able to purchase games that should be restricted to them, and digital distribution only makes enforcement harder. Contrast this to the age restrictions at casinos (and the penalty that non-compliance carries) and it is clear that if we accept the premise that loot boxes are gambling then using the existing ratings system is not a serious remedy.
Why focus on gambling?
My suspicion is that this policy proposal is not actually intended to address gambling at all but instead is designed to slow the adoption of loot box systems through making them less profitable. As with motion pictures, a large number of big budget and high profile games design with the goal with obtaining a T (or equivalent) rating (13+) so as not to restrict the potential audience. Assigning a more restrictive rating means fewer purchases of the game (assuming proper enforcement) and, of course, fewer potential customers for loot boxes. The result is that if the expected value from the loot box system with the restricted pool is less than the revenues from the purchase of the game from players who would be affected by the restriction, the loot box system won’t be implemented. Incidentally, it also means that fewer gamers overall will experience the game and that those who do play the game will bear more of the costs of development, reducing the consumer surplus.
While my own feeling is that this system will be ineffective at restricting the exposure of loot boxes to underage gamers, even if we assume proper enforcement the result is a blunt instrument that prevents gamers unconcerned or unaffected by loot boxes from getting titles they would otherwise enjoy while shifting the burden onto gamers whose only protection from the damaging effects of these systems is their birthday. As a whole I find this an unserious and disingenuous approach to the claimed problems with loot boxes. In fact I get the impression that a significant number of people calling for this kind of system are utterly indifferent as to the effects of loot boxes provided that they are not implemented in the games they play. The relabeling of games with loot box systems as mature does not make sense as a strategy for dealing with gambling addiction because it’s not intended to be a strategy to address gambling addiction but rather a rhetorically convenient means of curbing an unpopular pricing strategy.
Streamers in particular are ripe for condemnation as a few have assumed the mantle of ‘thinkfluencer’ on the supposed outrages of loot box systems while simultaneously being affiliated with Loot Crate (Columbia record club for cheap plastic crap) and Humble Monthly (loot box for games). Indeed, affiliation with either of these programs is viewed as having ‘made it’ in at least some circles of streaming and yet these programs are founded on the very same trade off of low price in exchange for uncertain (and often unknown) outcomes. I don’t see anything wrong with these programs per se, though I personally don’t see the value in either of them (my own advice on Humble Monthly is to only buy if the guaranteed game is worth it to you), but then, I’m not trying to burnish my image through condemning loot boxes either. It has been made abundantly clear to me that I am in the minority regarding loot boxes, I only ask for consistency when delivering the jeremiad.
It is one thing to complain about a policy recommendation, but do I have any alternatives to offer? Not on the issue of gambling. It’s worth remembering that the most common interaction with gambling is someone at a casino or lottery doing it essentially for recreation and without any harm. It may surprise you to find out that I’m largely uncomfortable with the idea that the government is involved in gambling (essentially I’m of the “The lottery is a tax on people who can’t do math” persuasion and don’t think the government should be involved in an activity that clearly does have a damaging effect on some citizens. Though I recognize the revenues it raises, and would stop short of banning it and so recognize that something state run is a second best solution). I reconcile these beliefs through acknowledging that there are a lot of things that I think would be better for everyone if people did them. I think people should read more, support the library, vote in municipal elections, talk to their neighbours, and not drink so much. I recognize that these are my own preferences, and that more than my opinion is required to legislate them (libraries provide benefits above and beyond their direct use and so tax dollars support them. People can generally drink what they want, but we forbid them from getting behind the wheel of a car, because it ceases to be only their problem).
However, I also think my lack of a policy prescription stems from the fact that I think there is a lack of clarity as to the question we are asking because people really only seemed to care about addiction once it was their own money on the line. Addiction is the main reason we regulate gambling, and it is one of the reasons we have an age restriction. And yet we know that addiction in gaming is not limited to monetization strategies like loot boxes. The discussion is confused and superficial because we have been unwilling to follow the implications of our newfound concern for addiction. If we are going to discuss regulation, then we need to broaden our perspective from loot boxes exclusively even if only to articulate why they are a special case (if, indeed, they are) and found our policy recommendations on more than rhetorical convenience.
I will leave it to follow up articles to discuss some of the techniques behind loot boxes and attempt to come to grips with the question of addiction.
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