6 November 2019

Loot Box Mechanics

An interesting example of inadvertent regulation (gambling legislation covering these mechanics) and shifts in societal expectations of what is appropriate/legitimate as a means of making money.


  • In August 2018, the Dutch Gaming Authority published a study stating that four out of ten games that it had analysed contravened the Dutch Gaming Act. The key different between the two categories, it appears, was that those that were found to contravene the Act had allowed players to trade those items outside of the game, giving them a market value (Vice reporting).
  • In August 2019, Vice reported that major gaming companies have committed to disclosing loot box probabilities in an attempt to ameliorate concerns over these mechanics.

The debate over loot boxes has been raging in earnest since 2017, when publisher Electronic Arts faced criticism for its microtransaction structure for Star Wars: Battlefront II. Governments have already begun enforcing policies against the practice, arguing that loot boxes exploit children and have addictive properties akin to gambling.

  • Regulation (in the US) is being proposed in the form of proposals for the Protecting Children From Abusive Games Act (put forward by Senator Hawley).
  • I’d be interested to see how the legislation proposes to define the scope of such loot boxes” and games”. Would it be pegged to existing gambling legislation? (See above regarding the Dutch Gaming Authority’s analysis.) Or would it be defined according to a set of characteristics unique to such electronic games?

On a related note, it’d be worth looking into this conference paper detailing the different mechanisms that can be used to monetize a free-to-play game. From the abstract:

The free-to-play model in the online gaming industry is based on providing an online game at no charge on either mobile devices or on a PC. Monetization would occur with virtual items which players may purchase during the game. It has been demonstrated that there are several motivations for gamers to purchase such items including unobstructed play, social interactions with other gamers, competition and economic rationale. These motivations can be exploited as drivers for value generation when designing such games in a way that appeals to the gamers by using several strategies. We elaborate on seven strategies, i.e. stratified content, inconvenient gameplay elements, mediums of exchange, inventory mechanics, special occasions, artificial scarcity, and alterations of content. Additionally, the theory of customer lifetime value has shown to be a beneficial concept in segmenting customers and identifying those who are especially valuable from a business perspective. Overall, research on business value generation in the field of online gaming seems less developed than in other segments and applications. Consequently, a common understanding of available concepts and strategies need to be developed to enable identification and overcoming of challenges in free-to-play online gaming.


Does the Remote Gambling Act potentially cover such mechanics?

Apart from inadvertent regulation, however, it doesn’t appear that there is a significant interest in regulating these game mechanics locally.

During the passage of the Remote Gambling Bill, the Straits Times reported that the International Social Games Association had made a statement stating its worries that the Bill was too broad:

In a statement released on Friday, the association said: The ISGA is fully supportive of the Singapore government’s efforts to prohibit illegal Internet gambling.”However, we believe that the drafted bill will inadvertently encompass legitimate activities and technology businesses, going far beyond the government’s concern on Internet gambling. In fact, it would have material negative effects on the future of Singapore’s digital economy development and the video games industry globally.

I found that quite humorous when I read it. It’s interesting to note what the line between illegitimate” and legitimate” is.

From the Wikipedia page:

In October 2014, Singapore’s parliament passed The Remote Gambling Act, which introduced a ban on unlicensed gambling websites and fines for anyone violating it. The law’s definition of gambling included staking virtual credits, virtual coins, virtual tokens, virtual objects or any similar thing that is purchased…in relation to a game of chance”,[104] leading to concerns that it would require producers of any game in which players paid money and received a randomised outcome to seek a license to operate from the government.

In response to games industry lobbying home affairs minister S. Iswaran clarified the law in parliament, stating that the Bill does not intend to cover social games in which players do not play to acquire a chance of winning money and where the game design does not allow the player to convert in-game credits to money or real merchandise outside the game”. The minister also specifically excluded platforms which offered virtual currencies which can be used to buy or redeem other entertainment products”, such as Steam, from the provisions of the bill.

However, the Minister also said:

The fact is that the line between social gaming and gambling is increasingly becoming blurred. What may appear benign today can quickly morph into something a lot more sinister tomorrow in response to market opportunities and consumer trends. That is why the legislation is cast broadly.

Games Design Ethics Technology

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