How ‘Loot Boxes’ Unlock Video Game Gambling Worries

(Bloomberg) -- Scoring the most points or unlocking more exciting stages in a video game used to require practice and patience. Today, gamers can often skip the grind and pay to get ahead by buying so-called loot boxes -- virtual vaults containing items such as tokens, better weapons or faster cars. As the popularity of loot boxes grows, so does the controversy over whether they offer an unfair competitive advantage to the wealthiest players. Worse, some critics contend that loot boxes constitute a form of gambling because players sometimes don’t know what’s inside when they buy them. The concern has caught the attention of regulators, who are cracking down on game makers.

1. What are loot boxes?

Loot boxes take many forms: packs of cards, treasure chests or even, in the case of Epic Games Inc.’s blockbuster shoot’em up Fortnite, llama-shaped piñatas. In most games, the more expensive the box, the better the loot. Some titles, like Words With Friends, use loot boxes as rewards for logging into a game each day, and some can be won for free. But almost all can be purchased using real money, and it’s this aspect that draws the most concern, especially when kids are buying them.

2. What’s the worry?

Consider the popular free-to-play card game South Park: Phone Destroyer. Players collect cards based on characters from the Comedy Central show and use their hand to battle other people on their smartphones. The game lets players earn a free pack of cards every four hours, but the publisher Ubisoft Entertainment SA also sells premium packs that can contain more exclusive characters for building a stronger hand. This common practice is seen as inherently troublesome because the specific "loot" available is rarely enumerated, and it’s a gamble whether a purchase even gives a player what he or she wants. The pricing levels are also set by publishers to encourage higher spending, which can encourage gamers to buy too much loot in search of a prize.

3. Who’s looking into the issue?

The U.S. Federal Trade Commission said in November that it is investigating the use of loot boxes. Belgium has already deemed them an illegal form of gambling for children and adults alike, and some publishers have discontinued selling games there as a result. The Netherlands also has outlawed them, threatening game publishers with large fines and even criminal prosecution. The U.K.’s Gambling Commission said in September that it had teamed up with more than a dozen gambling regulators across Europe to help understand the concerns. In a jointly-signed declaration, the countries pledged also to probe "gambling-themed content" within games, and hold "constructive dialog" with developers.

4. What’s the likely outcome?

In the short term, publishers may disable loot boxes in certain territories until the legal issues are clearer. Another possibility would be to reveal the contents of a loot box prior to its sale -- an approach taken by the developers of Fortnite -- or to disclose in advance the exact odds of unlocking each possible reward so that buyers know what they’re getting. It’s unlikely loot boxes will disappear entirely, though, as they’ve become a critical component of gaming industry profits. Fortnite’s success demonstrates the success of the business model: The game itself is free, but Epic Games generates hundreds of millions of dollars from sales of subscriptions, add-ons and ancillary products to its 200 million players.

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