Video Gaming – Loot Boxes and Beyond

Understanding Developments in Video Gaming and Loot Boxes

Loot boxes are virtual mystery items in video games that players can acquire, often through gameplay or in-game purchases, to obtain random rewards. The function of loot boxes can vary depending on the game and its design, but they are generally seen as a form of gambling.

The element of chance and the excitement of opening loot boxes have raised concerns about their potential to lead to addictive behaviours. A 2019 report by The Royal Society, ‘Adolescents and Loot Boxes: Links with Problem Gambling and Motivations for Purchase’ stated: ‘When video game companies allow adolescents to buy loot boxes, they are potentially exposing them to negative consequences’. Such concerns have had some effect and legislation to curb the gambling element of loot boxes is already in place in China, Japan and parts of Europe.

The Purpose of Loot Boxes

Lootboxes serve a valuable purpose for players in raising variety and excitement at the prospect of rewards but crucially, they benefit the developers of games by enhancing profits. Here are the main aspects of loot boxes:

• Monetisation: A primary function of loot boxes is to generate revenue for game developers. Players can purchase these loot boxes using real money, and the randomness of the rewards creates a sense of anticipation, encouraging players to spend more in the hopes of getting valuable or rare items.
• Player Engagement and Retention: Players remain engaged and interested in a game over a longer time. The expectation of receiving valuable rewards can motivate people to continue playing and participating in various in-game activities.
• Content Variety: Developers can introduce a wide variety of virtual items, such as cosmetic skins, character outfits, weapons, emotes (character behaviours), and more, into the game. This allows players to customise their in-game experience and stand out from others.
• Progression and Advancement: Loot boxes can be a way to reward players with items that aid in their progression within the game, such as experience boosts, in-game currency, or equipment upgrades. This can help them advance faster and enjoy a better overall outcome.
• Randomness and Excitement: The element of chance introduced by loot boxes can create a sense of excitement and surprise for players. The uncertainty of what they might get from a loot box can add an additional layer of enjoyment to the gaming experience.
• Free-to-Play Models: In free-to-play games, loot boxes often have a crucial role in generating revenue that supports the ongoing development of the game. Players who are not required to pay upfront for the game can choose to make in-game purchases, which may include loot boxes.
• Community Interaction: Some games use loot boxes as rewards for community events, challenges, or tournaments. This encourages players to collaborate, compete, or participate in various ways to earn these rewards.

The UK’s Proposed Reforms

The UK’s proposed reforms to the gambling and gaming industry are not yet law – the measures proposed in the latest Government White Paper are subject to further consultation before planned implementation in summer 2024. The gaming industry is fast-moving and evolving, and changes are already taking place in response to expected regulation. Loot boxes may be less popular by next year. In a 2021 post for Wired entitled ‘Loot Boxes are Dead, What comes next will be Worse’ Andrew Kersley argues that legislation will most likely diminish their usefulness and developers are already turning to more deadly and more addictive attractions as well as virtual sports and colourful virtual fruit machines.

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The Gaming Industry’s Response

The industry is responding and adapting, following concerns over loot boxes. Some game developers such as Fortnite, have eliminated loot boxes altogether while others have moved into less-regulated new areas such as skins betting. There has also been an attempt to try to normalise loot boxes with gaming influencers such as Mr Beast featured opening high-value mystery boxes on YouTube, giving the impression that spending money to take risks is fun and desirable.

What is Skins Betting?

Skins is the name given to in-game cosmetic items (sometimes literally skins) that can be acquired and displayed by characters to enhance their image and power – fierce, funny, badass etc. Skins have become a form of currency that can now be traded for real money at online sites such as Steam and Skins.

They can be earned as rewards in games or simply purchased for real or virtual money – the rarer items can cost thousands of dollars. Skins are often used to bet on the outcome of games through skins gambling websites that are not subject to any government or industry regulation regarding age or other safeguarding measures. The dangers to young people – who make up the majority of video gamers – are obvious.

Global Statistics for Gaming

The global gaming market size was valued at $249.55 billion in 2022 and is anticipated to grow from $281.77 billion in 2023 to $665.77 billion by 2030 according to Fortune Business Insights. This trend demonstrates the industry’s immense popularity and equally its potential for harm.

Statistics for UK Problem Gamblers

The Government’s latest review of gambling-related harms (updated January 2023), states that 0.5% of the UK population are considered problem gamblers although it estimates 3.8% (some 2.5 million people) might experience ‘some level of negative consequences.’ But addiction rates may be higher than this. According to the Guardian, a YouGov study in 2020 found that ‘as many as 2.7% of people in Great Britain, or 1.4 million people, might be considered problem gamblers.

Lack of Parental Awareness

A 2022 YouGov survey highlighted the lack of parental awareness concerning newer trends in children’s gaming and gambling activities. The survey found that:

• 42% of parents of children aged under 18 would not be confident talking to their children about loot boxes.
• 79% of parents of children aged under 18 have never heard of skins betting.

What Should the UK Do to Regulate Video Gaming and Gambling-like Activities?

Regulating video gaming and loot boxes in the UK involves several possible measures to protect players, especially minors, that other countries have already enforced or are considering. Here are steps the UK could take when considering loot boxes and other near-gambling activities in video games:

• Age Ratings and Warnings: Ensure that games are appropriately rated based on their potential for gambling-like mechanics. Include clear warnings about in-game purchases and the presence of loot boxes on game packaging and digital storefronts.
• Transparency: Require game developers to disclose the odds of obtaining items via loot boxes and skins gambling, allowing players to make informed decisions before making purchases.
• Age Verification: Implement stricter age verification processes for accessing games with gambling-like activities.
• Spending Limits: Introduce spending limits to prevent players, especially minors, from overspending on loot boxes and other purchases. These limits could be set by players or guardians.
• Parental Controls: Enhance parental control features that allow parents or guardians to restrict or monitor their child’s access to games with loot boxes and in-game purchases.
• Research and Education: Fund research into the effects of loot boxes on players, especially children, to better understand the potential risks and develop appropriate regulations. Use this research to educate players and crucially, parents about the potential risks.
• Classification and Regulation: Classify loot boxes and skins betting as a form of gambling if they meet certain criteria and subject them to appropriate gambling regulations. This might involve age restrictions, oversight, and compliance with responsible gambling practices.
• Industry Guidelines: Collaborate with the gaming industry to develop and enforce self-regulatory guidelines. Encourage practices that prioritise player well-being and fairness.
• Reporting Mechanisms: Establish easy-to-use procedures for players to report unfair or exploitative near-gambling practices. Ensure that these reports are investigated and appropriate actions taken.
• Public Awareness Campaigns: Run public awareness campaigns to inform players and parents about the potential risks of loot boxes and gambling-like practices such as skins betting.
• International Cooperation: Collaborate with other countries that are also working on this kind of regulation to share best practices and create consistent standards across different jurisdictions.

Increase in Virtual Reality Sports

There is a thin line between gaming and gambling – one that is often blurred. The industry has recently seen a big increase in people watching and betting on virtual reality sports – glamorous virtual enactments where Manchester United can play Chelsea over and over again with random results, for example. Colourful apps for playing slot machines on your iPhone are also highly popular. Gambling and gaming are closely connected and evolving fast. A lot has changed since the 2005 Gambling Act opened up the UK to become a major world force in the industry. 

If you are concerned that you or someone you love might have a gambling or gaming addiction please don’t hesitate to give us a call. We are always ready to listen in complete confidence and to talk through the best possible options.

References

1. Adolescents and loot boxes: links with problem gambling and motivations for purchase
2. The global gaming market size was valued at $249.55 billion in 2022 & is anticipated to grow from $281.77 billion in 2023 to $665.77 billion by 2030.
3. Gambling-related harms evidence review: summary
4. UK gambling addiction much worse than thought, says survey