Lootbox Epidemic

Although I originally promised another article, lootboxes are becoming far too much of a hot issue to not talk about. Every game seems to have their version of the lootbox. Today, I want to address some topics that are coming up about loot boxes.

Are Lootboxes Gambling

No.

With gambling, there is a high chance you will receive nothing in return. For instance, if you put money in a slot machine, you have no guarantee you will get anything in return. With lootboxes, there is a guarantee you will get back something, but there is no guarantee you will get back what you want. Lootboxes are analogous to collectible card games. If you buy a pack of Pokemon cards, you are guaranteed to get a set number of cards, but you’re not guaranteed a Charizard. Another example is gatcha machines in Japan. These are machined where you put money in and you have a chance of getting a toy. Which toy you get is not guaranteed. This is similar to the ESRB’s reason lootboxes aren’t gambling.

ESRB does not consider loot boxes to be gambling. While there’s an element of chance in these mechanics, the player is always guaranteed to receive in-game content (even if the player unfortunately receives something they don’t want). We think of it as a similar principle to collectible card games: Sometimes you’ll open a pack and get a brand new holographic card you’ve had your eye on for a while. But other times you’ll end up with a pack of cards you already have.

Everyone is focusing on is the fact there is some chance with a lootbox, but as the ESRB affirms, chance alone does not constitute gambling. Insurance, for instance, has chance. You only get paid when your house burns down which may never happen. Lookboxes always give you something. Slot machines usually don’t give you anything.

Are Lootboxes OK

No

The issue I have with lootboxes is you should not hard to buy anything if you already bought the game. When you buy a game, everything that is in that game should be available to you. You shouldn’t have to buy a $60 game and then either grind for in-game currency or have to spend more money to get the game’s connect. The same goes for cosmetics. This is content that is in the game that the game purposefully tries to keep away from you.

If the game is free to play, then microtransaction are acceptable as there is no entry cost into the game (they are bad for other reasons though). Customers already paid for the game. They don’t need to be charged for little add-ons

Why Do These Practices Exist?

Two reasons: development cost and greed.

I’ve discussed before that DLC and other similar things are done to recoup the outrageous development cost these games have. With EA’s closure of Visceral games, a former employee provided insight on how bloated these budgets are getting. From Twitter

Dead Space 2 cost 60 Million dollars to make and they were merciless with their budget. they only sold 4 mil and that wasn’t enough….cause you gotta spend 60 million dollars marketing it and you take a huge hit from MS and retailers taking their cut

He added that the marketing cost of these games is almost as large as the budgets and the cut to retails is about 50 percent ($30 on a $60 game). See here

The solution to the problem is simple: shrink the budgets. As games became HD, development cost and time got longer and longer, but the improvements from graphics is miniscule. But for whatever reason, companies continue to prioritize the visuals over the game themselves. I had a conversation with a friend who discussed creating an open world game with procedurally generated elements. On paper, the idea seems unfeasible. However, we concluded it would be easy if the game used graphics similar to a PS2. For a real-world example, look at Minecraft. The games looks like it came from the N64 era, yet it went on to sell 10s of millions and made the creator a billionaire. You don’t need to make a 4K masterpiece to turn a profit.

But here’s the secret: that’s what these companies want. Big companies like EA and Activision want to snuff out the competition, and they do this by making games budgets bigger and more ridiculous. If you haven’t noticed, numerous game studios closed around the 7th generation, and this is good for EA and Activision. It means they reduce the competition in the industry and even have the opportunity to buy out the stellar firms who could otherwise not compete.

And don’t let these companies make it seem like they are suffering. EA generated $4.8 billion in revenue and $967 million in net income for 2017. Net Income, as a percent of revenue, was 20 percent. This ratio is far greater than the 1 percent it can be for other companies. Moreover, revenue and net income decline from 2016 where revenue was $4.4 billion and net income was $1.2 billion. EA, and others, complaints about development cost is nothing more than crocodile tears. (source)

What To Do About Lootboxes

There are two good actions you can take. First, don’t buy these games. Even if you don’t buy lootboxes, you are still contributing to the game. See, certain consumers called whales drive the spending for these products. If there is a robust community playing the game, the whales are more invested and will spend more. However, if the game is akin to Lawbreakers and has almost no one playing, no one will spend money on it.

On the other hand, make fun of lootboxes. Companies like EA and Activision care about their public interest, and if you’re there making lootbox memes on everything they tweet out, they are going to get upset real quick. These companies want you to buy the game and spend more. Consumers won’t spend if everyone on the internet is saying “lol lootbox.”

DLC ages like milk. Companies come in with a new scheme, milk it for what they can, and then bail. Lootboxes will pass, but a new scheme will emerge. Stay frosty!

 

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