As video games have taken over the world, so too have they dramatically increased the risk factors for problem gambling. The inception of modern smartphones has given developers an entirely new breed of devices on which to develop and release games. Given their ubiquity, smartphones offer a platform for reaching a very wide audience very quickly. The first few waves of games released for these mobile devices were sold and priced like standard computer or console games; users paid a flat fee for access to the entirety of the game. Slowly, there began a shift from paid games to a brand a new model – free-to-play. Free -to-play games are available initially as free downloads, and users are given access to the core mechanics. However, the games feature advertisements and/or in-app purchases, otherwise known as “microtransactions.” These microtransactions can range from simple one-time purchases like an option to remove advertisements, or manifest as recurring purchases of in-game items. The latter has been observed to be a wildly profitable, yet sinister business model, given that a developer can intentionally create a frustrating, yet addictive experience that then nudges players to purchase items or boosts with real-world money in order to remove frustrations.
The implication of such a business model is the creation of an entire class of gamers manipulated into spending exorbitant sums of real-world cash to fulfill an addiction. These addiction-fueled, high-spending gamers are colloquially known as “whales.” To make matters worse, the financial success of in-game purchases has spawned an even worse practice known to most as “loot boxes.” The concept of a “loot box” revolves around paying real-world money for a random collection of in-game items, power-ups, or rewards. This system effectively mimics a roulette table or slot machine, wherein desired outcomes are dangled in front of players while their chances of winning are left to random chance. Loot boxes and other microtransaction schemes have transcended their free-to-play roots and are now also observed in large blockbuster video games. Despite such games commanding wide exposure among children, these systems are widely unregulated for their potential to induce gambling-like addiction in players. The prevalence of predatory monetization practices in mobile and console video games has ensnaring susceptible gamers and led to a sharp increase in adolescent gambling rates, and various business practices should be curbed by promoting industry self-regulation and awareness.
Adolescent gambling is on a steep rise. Alarmingly, the UK Gambling Commission reports an over 400% increase in gambling among children ages 11 through 16 in the past two years (“Young People”). Gambling disorder is unfortunately seldom spoken about, as it is mired in misconceptions. As shown by a recent survey on Canadian parents’ attitudes towards adolescent gambling, parents are blissfully unaware of the consequences of child gambling, and parents seem to overwhelmingly consider problem gambling as a relatively unimportant issue (Campbell). The fact of the matter is that gambling addiction is a compulsive, diagnosable condition, and very similar to alcoholism and drug abuse (American Psychiatric Association). Like with alcohol and drugs, adolescents who engage in gambling are at a higher risk of developing a gambling disorder later in life. Problem gambling actually has the highest suicide rate of all addictions, even surpassing alcoholism and every single kind of drug (Wright). Problem gambling can impose significant social and financial strain on individuals, placing them at risk for other addictions and health consequences, and for such a consequential affliction, the lack of awareness is shocking.
Exacerbating the issue are gambling elements in popular, well-known video games targeted at adolescents. In considering the rise of child gambling in the United Kingdom, the UK Gambling Commission attributed part of it to monetization practices in games (“Young People”). One of the most prevalent and risky forms of this monetization is chance-based rewards. Rather than purchasing a defined, tangible item, players purchase a random chance at receiving an item from a pool of potential rewards, akin to spinning a wheel or pulling a slot machine. Employing various names across the medium, from “loot boxes” to “card packs” to “bright engrams,” game developers dangle rare or powerful items in front of players and incentivize them to continually purchase chances to draw these items. The UK Gambling Commission notes that 31% of children in the UK had opened these so-called “loot boxes.”
One example comes from Blizzard Entertainment’s 2015 game, Overwatch. This cooperative first-person shooter gives players dozens of unique heroes to choose from and then throws them into battle in teams against other players. Players can level up by playing, and when they do, they receive a loot box. Loot boxes can be opened, and the player is randomly given four cosmetic items. These can include alternate appearances for characters known as “skins”, dance emotes they can perform in-game, new profile pictures, and more. Cosmetic items are assigned rarity, such as “Rare” and “Legendary,” and the random chance of drawing an item decreases with increased rarity. Loot boxes can also be purchased with real money. In a game that is exclusively played with others, there is a level of “street cred” associated with looking unique. Leveling up is often laboriously slow, and thus, players are incentivized to pay real money for loot boxes for the chance to receive rare cosmetic items that can make them look unique. The odds are stacked against them.
Due to Chinese gaming regulation, Blizzard was forced to reveal the odds of receiving items in their loot box. As per their official website, Overwatch loot boxes have an 18.2% chance of dropping an epic item, and a 7.4% chance of dropping a legendary item, the rarest item types in the game (Beck). Additionally, players have no choice what kind of item a rare item might be, or for which character. With over 29 playable characters, there is a roughly 3.5% chance an item is even compatible with the character players want to play, and then a 12.5% chance the item is the type of item they are looking for, given they have no control over if they receive a skin, emote, player icon, or other of eight possible rewards. Incredibly, there are then also multiple rewards with the same classification, such as two or three unique legendary skins for the same character. Multiplying those percentages together, there is a 0.03% or lower chance that a player receives the item they want in a loot box.
These astronomical odds can be found across the multitude of games that feature similar “loot box” systems. Loot boxes come dangerously close to gambling, and can have a similar psychological effect on players, especially young children. Emil Hodzic, proprietor of the Video Game Addiction Clinic, sees loot boxes as a “poker machine-like experience” and compares them to gambling (Lawrence). He describes how drawing a rare skin or emote can draw players into spinning the wheel over and over, and that “the interest and the attachment and the drive for what you get from that loot drop can definitely increase, especially when they’ve got the seasons thing, like [a] Halloween [event].” The seasonal events he mentions are limited-time periods where new items are added to the possible rewards from a loot box, encouraging players to buy in bulk during that period or risk missing out on time-exclusive items. The UK Gambling Commission, when considering the rise in child gambling numbers, noted video games as a key contributing factor with 31% of children having opened loot boxes (“Young People”).
In response to concerns by consumers and regulators that loot boxes constitute unregulated gambling, loot box practices have been banned in multiple countries, with new investigations cropping up in many others. Belgium was among the first to classify loot boxes as gambling when earlier this year, the Belgium Gaming Commission ruled that loot boxes were “in violation of gambling legislation,” forcing offending companies to seek gambling permits, remove the mechanic from their games, or withdraw from the market, or otherwise face legal penalties (Gerken).
The response by game companies has revolved around the issue of whether or not these monetization practices constitute gambling. The CEO of Electronic Arts, a company who has loot box mechanics in many of their popular releases, gave a statement on the controversy: “We don’t believe that… loot boxes are gambling firstly because players always receive a specified number of items in each pack, and secondly we don’t provide or authorize any way to cash out or sell items or virtual currency for real money” (McShea). This response falls short, as it is an appeal to semantics. While the legal definition of gambling in some countries may not match the exact behavior loot boxes constitute, loot box mechanics still prey on the same fundamental pleasure and reward centers that actual gambling does. As shown by earlier statistics from the United Kingdom, loot boxes can be and are acting as a gateway behavior into problematic gambling.
Another widely used manipulative tactic to extract money from consumers is the use of recurring payment sinks. Most often seen in mobile phone games, this form of monetization involves the sale of expendable items in exchange for real-world money. These games are designed to be addicting and also intentionally frustrating to a slight but not overbearing degree, so that once the player is hooked on the game but slightly frustrated, the company can then sell them the solution to the problem they created in the form of microtransactions. This model is known as the “free-to-play” model, as the games are offered for free and the main source of revenue is in-app purchases.
The mindset behind the free-to-play model can be better understood by examining the processes of companies that implement in-app purchase systems. Scientific Revenue is one such company, specializing in mobilizing big data to profile consumers and create targeted pricing models for mobile games. Its founder, William Grosso, recently outlined the company’s outlook on major trends in the mobile gaming space in an article posted to Gamasutra. He notes that companies are “increasingly enabling special in-game behaviors, limited time events, behavioral incentives, and offers targeted at individual players or segments of players” (Grosso). Some developers treat free-to-play mobile games as fast checkout lanes, seemingly developed with the sole intent of hooking players and enticing them to repeatedly spend money. Examining Scientific Revenue’s website further, their model revolves around running players through an algorithm to determine who is most and least susceptible to falling prey to recurrent spending sinks, and then offering special deals and discounts to less interested players to hook them (“Dynamic Pricing”). This raises significant questions regarding the ethics of such practices. Such algorithms are based on exploiting players into spending money and fostering an addiction, as well as maximizing revenue off those already addicted. The industry dubs such addicts “whales.” Scientific Revenue, for their part, is very upfront about this goal: “Turn free users into paid ones and keep more whales.”
It is important to note that not all free-to-play developers aim to exploit players to such degrees, but nonetheless, justifications about certain practices fall considerably short. The free-to-play game Battlefield Heroes is one such example. The game initially did not paywall players to a considerable degree, and free players could reasonably enjoy every part of the game, but the game was struggling to stay afloat. Electronic Arts considered the game “too free,” and in response, heavily restricted parts of the games, locking gameplay enhancements behind microtransactions and implementing considerable progression barriers to frustrate players into spending money to progress instantly (Nutt). The uproar from fans was swift, with the game’s forums receiving thousands of posts detailing fan outrage. However, the changes worked. The game saw a threefold increase in conversion from free players to microtransactions purchases, and a 100-200% increase in revenue. Despite backlash, the game was performing amicably. The game’s senior producer, Ben Cousins, defended the changes, stating, “‘I believe that the responsibility to control spending on any product or service lies with the consumer, unless there is a scientifically proven link to addiction as is the case with… alcohol and gambling” (Rose). This, however, fails to truly address the potential toll such monetization practices have on susceptible end users.
The role of “whales” in the free-to-play model requires closer examination. Specifically, whales are the top 10% of spenders in free-to-play games. Despite being only 10% of the player base, these high-spending players account for 70% of in-app purchase revenue and 59% of total revenue, including in-game advertisements (“Top Personas”). A report examining whales and their proclivity towards in-game monetization design linked Internet Gaming Disorder with higher average revenue per paying user (Dreier). Internet Gaming Disorder is included in the diagnostic criteria for Gambling Disorder, and defines a compulsive addiction to online video games (Sarkis). The report concludes that addicted gamers associate significantly with increased purchasing of microtransactions, as a result of vulnerability to stress and dysfunctional coping. Taking these facts into consideration, it is reasonable to assume that the inclusion of microtransactions in free-to-play video games primarily affect vulnerable gamers and rely on them for a majority of earnings. This places such practices on shaky ethical ground, as free-to-play games have low or no age restrictions, despite their potential for inducing pathological spending habits akin to gambling.
The human toll caused by compulsive spending on microtransactions can be devastating. Following a controversy surrounding loot boxes featured in the game Battlefront 2, a Reddit user going by the username Kensgold posted a thread titled, “An open letter to DICE, EA, and other devs: I am 19, and addicted to gambling” (Kensgold). In his thread, Kensgold pleaded game developers to seriously consider the harm that uncontrolled in-game purchases can have. His desire to spend money in games began at the age of 13, with a city-building game akin to Clash of Clans. He only spent around $30, but a year later began playing a mobile game called The Hobbit: Kingdoms of Middle-Earth. This game was aggressively monetized, incorporating previously discussed tactics of engineered frustration and purchasable gameplay enhancements. Kensgold bought into the game’s community, and theorizing that the game’s top players likely spent thousands of dollars to dominate the leaderboards, surmised that he too would have to spend as much to remain competitive. He spent $800 on The Hobbit in the summer of 2015, and after getting into other microtransaction-heavy games, spent a total of $4,116 on in-game microtransactions that year. This addiction was fueled by pay he received from a part-time job. When playing with friends, if he saw someone don a cosmetic item he did not have, or hold a gameplay advantage over him due to an item he did not possess, he felt a strong urge to purchase loot boxes, consumable items, or whatever other microtransactions the game offered in order to match up to others. In total, his bank statements and receipts list a staggering $13,500.25 of solely in-app purchases.
Kensgold’s story is echoed by others. The endless money sink of gameplay enhancements and feelings of envy and competitiveness among players are regularly brought up as contributing factors to addiction-fueled in-game spending. David Pietz, a 34-year old gamer from Oregon, spent upwards of $20,000 on in-game purchases over the course of five years (Hood). He says the purchases make him feel good, as he can become more competitive, and that the option of purchasing those boosts as opposed to hours of play is nice. Despite this feeling, he acknowledges that developers are preying on him, and he considers loot boxes to be an abject form of gambling, comparing them to a slot machine. He further focuses on the intangibility of those small $1-5 purchases adding up to hundreds or thousands of dollars in the long-run. David is just one of many who have fallen victim to the same monetization trap.
The entire business model of free-to-play games rests on the backs of manipulating high-spending players like Kensgold and David Pietz. Compounding that is the prevalence of gambling-like experiences such as loot boxes prevalent in even the largest console video games, and the unwillingness to back away from such practices. These games are widely available and often actively marketed towards children, breeding gambling tendencies from a young age that have led to drastic real-world increases in gambling. Gambling disorder itself exists in a society of ill-informed parents oblivious to its harmful effects. In order for all parties to make smart decisions, and to coerce game companies to limit predatory practices, the industry should practice self-regulation and assign appropriate age ratings and warnings to games that employ gambling-like monetization. This would serve to inform consumers about the potential harm inflicted by gambling.
