The loot boxes bought for real money house an ingame ‘random’ item and this item is awarded to the gamer after it’s opened.
Until recently most of the loot boxes contained cosmetic items, but the items contained in Battlefront 2 had the potential to have a major impact on the game’s competitive nature. For example, an item that could come out of the box was providing 100 percent extra life to the players who played Darth Vader. The rare coincidence of powerful items that provide a competitive advantage has led many to liken the loot boxes on Battlefront 2 to slot machines.
The instance attracting the attention of the authorities was a game with luck-based business model that was approved for children of 16 years. The US State of Hawaii Representative Chris Lee said that games containing loot boxes should be banned from being sold to children, while the Netherlands and Belgium are launching an investigation to determine whether the loot boxes are online gambling or not.
The roots of loot boxes were based on free to play games. But with the business model proving to be quite successful, it has also begun to be used in AAA productions. Although SuperData research reveals that one third of the gamers in the US think that loot boxes cause unfair advantage to people who spend money for them, though increasing number of publishers are employing the business model in their titles.
With micro transactions rising by 100 percent in the last five years, revenue garnered by publishers for in-game purchases in 2017 reached $11 billion.
Overwatch, with just the loot boxes containing cosmetic items, has provided the publisher Activision Blizzard with a $395 million prize package since past year. EA Sports earned half a billion dollars from the boxes in FIFA 18’s Ultimate Team. As Western countries have begun to reassess the idea of regulating loot boxes, Asian regulators have been strictly monitoring the business model for years and drawing indisputable red lines as to what can be done and what not.
Japan has banned a business model called ‘kompu gatcha’ in 2012, where players earn bonuses when they spend money for randomly falling items to complete the whole set. In 2014, South Korea banned all Facebook games for a while, reviewing the games that had casino-style gameplay but did not have monetary payments. China, on the other hand, made the publishers reveal how likely an item may drop, which item had how much percentage to drop in this May.
There are three different possible scenarios for the loot boxes.
1. Nothing changes and publishers maintain the current approach
This scenario would give the publishers a chance to show similar approaches to the loot boxes if regulatory calls are not successful. But companies that publish AAA games like EA, Activision Blizzard and Bethesda will have to be more careful when generating revenue from their loot boxes in 2018. At the same time, selling games without loot boxes can turn into a marketing strategy.
2. Publishers regulating the model by themselves
Publishers who do not wish to be exposed to binding regulations of the countries may establish an industry-wide binding body. A similar one happened in 1994. US senators Joe Lieberman and Herb Kohl launched the ESRB agency, which oversees the age limitations of Canadian and US games, against the government-imposed regulation of violence in games. Publishers may accept an alternative to the regulatory nature of the countries, a la the ESRB model.
3. Loot boxes are considered as online gambling
This option includes the worst-case scenario for publishers. Experts think this option has a smaller chance than the other two to become reality. Because Kinder has random prizes in many of the games used by children, from surprise eggs to digital card games.
If this happens, the $1.7 billion card collection game genre, which is based almost exclusively on the sale of random goods packages, will completely collapse. Publishers, such as EA and Activision Blizzard, may have to completely overhaul this model, which earns them hundreds of millions of dollars, and this may cause short term big drops in their stock values and earnings.
The uncertainty about the loot boxes put the game industry in a difficult position. The most profitable business model of recent years will either correct itself or risk getting sanctioned by the governments.