In the free to play gaming market, loot boxes pose a real quandary for game developers. Using the Japanese gacha system they are a popular game mechanic for increasing player engagement. However, the recent controversy with a number of high profile paid games (using loot boxes) is a cause for concern. It appears that core game players don’t like loot boxes. They have already paid for the game and they don’t see the need to have to pay for new content.

With free to play games it is different. Casual game players are used to daily reward mechanisms. A number of countries are now looking at the legality of loot boxes as a form of gambling. Are they a form of gambling? As the in-game currency cannot be used outside of the game, in most cases they have been shown not to be a form of gambling. However, loot boxes in games have now grabbed the attention of legislators in a number of countries.

Game developers need to be very careful in their implementation of a gacha type loot box system. They need to ensure it is property designed to reward players for ongoing play and not give an unfair competitive advantage.

For us we see it as a systematic structural problem in the games market as a result of the prevalence of free to play games. Professional game developers need to be remunerated for creating quality games that provide hours of entertainment - even if they are free to play. Google and Apple are delighted with dominance of free to play games as it effectively gives their customers free content. Yes, there is the freemium business model but it only works for a tiny number of large publishers. Both Google and Apple have a big part to play in correcting the market to so that there is a balance between free content and content creators getting paid. Unless this occurs, the games market will stagnate with no innovation and everyone making the same type…. With lots of loot boxes!