Researchers say loot boxes could cause overspending and lead to ‘more conventional forms of gambling’

Australian psychiatrists and researchers have called for greater regulation of video games that encourage players to purchase chance-based items, also known as loot boxes, likening them to poker machines and warning they can lead to overspending.

A Senate inquiry, which was moved by the Greens senator Jordon Steele-John and passed unanimously by the Senate in June, begins in Melbourne on Friday, and has already drawn written submissions from industry advocates, health professionals and members of the public.

Games with loot box mechanics have long proven controversial, with critics and gamers alleging similarities to gambling and warning of their appeal to younger audiences. Some players have shared stories of their own descents into unwittingly addictive behaviour, including the UK player who discovered via GDPR that he had spent over $10,000 in just two years.

In recent months, politicians around the world, including in the US and Belgium, have called for or begun taking action. The current inquiry is the first major government movement in Australia on the subject, beyond advisories.

Q&A What are loot boxes? Show Hide Loot boxes, usually embedded in games based on popular licences like Star Wars or Fifa, are roughly similar to baseball cards or other collection-based blind boxes: players pay a small fee for a chance to obtain a random assortment of virtual items. These rewards can be cosmetic (such as ‘skins’ that change the look of in-game objects) or affect gameplay (perhaps through higher stat numbers or unlocking abilities). Items usually have differing levels of rarity in proportion to their power or aesthetic desirability. Players could open a box and get an extremely rare and useful item, or get a bunch of junk – seemingly at random, especially because publishers rarely disclose the odds of winning certain items. The fee that players pay to open a loot box is usually in in-game currency that can be earned slowly through regular play. However, games are often structured to encourage players to buy the virtual currency for real money, especially for those short on time, or who feel a compulsion that has been likened to pulling a slot machine’s handle. Microtransactions, especially loot boxes, represent a continual revenue stream for publishers in addition to the initial one-off transaction of buying the game. While it is estimated that only a small proportion of total players spend any money on microtransactions, a subset of those that do spend astronomical amounts. An estimated 0.15% of players provided 50% of all revenue in the free-to-play mobile market according to research conducted in January 2014.

To fall under legal definitions of gambling, as defined by the states, a common element is that a game be played “for money or anything else of value”. This has commonly been interpreted as requiring an ability to “cash out” your virtual items, which most video games do not permit, although many games have (generally unauthorised) secondary markets where players can trade items or accounts for real currency.

Both the New South Wales and Victorian government submitted that most loot box systems do not currently fall under the legal definition of gambling, though a few submissions noted that items could still be “of value” to players in terms of prestige or other non-monetary forms of utility.

However, the majority of responses focused on the psychologically addictive elements of loot box systems, with many labelling the practice “simulated gambling”.

Academics and gambling research groups paid particular attention to the “variable ratio reinforcement schedule” – the fact that players do not know when exactly they will get a reward, driving them to acquire and repeat behaviours frequently in the hopes of winning.

“The variable ratio reinforcement schedule which underpins many gambling models similarly underpins the model of chance-based items,” said the Royal Australia & New Zealand College of Psychiatrists in a submission. “Concurrent with these behaviours are the adaptation of neural dopamine pathways which further encourage these behaviours.”

Dr James Sauer and Dr Aaron Drummond, authors of a paper cited in the Senate motion referring the inquiry, said in a joint submission: “It is plausible that those engaging with these loot box systems could have short-term consequences (eg, overspending on accessing loot box systems) and longer-term consequences (eg facilitating migration to more conventional forms of gambling).”

It is extremely difficult to compete in the contemporary games market with any other revenue model. Marcus Carter

Meanwhile, the Interactive Games and Entertainment Association – an industry representative group – likened loot boxes to football trading cards or Kinder Surprises, citing a pre-existing “surprise and delight” element.

“The same element of surprise in these other consumer products has simply been adopted with loot boxes,” the IGEA submission said.

Concerns were also raised regarding ease of access of loot box systems and microtransactions to children and other vulnerable groups, as well as the relative lack of information provided to parents and guardians.

The Office of the eSafety Commissioner estimated that 34% of young people made in-game purchases in the 12 months before June 2017, while the Association of Heads of Independent Schools of Australia cited research finding that around 20% of simulated gambling players moved on to online commercial gambling and 5% of young Australians would develop gambling problems before they were 25 years old.

Dr Marcus Carter, a former president of the Digital Games Research Association of Australia, argued that “predatory” practices were “pervasive”, citing potential variable odds manipulation, push notifications about limited-time offers and other player retention mechanics. It is, he said, like “having [a] slot machine in your pocket that actively encourages you to gamble at your most vulnerable moment”.

Carter also cautioned, however, that “it is extremely difficult to compete in the contemporary games market with any other revenue model than [loot box type monetisation mechanics]”.

“Consequently, recommendations should balance protecting consumers with how to protect Australian-based game development and the potential impact of restricting this market on an important and growing creative industry in Australia.”

Facebook Twitter Pinterest Some groups called for the Australian Classification Board to ensure that games with loot box systems were placed in age-restricted categories, or refused classification. Photograph: Blizzard Entertainment

Queensland’s attorney general and justice minister, Yvette D’Ath, noted that certain features of games such as jurisdictional issues and convergent online communities made state-level regulation impracticable, and recommended amendments at the federal level.

Submissions called for solutions including requirements for companies to publish the odds of winning items, greater and more specific content warnings, notifications to account holders at time of purchase and the ability to “opt-out” or apply a parental lock to in-game microtransactions.

Some groups called for the Australian Classification Board to ensure that games with loot box systems were placed in age-restricted categories, or refused classification all together. Australian video game classification is already regarded as among as the harshest in the world, with multiple high-profile games initially refused classification over the past few years.

The majority of individual submissions were also broadly in favour of regulation.