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Loot boxes a matter of “life or death,” says researcher (gamesindustry.biz)
52 points by EndXA 63 days ago | hide | past | web | favorite | 95 comments

> It's not something we should trivialize or laugh at or compare to baseball cards.

This seems like a strange comparison to reject. Baseball cards were originally 'prizes' packaged with other products, and they were randomized to create excitement and keep people brand-loyal while they hoped to find the prize they wanted. They're the precursor to CCG booster packs, and from there to MMO loot systems, so of course we should compare loot boxes to baseball cards!

And it's even darker than that. The major originators of baseball cards were tobacco companies, so you'd go out and buy ATC cigarettes in hopes of getting Honus Wagner. The causal chain from baseball cards to smoking to cancer was far tighter than the chain from loot boxes to problem gambling to suicide, and yet we're told that loot boxes are a real problem, not like baseball cards. Exploiting people, and targeting kids, with randomized prizes is way older than B.F. Skinner's work.

It's a minor side note of course, not the core of the discussion, but it's a bit concerning to see a researcher specializing in loot boxes botch his history so badly.

I thought this was strange too. I was just watching Gary open a few $500 football card boxes today (5 cards in each). Upon opening a box without any rare players he said: "That's what you get sometimes gambling!" So I think people know that's what's going on.

> So I think people know that's what's going on.

Addicts generally know at some level that they are addicted. The core problem is more that addicts can't break the compulsive behavior without a significant intervention.

Which is one of the reasons why these digital addictions can be such a big problem. Someone can't repeatedly open one pack of baseball cards after another endlessly. A limited number of packs exist, it requires time and energy to acquire them, and you will often have to interact with a human to get them. Those limitations serve as minor interventions. They act as a throttle on the addiction that simply doesn't exist when opening a never ending supply of loot boxes in the privacy of your own home.

In my experience as a recovering behavior addict, the difficulty partially lies in a lot of cultural concepts around addiction, recovery, and learning that run counter to what science tells us about learning. "Instantaneous recovery" is described as a random chance event, as opposed to possibly the outcome of someone who's got a better grip on how to grow because they were missing a single piece of wisdom that, when acquired or acted on, led to cascading network effects in the brain.

I get hackernews think their conscious brains are in total control of their destiny, and I do think the nerdier and smarter you are the more that can be true, but psychology basically has proven this to be a self-delusion.

Your subconscious and instinctual drives have ludicrous control over your conscious thought. Anyone who knows an intelligent drug addict knows the lengths of rationalization that a conscious brain will wrap itself into in order to justify a fix.

> Anyone who knows an intelligent drug addict knows the lengths of rationalization that a conscious brain will wrap itself into in order to justify a fix.

Talking to a clever, articulate addict can be downright scary Their ability to rationalize isn't just limited to fooling themselves and downplaying the problem to others. It's quite a surprise to hear someone justify their habit so persuasively that you have to go back and reevaluate whether they're right.

(Of course, another part of this is that a really self-aware addict is especially likely to see the motivators of their behavior. If they're consciously self-medicating, even harmfully, "just quit" is a crappy answer.)

Some stores would only have one box of baseball cards. You would literally run out after 24 packs were sold. It wasn't like baseball card stores were ubiquitous, like they are today.

There were natural bottlenecks in place, where as today, people can literally blast through 24 packs with a tap of a screen.

its the scalability of these loot boxes that are a problem now.

I mostly wanted to point out that baseball cards are a natural and historical point of comparison, but I agree that loot boxes are have moved past their predecessors. They've rolled together the tactics of CCGs, MMOs, and casinos into something thoroughly unholy.

From CCGs and even baseball cards, we obviously get artificial rarity and the basic Skinner box experience. From MMOs, we get scheduled rewards to draw players back, player-bound prizes that can't go to an aftermarket like cards, and unconstrained on-screen purchasing. From gambling, we get secondary currencies for fluid spending, the lights-and-sounds opening experience designed to make bad outcomes feel rewarding, almost-got-it visuals like a one-off reel, and banned-in-casinos tactics like scheduling wins based on money spent.

The results are genuinely alarming. I used to think these fears were overblown and 'whales' were mostly people with spare cash, but then I started to see kids interacting with freemium games. It's a distillation of decades of cash-extraction tactics, aimed at children or at distracted adults, and delivered by a vector that's constantly accessible. Honestly, it's one of the best arguments I've seen that people can be systematically harmed by access to products even without physical addiction or health damage.

Its very serious, and it IS a problem and its not just "suckers". At the very minimum, they're preying on children who don't have the capacity to understand the depths of addiction - but in this case I'd say its extremely common in adults to lack the antibodies for this type of reward system. Its predatory pure and simple, in ways that we have legislated against in the past (think of the literal snake oil salespeople - the FDA was created to combat hucksters looking to make a buck).

>At the very minimum, they're preying on children who don't have the capacity to understand the depths of addiction

I hear this kind of thing all the time, but how many of them are actually preying on children? Let alone preying on children, how many of them even have a substantial amount of children as collatoral damage?

This is not some kind of rhetorical question, I'm genuinely curious as to the numbers here. I'm only really familiar with Asian "gachapon" style games that do this kind of thing and I don't think childen are genuinely a large part of that demographic.

This is a great question, and depends on lot on how you define 'preying'.

For a brief period this was unambiguously happening; we had those news stories about kids running up thousands of dollars in freemium charges, and even a few accusations of games actively avoiding password locks (e.g. by prompting for new payment just before the lock timer).

But barring parent's phones, kids mostly don't have money. So the question becomes... If a kid is asking to have their allowance deposited into Fortnite, and trying to sneak downstairs after bed to play more Fortnite, are they being preyed on? (If it's because they want to play alongside their friends who are still on, does that change the answer?) If a kid is constantly begging their parent to let them spend money in a mobile game, are they being preyed on? (Is their parent?)

Anecdotally, I've seen plenty of younger kids (5-10, maybe) who get freemium games from app stores, and then end up begging their parents to pay for various unlocks and boosts (e.g. the $1 level skips from Angry Birds, or extra lives in Candy Crush). I've also seen quite a few kids (9-14, maybe?) with relationships to Fortnite that seem disturbingly fixated and dependent, but that's much harder to judge against the simple and innocent aspect of kids getting extremely engaged with whatever they currently like playing.

It's always fascinating to watch modern individuals rediscover wisdom that is centuries old, whenever modern people rediscover vices that are centuries old.

Baseball cards, trading card games, capsule machines, blind box toys and collectibles... they are all legalized gambling for kids (and adults) and loot boxes are simply more of the same but in digital form.

I'm not sure why the former aren't regulated more closely though.

Crane/claw machines and Stacker arcade machines are "skill" games that are very close to gambling given the irritating (though technically not random) variation in claw tension (making the game almost impossible to win at low tension) and the randomness of the last level of Stacker.

But it’s comparing them to something which existed in its time to something which doesn’t exist today is kind of tangential.

Baseball cards today don’t have a connection to tobacco.

At least there’s something physical and tangible with sports cards...I can’t say the same for Overwatch packs etc.

Are people burning through a lot of money buying Overwatch loot boxes? They are just so easy to get by playing, and they serve no in-game purpose. I really think it's a great monetization model. I paid $30 once, I get a new update every month. If you really want some cosmetic, you pay for loot boxes, and either get the item you want, or enough duplicates to get enough credits to get the item you want. I dunno, it all seems very fair to me.

I will admit that some people really do want cosmetics and will go out of their way to get them. I have a friend who really likes collecting "everything". The end result is us playing mystery heroes with remarks from her like "I hate mystery heroes so much" because it means 3 extra loot boxes a week. (I like mystery heroes, though. That's why I play it.) But maybe that's the beginning of a problem.

Similar intrinsic worth though (c. zero).

But there was still exchange value.

Furthermore, the scale and ease of purchase of lootboxes vs. baseball cards are incomparable.

People do sell loot box items in a lot of games... that often just makes the gambling problem worse, because people buy the loot boxes thinking they will make real world money.

Good timing for this - the Team Fortress 2 hat market just collapsed over a change in drop rates.

It's probably worth differentiating tradeable loot boxes, which end up used like stock speculation, from untradeable ones, which seem to be used more like slot machines.

Indeed, letting players try to scam each other seems slightly less evil than scamming the players directly.

Being unable to resell, or even often gift, the output from lootboxes makes a significant difference as well.

I disagree, with an anecdote:

I purchased a completely random lot of Magic the Gathering cards from someone getting out of the game. I turned around and parceled the cards out for a profit.

Those cards had monetary value at least twice beyond the initial purchase - to the purchaser as he sold them to me, and to me as I sold them to someone else. And that's beyond the value of playing the game.

Not only does that value let players cash out to some extent, it limits the amount 'whales' will commit to the game.

Good Magic decks range from "not cheap" to "breathtakingly expensive", but no one assembles tournament-level decks purely from opening packs; they buy at least some of the cards from aftermarket sellers. That's a fixed price for a known good, which gives some confidence that people are making rational buying decisions even when they spend a huge amount.

Even casual players are quite likely to open packs, find some things they want to build around, and then fill out what they need by trading or buying. It offers a backstop on the entire system that digital and especially non-transferable products simply don't have.

Many loot box items for games can be traded, so markets exist to sell them for real world money. This makes the gambling problem worse, though, not better, since people then think they can make real money and gamble more.

That makes cards worse, since they have encumbrance.

It feels to me that the issue is game studios are too large. Indie's don't engage in this behavior and still produce very excellent games without going bankrupt (Factorio, Stardew Valley, Stormworks). Even smaller developers that choose a Free-to-play model with transactional elements (Path of Exile) can do it in a very player friendly way that aligns with game value.

On the other side are companies like Activision and EA that will sell you a $60 game and expect you to spend another $60 in micro-transactions, screaming "more profit" the whole time.

My advice is choose who you support with your money carefully.

Only two of those games have 3d graphics: one has an mtx revenue stream, and the other is a stylized low resolution design and conveniently has no real background to render.

Successful indies survive as they do because they stay within their severely constrained production budgets. Modern AAA's have large studios and insane budgets (Red Dead Redemption 2 is estimated to have cost around $1B to produce) because modern computer graphics are really, really time consuming and expensive to produce.

If we assume that RDR2 did cost $1B, and Rockstar nets an average of $40 per sale, they'd have to sell 25 Million copies just to break even on box sales alone. Reports are that they've hit that number of units shipped as of this month, but again, that's just to break even (and assumes the game has never been sold at a discount, and that physical copies have the same margin as digital).

That $1B number gets some real doubt from me. I'd bet the real number is a few $100M lower. No way rockstar had over 1k people working on that rd2 for eight years at ~$100k avg.

Don't forget marketing budgets. It's not unheard of for the really heavy hitters to spend at least as much marketing a game as developing it: https://en.wikipedia.org/wiki/List_of_most_expensive_video_g...

Without microtransaction and lootbox revenue, developers might have to not build essential features like ensuring horse testicles shrink or enlarge to match the ambient temperature.

How would players cope with this lack of equine testicular realism?

It's true indies and smaller studios can make some great games but there's yet to be a real way to make a large game with lots of detail and nice graphics other than throwing tons of people at it to place all the random street trash in The Division or figure out the building destruction in Battlefield and those people are expensive.

I'm not defending the microtransaction money grabs EA has been making recently but there is something to be said for the fact that games have STAYED $60 for years while getting more detailed and more expensive to make.

Path of Exile does have (cosmetic) loot boxes though. They didn't always, but they do now.

Not a problem for me because I just don't buy them, but just not buying them isn't really a solution for people with a gambling problem.

Games like Factorio do show indeed that it's possible to just sell an excellent game for $20-30 and be profitable.

Now, I don't have a source for this, but I heard valve for example stopped making single player-pay upfront games because the a one time profit of $200 million simply isn't worth it compared to, let's just call them 'modern monetization' techniques.

Path of Exile doesn't have just cosmetic loot boxes, you can actually buy game upgrades! You can unlock inventory tabs and get better sorting.

And that's what I mean. Those features are a few dollars, you almost always know exactly what you're getting, and they're generally only useful after you've put a few hours into the game. For a free to play game, that's a totally valid use in my book.

> but just not buying them isn't really a solution for people with a gambling problem

Someone having a pre-existing gambling problem isn't the fault of the developers, nor is that what the researcher in the original article is claiming. The researcher claims that allowing kids to engage in buying loot boxes fosters a gambling addiction later in life.

Yeah I'm aware of how their monetization works and I think it's great as they at least never force you to buy them and everything eventually becomes available for a flat price in the shop at some point.

> Someone having a pre-existing gambling problem isn't the fault of the developers, nor is that what the researcher in the original article is claiming. The researcher claims that allowing kids to engage in buying loot boxes fosters a gambling addiction later in life.

Kids can also buy lootboxes in PoE. Ok sure, technically kids shouldn't be playing PoE, but that's just not reality.

> Games like Factorio do show indeed that it's possible to just sell an excellent game for $20-30 and be profitable.

Sure, but that means nothing since games of the quality of Factorio come along once in a blue moon. It's nice that selling filet mignon is profitable, but selling a decent burger has to be profitable too to have a viable industry. That has proven to be difficult in the games industry under the current circumstances.

(And if any here disagree, ask yourself, "is the software or service I'm building for my employer comparable to a Factorio or whether it's just another average product/SaaS and whether or not my employer "deserves" to be profitable to sign my paycheck".)

It's not just that: Factorio makes it harder to games like Factorio to be profitable.

The way we consume videogames is essentially unique among media, because the time investment is so varied. Making a superhero movie helps saturate the market for superhero movies, but almost no one directly decides "instead of going to the rest of the MCU, I'll just rewatch Iron Man fifteen times". But with videogames, it's unremarkable to someone who loves two games give one 50 hours of playtime and the other 1,000. If you're going to enter the market, competing with that 1,000 hour title is a much tougher challenge.

Factorio is like an an endless filet mignon; since it's not sold on graphics or story, that $20 purchase will endure to challenge all of its successors. (Satisfactory might catch on, but if it does the niche will be one step more exhausted.) Minecraft is a $30 game that's still eating play hours among people who've owned it for years; continuing monetization has depended not on a sequel but on ports (Pocket Edition), peripheral merch, and new generations of players; that's very obviously not a model most games can use. Dwarf Fortress is a niche of its own, near-permanently filled by just two donation-funded developers. (Dominions is less famous, but similar: a two-man team has kept people playing their output for twenty years.) Even AAA products like Civilization struggle; lots of people avoid buying Civ games at release because they compare unfavorably to the patched-and-expanded predecessor.

Nor is it a coincidence that all of those games are immersive strategy or construction titles. On one hand, they're generally modest in terms of graphics and campaign, so there's no obvious need to switch to newer titles. And on the other, they're modest in graphics and server load, so a small team can make a popular title relatively cheaply. The end result is that you can make a solid profit on this sort of cheap, no-loot, no-subscribtion game - if you're one of an inherently small number of winners in a constrained design space.

I don't think there's anything wrong with this. It's a triumph that $20, thousand-hour games exist, and the people making them actually do seem to make solid money. But it's worth remembering just how niche an arrangement this is. It's possible for media to exist that is at once desired and unprofitable to create; the Factorio equivalent for an FPS or CCG might well be such a product.

Having played both Factorio and Satisfactory, while they scratch the same itches, they're different games. And that's why they're both successful - with different groups of people. All of my friends who entirely shunned Factorio love Satisfactory.

You can't remake the same game with minor upgrades and expect players to drop another $20. That's just reharvesting the same crops. No, you do in fact have to try and have something new. That's the nature of media - not every crappy action movie deserves it's $11 ticket either.

$20 on Factorio is probably the best money I've ever spent on a game, having played over 1,000 hours. In other words, they've managed to make something endlessly addictive without any gambling element at all...

Although from an industry perspective, that's bad news because you're paying $0.50/hour for entertainment. And without room for a new campaign or a graphics upgrade, whoever wants to sell you your next 1,000 hour game still has to compete with Factorio. Minecraft, Terraria, Factorio, and maybe Satisfactory have all done well, but each one contends with all the rest.

Don't get me wrong, I love Factorio and I think it's a way more valuable achievement than any of the loot box games under debate. I also think it's a viable development model: Factorio was in the top 100 for 2018 Steam revenue, with a 20 person studio. It's just interesting that unlike other media, videogames have this order-of-magnitude variation in how much they compete with one another.

(This ties into a much longer narrative about the decline of single-player campaigns. The beauty of e.g. Dragon Age is that you can make an engrossing game and build, not undermine, the market for your next one. But as the difficulty of development shifts towards hard-to-reuse things like character models, there's an increasingly strong incentive to emulate CoD and R6 and wring as much longevity as possible out of each iteration.)

Curious which category you'd classify Valve's monetization techniques.

The big ones Counter Strike and Dota are entirely cosmetics after all.

Indies also make lootboxy games, but they don't last because they get bought or cloned by companies like Zynga. and big companies also make non-lootboxy games. But when an indie makes a lootboxy hit, then it becomes a big company with its big money.

This caught my eye

"It turns out if the seller publishes some list of probabilities and lies about them, the seller can make significantly more money," Elmachtoub said. "There is a benefit for lying. Since there's a benefit for lying, there must be regulation around this."

Elmachtoub said games need to be monitored to ensure publishers are actually following the probabilities they post, and it needs to be tracked not just in aggregate but on the individual consumer level because it's otherwise possible to gain more money by extorting specific individuals.


"Another unique thing about loot boxes versus baseball cards is that companies can see your inventory. That's a fundamental difference. Being able to take advantage of that would obviously be beneficial to the seller and allow them to exploit more.

They raise a valid point with a needlessly sensationalist title - but it does feel like a natural (d)evolution of the gaming industry. This is what happens when a studio becomes successful, hires a lot of people, then tries its hardest to maximize profits.

The real solution here is that parents need to educate themselves on how to lock down permissions on game purchases and manage their children's playtime/addiction levels. Government regulation is not a good substitute for parenting.

Remember, as a consumer, you can still support games that don't employ these tactics! Personally, I have way more fun playing Rimworld, Factorio, etc.

Are you saying the same thing about casinos? That children should be able to go to casinos? And the parents should just make sure their children don't actually go to the casino?

That sounds wholly crazy to me. Loot box mechanics should automatically result in a mature rating for the game.

It's not that I don't think it's a problem, it's that I think regulation isn't a good solution. Game companies would just find a way to circumvent the system. What if loot boxes could be bought with in-game credits? What if you could buy short term in-game credit boosters for real money? The regulation route, if continuously followed to address the problem, would end up with all games being rated 'M', or being subject to high regulations/restrictions which would affect anyone who wants to enjoy them. After all, games themselves are designed to short circuit your brains reward system to give you hits of dopamine. The root of the problem is that kids aren't always capable of understanding these complex issues, and it should be up to their parents to inform and constrain how their kids enjoy games.

I don't have a problem with all games containing even the hint of loot boxes getting the mature rating. The regulations should be just as strict as for casinos. If a game company wants to run a casino along with their game then it's their right but then don't expect to be treated differently.

In that case - any game that has purchasable content would be rated 'M' and it isn't a far leap to just say that every game should be rated 'M' because of the potential for addiction. What about candy and soda? Sugar is also addictive

Loot boxes and in game purchases aren't the same thing.

If the companies are already doing bad things, arguing "let's not regulate it because they might do bad things" doesn't help the situation at all.

It's not just kids. It's also adults, many of whom have an addiction issue with gambling. Parents becoming experts on gaming and microtransactions won't solve the issue.

Given that the industry refuses to self regulate, and they aren't reliant on rational consumers to the point where actions that rational consumers make would matter, what is the next solution that isn't regulation?

The big issue right now is even if parents wanted to it's hard to impossible to completely lock an account of out spending money buying these short of removing all payment features from the account.

> Government regulation is not a good substitute for parenting.

I don't get this attitude. You seem to agree that loot boxes are a rather stupid idea born out of oversized companies using psychological tricks to make money.

Given that, there is simply no cost to the government banning this practice. Requiring, instead, every single parent to learn about the myriad ways companies may come up with to exploit their children seems wasteful at best. But of course not every single parent would be able to avoid every single trap, so this stance really is just about accepting some number of people to be the pray of corporations.

This sort of argument is surprisingly common: toxic food additives, usury credit card or insurance rates ... literally any scam ever invented: you'll find people arguing it's the victims' fault for not being experts in toxicology or investment.

Why do you believe that the default should be "allow gambling" with only the option to opt out, with a different method of opting out with every singe platform.

Imagine if that were our default computer security stance. "Let the websites do whatever they want; it's up to the users to educate themselves and limit what websites can do."

I think that loot boxes should be subject to the same laws as slot machines in the US (since they are online slot machines, right?).

If your state doesn't allow slot machines and online gambling then no loot boxes for you. If it does, you must also be 18 / 21 to purchase a loot box; depending on state law.

What's the loophole currently being exploited that prevents loot boxes from being classified as online slot machines?

This is also a deep hint to a potential worst case outcome of loot boxes. Pinball machines experienced a prohibition because of their similarity to slot machines. States that do not allow slot machines stopped allowing pinball machines. Eventually those states started to relax the prohibition based on whether or not pinball machine scoring systems could be determined by player skill and whether or not pinball machines produced payouts/rewards/prizes. But they started by banning all pinball machines, and bankrupted a number of companies in the industry.

Videogames should have been a lot more careful to avoid this situation in the first place. It's not like the pinball prohibition was that long ago (New York was the last state to stop prohibiting pinball machines in 1976), nor that it was that far from home because it impacted laws on early arcades where videogames got their start (literally right next to pinball machines, and sometimes by the same manufacturers).

It probably is a stretch for states to simply ban all videogames in 2019, but that sort of reaction is certainly possible in the right climate, and it has happened before.

Interesting... I can see video games getting banned on the basis of addiction, but not specifically because of the loot box mechanic; since it can be removed. Pinball on the other hand would have had to become free?

I just hope that once someone starts enforcing our existing laws that video game companies will abandon this idea since the access and implementation to the boxes would be different based on the user's physical location.

That was the argument for pinball prohibition starting by just outright banning all pinball machines rather than sort them into categories: they were hugely addictive. The loot box mechanic draws the public scrutiny of the comparison to slot machines, but that worst case is that the scrutiny continues on to find the entire category too addictive. (Which is exactly the progression pinball prohibition took: at the time there were an increasing number of pinball machines which we might call today more "pachinko-like" / "plinko-like" that initially grew the ire of politicians and family groups, but after evaluation they started to feel all versions of pinball were addicting and needed to be managed.)

> What's the loophole currently being exploited that prevents loot boxes from being classified as online slot machines?

Prosecutors' reluctance to make a case and uphold existing laws.

Many games lack a way to convert from in game items to real world money so I can see where existing gambling things wouldn't apply, eg only a few games have a market setup where you can buy and sell items for real money like TF2. Some even completely lack trading so there's not a way to get money for them period.

But keys cost real money. And people want bragging rights, not money.

Yes but without the conversion to real money on the back end it doesn't fit perfectly into existing regulations. It's also partially that they've just not really been on the radar in a big way until the past couple years.

I'm not saying why they shouldn't I'm saying why they haven't so far.

I've never understood this, all economic transactions are voluntary, who am I (or in this case, you) to tell people they can't make that decision?

People who make bad decisions shouldn't be protected from the consequences of their actions. I do agree that loot boxes and gambling mechanics are pretty bad methods of monetizing a game, that's why I don't buy them, but I don't presume to tell other people what they should think of them or the business owners whether or not they can add them in.

This assumes the lack of negative externalities from such a system.

When my nephew was 7 years old, he ran up a £200 bill for nonsensical digital objects on Xbox Live during the 360 era. Microsoft reimbursed my brother after we described the problem to them.

This was a little while before the media even knew there was a story. Given the early success of Xbox Live, I suspect they probably saw the issue coming long before the recent witch hunt, and did the right thing.

I think as a burgeoning social problem, it can definitely be likened to what the fast food chains are now penalised for. And as it's a burgeoning problem, there are probably no (edit - meaningful long-term) research projects to explore the link between free to play marketing and gambling problems later in life, but I'd be surprised if there's no link there.

I think it would be remiss of any organisation to call for a total ban, just as it would be for any group to call for a ban on cake... But I do think laws prohibiting the offering of in-game products to certain age groups, for cash should be considered.

Beyond that though, I think loot boxes and in-game economic structures are fair... ummm... game...

Cake at least has a natural limit, you'll be physically sick. Loot boxes the physical limit is probably going to make everyone who isn't Bezos poor.

I agree wholeheartedly with the concerns about gambling.

I have another concern to toss on the pile while I'm at it though. This what-if was presented by Bellular a few days back: (TL;DR: The profit ratio for microtransactions is orders of magnitude larger than expansions)

Assuming a new WoW mount:

- Takes about 1 man-year of effort to create, costing the company $200,000

- 10% of the player population will purchase the mount at $25

- WoW has approximately 4M active players

That mount just made Blizzard/Activision $10M, at a cost of 200,000. That's a profit/cost ratio of 50:1.

It gets even worse when you factor in loot boxes. New mount has a 1% chance (which is very high) and loot boxes are $1 each? That's going to net (a very approximate) $40M in profit for that one new mount, raising the ratio to around 200:1.

Let's compare that to releasing a new expansion:

- 100 man years of development effort (a team of 50 for two years, probably on the low side)

- $10M in marketing budget and other overhead

- 4m players purchase it at $40 each

That's $160M in revenue, but with $30m in costs. Profit to cost ratio of 5:1.

Given the orders of magnitude between the two, there's a strong incentive to only cater to the 10% of players, at the expense of the other players. How will that impact our games going forward?

> Given the orders of magnitude between the two, there's a strong incentive to only cater to the 10% of players, at the expense of the other players

This model is prevalent in mobile gaming as well. Many popular games have IAP of $50 - $99, that you can buy multiple times per month, which is targeted more towards a 1% than a 10%.

> How will that impact our games going forward?

I think it affects many industries. Real estate is one of them. I've lived in a few cities with rising real estate costs where the majority of new mid-rise apartments are luxury, clearly priced towards those 10% or less.

People who have money, want as much money as possible now, at any future cost. This is simply the general outlook of many businesses at the moment. Of course, this is unsustainable, and it will probably crash at some point.

> That's $160M in revenue, but with $30m in costs. Profit to cost ratio of 5:1.

This doesn't consider the immense second order effects of releasing an expansion. Releasing a new expansion maintains and increases player engagement - i.e. monthly subscription fees. Without new expansions to keep the player base engaged, players won't purchase cosmetic additions like mounts.

You're right. But it doesn't change that the focus of the studio changes from "how do I keep these 4M players playing my game" to "how do I keep these specific 400,000 players purchasing my microtransactions".

And given some of the monetization industry talks, the strategy doesn't necessarily include "make a good game".

> "It turns out if the seller publishes some list of probabilities and lies about them, the seller can make significantly more money," Elmachtoub said.

Perhaps contrary to the author's point, the ability to reap rewards by defrauding players regarding probabilities of payouts seems to imply some rationality in purchasing the loot boxes.

> "There is a benefit for lying. Since there's a benefit for lying, there must be regulation around this."

In all things there is often a short-term benefit to be derived from lying. It doesn't necessarily then follow that "there must be regulation around" all things.

Obtaining money by deception is already regulated: it's fraud. People publishing deliberately inaccurate lootbox odds should be prosecuted and given, at the very least, a criminal record and large fine.

Part of the reason gambling is particularly regulated is because the random nature of payouts can make fraud undetectable to the victim.

It's not like I could play the Powerball lottery enough times to prove jackpots pay out at the advertised rates. If the draw was conducted on some opaque, unauditable remote server, they could fiddle the draw so jackpots over half a billion dollars all went to the CEO, and it'd be undetectable.

> It's not like I could play the Powerball lottery enough times to prove jackpots pay out at the advertised rates.

You don't have to play the lottery yourself to analyze the results. (Not that anyone participating in a state lottery is paying much attention to the odds... if they cared about that they'd take their money to an actual casino where the house takes a much smaller cut.)

> they could fiddle the draw so jackpots over half a billion dollars all went to the CEO, and it'd be undetectable

It might be undetectable once. Even twice might be written off as coincidence by some, though many would rightfully be convinced it was rigged and stop playing. Sure it's not impossible for that to happen by chance, but the probability of the CEO winning multiple large jackpots is remote. Anyway, most lotteries and the like bar their own employees and close associates from participating; their business rests entirely on their reputation for fair play and they can't afford that kind of conflict of interest.

There are algorithms which can be used to generate provably random results. For example: Pick a random 256-bit seed and announce the hash of that seed to the public. Wait for six blocks to be mined on the Bitcoin blockchain and then announce the seed. The random result is determined apply a predetermined formula to the hash of the seed value plus the blocks mined during that interval. The lottery operator has to choose the seed before they know which blocks will be mined, and the miners don't know what the seed value is until after the fact, so no one has the ability to influence the result.

Here's a question - if you have 1 in 1,000, or 1 in 1M odds of getting a specific item, is it acceptable to list those odds as "<1%"? That's what occurs today when companies are forced to reveal rates. It's misleading at best.

If "<1%" is so successful in misleading people and increasing sales, why wouldn't they just do it without the regulation requiring it?

> why wouldn't they just do it without the regulation requiring it

Likely because it has a negligable effect, and it's harder to do than not to do. Does a gambler stop gambling despite knowing their odds of beating the house are less than 1%?

If it is a negligible effect, then it shouldn't matter much if regulation requires notice and it has negligible effect either. Seems like a non-issue.

> It doesn't necessarily then follow that "there must be regulation around" all things.

The industry has proven that it can't regulate itself. The consumers can't push back against it, because the industry is becoming self-sufficient by only preying on a small minority of the users and doesn't appear to care about the others.

What's the logical next step that isn't regulation?

Life itself is also life or death

Its also life-or-death for much of the game industry. The same way most restaurants and fast food chains wouldn't be able to exist without "cheap tricks" targeting primitive brain circuity (e.g. MSG, sweeteners, frying), most game studios would not be able to survive based on box sales alone. They need a skinner-box to extract more money out of people. Creating a game that is compelling enough to extract ever-increasing value out of people based on content, quality, and narrative alone is extremely difficult. Making a "random loot box" system is extremely easy and pays far more, even though its the "easy way out". Of course, like fast food and cigarettes / drugs, the consumers also bear responsibility. Rather than supporting "clean" games with something noble to offer, the games that exploited these tricks virtually printed money, while the "old timey" approach of spending years making a quality title gave way to the more casino-like interactions we see today. The truth is fast food, drugs, and gambling are just more fun than home-cooked nutritious meals, healthy habits, and deep/challenging engagement.

Pretty much everything fits these patterns of reduction to the basic animalistic appeal: movies, music, clothing/attire, dating apps, even our politics. Its just easier and more effective to appeal to the limbic system than to figure out something new and profound.

>most game studios would not be able to survive based on box sales alone.

Where are you getting that? It's the basis of your entire argument and there's nothing to back it up. The loot box model is relatively new and we have a plethora of successful games (most) which don't use them at all.

This has been proven false multiple times, including EA explaining to their investors that removing lootboxes from Battlefront 2 had no material impact on the profitability of the game.

In 1999, I could go into a game shop and pay £40 for a finished game with a story.

In 2019, it costs £60 (or more for a "gold edition" or whatever). It isn't finished, has colossal bugs that require 50 GB patches just after launch, barely has a story (because listening to 13-year-olds shout ethnic slurs at one another is the new having a well-written story—and every developer thinks stories are passé and we all want "Live Services") and then tries to use psychological tricks to try and induce a gambling addiction.

I opt out and play the old games from the 90s and early 2000s that don't do all this BS.

Ultima retailed for $80 in the 80s. Prices have been fairly flat, ignoring inflation, for decades.

Games that dont have loot boxes outnumbers the ones that do. And there are definetely very good aaa examples in such games. Those games/companies survives just fine.

And it is not like all games that have loot boxes games are f2p game. Quite a bit of them are full price games + lootboxes

they could survive on box sales alone, but they would have to change back to what they used to be.

edit: And let me point out, you can make money online without lootboxes, plenty of companies do, so it's not as if the revenue stream completely disappears.

It is all about if people will be willing to have less detailed games or pay 90-100 dollars for the same games, or increased subscriptions.

Or fewer AAA games.

And once your art budget is in the tens of millions, 'less detailed' is often a pretty small difference.

They could just charge more for the games. Video games used to be a lot more expensive in the 1990s and people still bought them.

Did they? I remember then being £20-30 (GBP), whilst now they're £60. I'm sure the cost of living hasn't doubled??

I only got my first game system, N64, at the end of the 90s though.

Can't speak for the UK, but in the US, I remember a typical game was $50 new when I was growing up in the late 90's, compared to $60 today. According to an inflation calculator, that same game in 1999 would cost $77.

I can't find figures for UK but MSRP for Ocarina of Time and Breath of the Wild were both $60.

I think my, apparently false, view comes from getting in well after launch on N64.

In the US, yes. Games have not increased in price alongside inflation. I recall paying $80 for certain Nintendo (NES) games. Most new games were $60.

Whatever happens with WoW Classic will echo across the industry.

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