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If you’re a gamer, you know all about loot boxes. We haven’t covered them or the associated controversy here, as both are slightly outside of the usual topics we cover. But we do in fact cover digital marketplaces and how companies and industries react to market forces and it’s becoming more clear that the gaming industry and the gaming public are on something of a collision course over loot boxes.
As a primer, a loot box is a digital randomized thing, typically purchased in-game and resulting in a random reward of in-game content. Some content is more valuable than others, leading to some referring to loot boxes as a form of gambling, particularly when some of the game content can provide benefits to players in multiplayer settings. Overwatch popularized loot boxes somewhat in 2016, although mobile games have used some flavor of this kind of monetization for pretty much ever. The gaming public never really liked this concept, with many arguing that it breaks in-game competition by giving players willing to pay for loot boxes an advantage. But the loot box fervor hit its pique after the release of Star Wars Battlefront 2, with EA being forced to massively alter how its loot boxes worked in game. Since then, loot boxes are a topic of consumer backlash as a general rule.
Making it somewhat strange, therefore, that the gaming industry seems to want to embrace loot boxes as its dominant business model.
With all the controversy, scrutiny, and international regulation randomized video game loot boxes are facing these days, you might think the practice of charging players for a chance at unknown in-game items might be set for a precipitous decline. On the contrary, though, one analyst sees spending on loot boxes increasing by over 62 percent in the next four years to become a $47 billion piece of the industry. By then, loot boxes will represent over 29 percent of all spending on digital games, the analyst said, up from just under 25 percent currently.
In a newly published forecast of the global game market, Juniper Research concedes that developers are "effectively encouraging a form of in-game gambling" with loot boxes and using that addictive potential to "extend both the lifecycle and engagement of games titles to their audience." These kinds of non-traditional money-making techniques are a practical necessity for developers squeezed by increasing costs and stagnant or declining up-front game prices, Juniper says.
Whatever your opinion of loot boxes, it should be clear that there is trouble on the horizon. Individual opinions will vary, but it seems clear that the majority of gamers are strongly against loot boxes, and that majority is very, very loud. Put another way, the vocal reaction to loot boxes is almost universally negative, with barely anyone at all praising their use in games. The market is sending the gaming industry a very clear message and the industry has apparently decided to place an awful lot of poker chips in dismissing that message.
Even governments are getting in on the backlash, actually, for a variety of reasons. Some seek to protect consumers from blatant attempts to extract more revenue from them by gamemakers, while others want loot boxes regulated as a form of gambling.
Yet the gaming industry is so all-in on this that Juniper thinks both the public and governments will allow loot boxes to exist merely because gamemakers are making so much money off of them right now.
"Whilst some restrictions may be put in place by government and regulatory bodies, the practice is unlikely to be banned outright simply due to the effect it would have on the games industry as a whole," Juniper writes in a recent white paper on the subject. And while platforms like Steam have recently cracked down on third-party "skin gambling" sites, Juniper argues they’ve resisted calls to ban skin trading altogether for the simple reason that they make too much money from their five-percent transaction fee.
That all works at the governmental level, where regulatory capture is indeed a thing and monied interests likely will indeed sway politicians, but the market forces in the public are another matter. Already the public has thought of loot boxes as generally abusive of the industry. Free to play mobile games are one thing, but the moment EA tried this in a paid-for console game, the shit hit the fan.
Loot boxes aren’t the only business model available to the gaming industry, but they are fairly unique in how disliked they are. If the gaming industry doesn’t correct course soon, we could easily see a slowdown in an industry otherwise primed for massive growth.
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