MMO lockboxes: Market impact, regulation, and the letter of the law

    
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GIbiz posted an article earlier this week peppered with quotes from Mat Piscatella, an NPD US games market analyst who suggests that the recent lootbox/lockbox grumbling hasn’t had any effect on sales: “The loot box or microtransactions controversy has not yet resulted in clear noticeable limitations of the sales potential of the games with [those mechanics].”

The assessment should surprise absolutely no one at all, since while MMORPG players have been fighting back against the rise of the lockbox for at least six years by our count, mainstream PC gamers are only now coming to terms with the more pleasantly named “lootbox” phenomenon. It’s, uh, probably going to take more than two weeks of mainstream complaining before markets and governments show any signs whatsoever of reaction.

This, incidentally, is basically the same argument that popular vlogger Jim Sterling makes in a satisfyingly profanity-laced video, which I’ve tucked down below because his rants make me happy.

Indeed, based on our own poll from earlier this week, it’s pretty clear that even in a community that overwhelmingly refuses to pay money for lockboxes, very few of us actually steer clear of games that have them, most likely because very few games abstain from the practice in the first place, and most of us aren’t willing to give up our entire hobby.

In other lockbox news, MMO blogger Serrenity is back with an analysis on whether lockboxes constitute gambling from a legal perspective, which matches up with our own reporter’s conclusions last year. In a separate piece, he argues (convincingly) that even if you aren’t concerned about gambling paying for the online gaming industry, you should probably be concerned about the fact that the complete lack of regulation, oversight, and transparency in how lockboxes actually work means studios could be literally cheating the whales left and right, and we’d never know.

Gamasutra, meanwhile, has declared that “the game industry must face up to its gambling problem.”

“Its failure to self-regulate, to develop wide ranging ethical standards for the practice, will lead inevitably to the imposition of regulations from without,” Katherine Cross argues on Gamasutra. “Gaming studios have, for the moment, been glorying in the grey area created by technological novelty, after all. Most people still don’t know or care what a ‘lootbox’ is, much less regard its contents as in any way valuable. […] But reality will catch up to us. These in-game practices are, after all, in line with the letter of the law, but not their spirit.”

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Suikoden

That video was awesome! Thanks for posting that. Keep up the good fight at MassivelyOP. You have a voice, and like the video said, just because you may not bring down loot boxes single handedly doesn’t mean we should not voice the truth.

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Erik Heinze-Milne

The problem is, the people who spent $5-10 no longer doing so as they boycott lockboxes has next to no effect when you have individuals willing to drop $15,000 for shits and giggles. The average consumer’s vote with their wallet simply doesn’t have any noticeable weight.

Veldan
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Veldan

This is the fundamental problem with all of this. 99 out of every 100 users can boycott this all they want, if the 100th user drops a stupid amount of money on the game, nothing will change.

Andy McAdams
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I’ve said similar things. I think there’s two things happening here. First, the revenue generated per lockbox is pretty substantial as we are continually seeing more companies adopt them. At least for GW2, I’m going to try and make my revenue calculations a little bit more robust, but it’s a slow going process :-)

Second, if lockbox revenue stops to drop, companies will start putting more and more into the lockboxes to inspire/force people to pay for them to enjoy the game. We’re already seeing the beginning of this where gameplay content / mechanics are being put behind the gambling mechanics and I don’t think we are really all that far away from attunement keys for dungeons/raids being put in lockboxes, or exclusive crafting recipes, or all out classes. Housing materials are already buried in lockboxes, so nothing new there (but still sucks).

In the super unlikely event that the ticking timebomb doesn’t go off, I think we’ll get to a point in MMOs that publishers using this mechanic will go too far in trying to fleece players, and those players will go to other MMOs that don’t have the exploitative lockbox mechanics. With the advent of Lumberjack and SpatialOS and whatnot, in about 18 months or so we should see a deluge of smaller, ‘can’t afford to be dicks’ MMOs coming out with much fairer monetization.

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Anthony Clark

I won’t buy the game initially if it has lockboxes. Also if they get added, I stop playing and drop any sub I may have had. I may just be one person, but it’s the only vote I have and I will use it.

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rafael12104

Not much more I can add on my end. It’s a ticking time bomb. Who knows when it will go off, but it will.

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wandris

The video is spot on. First loot boxes I remember seeing was Gw2, maybe SWTOR, and it was clearly just some scammy bullshit greed tactics but whatever, it is wasn’t going to affect me. A few years later the gambling aspect and integration into more games becomes apparent, it is not longer just a scam it is a trend. Then more recently lockboxes become more integral to the monetization models of many many games and it is only ramping up with entire games being designed with this in mind. At this point it is not just something that gets under my skin it is a betrayal. A betrayal that happens again and again as these corrupt companies exploit their customers.

Now I have spent most my life indulging in games, buying games, and spending a lot of my free time keeping up with developments. This is changing, I am not going to support in anyway companies which lack any ethical standards and take advantage of human weakness. It is time to draw a line in the sand and as such it is my sincere intention to no longer ever buy new games which do these things. I am not quite prepared to go so far as to quit the games I am already into that have lockboxes, given at this point they are not completely corrupted yet and most things are not dependant on using lockboxes. But for the next 30-50 years of my life, any games by companies who ever used these despicable tactics are getting an automatic pass, perhaps for all time.

I hope these business pay for what they are doing, and I would not feel any sympathy if they eventually get torn down, regulated up the ass, or financially ruined. People who take it upon themselves to backdoor a casino into people’s homes and free time deserve whatever they get. If you still do not get why this is a problem look at it like this. Put something of value in and maybe get something of value back out(although the odds are always stacked against you to get you to keep spending). If you are not into a games(or gambling) you might not realize that the kind of things that come out of lockboxes have value, perhaps even more value than money in some ways. In almost every way that counts, a lockbox is essentially a slot machine and of course that is going to work becasue it conditions people into addictive and compulsive behaviors.

Out of the millions of people who play games nobody asked for this. It does not benefit customers and in all likelihood they are going to turn a % of gamers into degenerate gamblers. If you are not outraged you should be, and once the damage really becomes apparent you probably will be.

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Arktouros

I watched that Jim Sterling video and I have to say I disagree over all.

I disagree because as games get more and more “social” (IE: multiplayer) regardless of platform (console, browser, mobile, etc) they tend to follow the same trends we’ve seen in MMO games on the PC. As player bases overlap and devs try to bring “unique” elements to their games the genre/type lines in which we define games gets blurrier and blurrier.

With that in mind we can see lockboxes, since their introduction into the MMO space, have shown no signs of slowing down nor do they put a hurt their bottom line. That goes for B2P games or any other business model. So when he says things like the market takes time to adjust we’ve already seen with time that these models are still going strong and are supported.

The fact is if you can come up with a good game, people are going to pay for it. Black Desert Online is my #1 go to for that where throughout 2016 it was a never ending cycle of controversy over $30 outfits then the p2w ghillie suit then sellable dyes on the AH then value packs then selling items in the cash shop. Here we are over a year later and the game is stronger than ever with many of those who jumped on the “hate train” having to eat crow after coming back.

All that outrage is just a lot of noise with very little financial power behind it to make an impact. What people say and what people do are two hugely divergent things. Jim already knows this as he covered in his “Players into Payers” video and the kinds of data game companies are collecting on their users. We’ve seen this repeatedly in multiple MMOs where the rage train hypes up, news sites and youtube bloggers continue it for the click throughs (nothing personal MOP), and few months later people have moved on to something else to be recreationally angry at.

It’s just tiresome and boring at this point.

Andy McAdams
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Hard to argue against the outrage du jour, as apparently current US political climate only has 2 settings at the moment – outrage or apathetic. It feels similar here. BDO I don’t think has lock-boxes, and while I might find P2W items distasteful, at this point there are such varied ways to play games that I don’t think it’s possible to get away from P2W because you are always monetizing someone’s gameplay.

The pay-to-gamble-but-lol-not-really-just-give-us-money gameplay of lockboxes isn’t the same as the pay-2-win argument. I don’t see it as outrage (at least from me). I’m sure there are those just riding the high of intense emotions, but I’m trying to legitimately raise / champion an issue.

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Arktouros

See here’s the problem though, BDO isn’t pay2win. It never has been. If you’d like I can type out my usual essay countering all the normal misconceptions but they don’t matter. People who are upset aren’t upset with the facts and reiterating them usually just leads to them trying to nitpick one point as if that’ll suddenly make all the other facts wrong.

It’s the exact same principle with lockboxes. We had a great conversation the other day about removing the RNG from crates and directly selling the items. When confronted with a $40 mount or a $100 cosmetic item people react the exact same aversion. We saw this in BDO as well at the release with the $30 costumes bound to one character. People see items in the game they feel entitled to access to that item and when it’s unavailable to them they get mad and it doesn’t matter what the business model is. Be it price anchoring into gamble crates or a $40 sticker tag the root issue is they can’t get what they feel they should be able to get.

To me the payment outrage thing is a meme at this stage. Whether it be over pay2win, lockboxes, sticker shock, DLCs, etc there’s always someone who’s looking for something to be recreationally outraged over and it’s just eyerolling.

Andy McAdams
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I’m not super interested in having a P2W conversation about BDO because it’s just ancillary to the discussion at large here. I withdrawl my statement about P2W in BDO (though I think the pay2win is more or less meaningless anymore).

The item price disparity you mentioned – I think what people react to when looking at a $40 mount or a $100 cosmetic item is one of scale. Whenever I can pay for a game at $60 price point and get arguably hundreds of hours of enjoyment out of it, it’s hard pill to swallow to pay $40 for a mount, or $100 (almost twice the cost of a base game) for something locked in the game world. That’s the challenge I see. A price point of $10-$15 for a mount is palatable — the ratio is still astronomical compared to the cost of the base game, but it’s also the equivalent of 2 drinks out at the bar — which is an acceptable amount for me.

For some people, that $100 purchase might be palatable. I think also think you get away with slightly higher than the prices in a F2P because you don’t have the revenue from the initial box sales. A full armor skin set for $30 doesn’t seem unreasonable to me because that’s a crap-ton of work. $100 seems exploitative.

That’s how I look at it. I know the microtransaction items have insane profit margins and I’m OK with that, but when they go into the realm of the developer saying ‘lol-i-cant-believe-people-are-paying-that-much-for-this’ thats too much.

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Arktouros

Lets take your night out at the bar example and expand upon it.

I used to go to the bar and get a $5 pitcher of beer. It wasn’t great beer, but drink a few of them and you’ll get drunk. Conversely I can pay $40 and order shots and get drunk. Or hell I could go all in and start ordering mixed drinks and next thing you know I’m out $100 but still drunk. We’re all going to get drunk the difference is I’m going to be drowning in minty Mojitos while you drink the swill.

Could you imagine the Beer people screaming “PAY2WIN!” at the mixed drinks people? Bad example, cause I totally could see that, but the point is the way people see video games and the way people see similarly mixed price markets is kinda crazy when you think about it.

In my opinion, that is born from expectation. You used to buy a game and you used to be equal to every other player. Now you have scenarios where there are haves and have nots and even if there’s objectively no power difference between them (IE: Everyone is equally drunk) we see and hear complaints. Calling the “bar owner” out on his “exploitative” priced “mixed drinks” because you can get “drunk” off cheap “beer” just seems really odd to me.

People are essentially taking things they don’t like, screaming loud as they can that it’s all going to come crumbling down to ruin and it’s like, “Boy I just don’t think there’s anything to really back that up.”

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CMDR Crow

This is part and parcel for a saturated industry operating within a post-scarcity economic model. Majority shareholders will control a very large portion of the industry customerbase while the larger demand actually skews far, far smaller when you get below the “big few.”

Games with large customerbases, such as ESO, FFXIV or WoW for a few examples, can afford to project revenues based on whole industry statistics on demand. They can, through sheer popularity, maintain themselves consistently via non-“gambling” mechanics and while employing more traditional models of content distribution.

Smaller outfits, and here Funcom is a decent example, see a HUGE playerbase out there, and make the mistake (understandable) of believing that they can capture part of that base. The reality is that the actual number of players available to become invested long-term is minimal. The necessity of employing sketchy revenue practices is what balances the books, from a business perspective. Companies have spoken about smaller playsessions and the like for years and years now as a positive about their games, but MMORPGs will never actually approach that kind of game without becoming something a little different. There’s smoke and mirrors claiming larger playerbases, larger demand and larger potential profits. Players don’t remain in the same game for years anymore (in terms of planning a stream of revenue) so you have to get what you can when you can as quickly as you can. It is cynical by default. F2P+Whale models are based on the premise that most people won’t stick around and that most people don’t want to have to play the game to be powerful. You cast a wide net, toss 90% and then maybe you have a few good ones left at the end.

In the end the “solution” will be this current bubble bursting. Gaming has been a wholly bubble-driven industry for quite some time now and those bubbles keep getting bigger and bigger. The industry is a train barreling forward without breaks. Eventually it will crash. As it stands now, there is so much out there that companies have to engage in serious maximization of profit in order to ensure they retain any kind of customerbase.

This isn’t a defense of lockboxes, to be clear. I really hate the things and they’ve driven a lot of the worst aspects of our current industry zeitgeist. That said, until supply chokes a bit and demand is calibrated better for post-scarcity sustainability… this will continue. Smaller games, where they fight hardest for players, are often the worst. SWL is the revamp of my favorite MMO ever… and I just don’t want to log in because it is so focused on their microtransactions. I miss when the gameworld was self-contained and didn’t reach out of our monitors. That your character wears an outfit that your character gained, not you in your chair typing in your creditcard number. At the end of it all, the final raid boss reveals itself to be overdraft fees.

Andy McAdams
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Andy McAdams

I dislike Micro-transactions, but I can at least deal with them (even if they break the 4th wall all the time). At least I’m making a payment and know what I’m getting.

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Jeffery Witman

Buying potions in DDO never rubbed me the wrong way. Spending $1.50 on a lockbox key in a game for the miniscule chance of getting something awesome, but likely ending up with the equivalent of what used to be a standard mob loot drop, is all kinds of dirty.

Paying has literally replaced playing as the primary method of advancement in a lot of these games. Sometimes that doesn’t lock in until “end game” and other times it’s apparent from the beginning, but it’s become almost all encompassing.

Veldan
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Veldan

That video was oddly satisfying to watch (or rather, listen to). I hope he’s right, but given for how long lockboxes have been in MMOs already, I’m not holding my breath.

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Sorenthaz

The moment the government is pulled in to regulate anything related to gaming is the moment the AAA game industry takes a huge hit. As is many companies are going down an unsustainable road that’ll probably crash hard whenever they finally have to raise base game purchase prices past $60.

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I think that there are lots of reasonable ways to monetize above $60, but I think that you are right that the shops that rely on lock-boxes will go down and we’ll probably lose some good games in the process. But if it makes the genre as a whole better, at least the loss won’t be in vain.

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Bhagpuss Bhagpuss

Limiting the discussion to MMOs, the two questions that concern me are these:

1. Were the complainants to achieve what they desire, namely the full and undivided attention of the relevant regulatory authorities, what would be the effect on this hobby?

2. If, as a result of being brought fully within the scope and oversight of the legislation that governs gambling, lockboxes/lootboxes were rendered unprofitable and/or impractical as a revenue stream for the genre, what would replace them?

It seems that one possible outcome could be MMO companies choosing to convert their games to comply fully with the legislation, effectively turning them into another part of the online gambling industry. Alternatively they could choose to remove all aspects of the games that could be of interest or concern to the regulatory authorities.

The first of those outcomes could effectively change the nature of the games to such a degree as to make them unrecognizable. The second could see a lot of MMOs close.

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Jeff Mauney

Well stated. Historically, the people who scream for the government to Do Something About This Outrage are almost invariably the same ones hollering about regulatory overreach when the government finally Does Something About The Outrage.

More succinctly: Be careful what you wish for.

Andy McAdams
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Andy McAdams

It’s ridiculous that you are trying to pin outcome on the players, instead publishers who created the situation to begin with (victim blaming). Publishers are being shady, are breaking the law, and are going to have to deal with the consequences of their actions because they can’t make money in a moral, ethical way and instead have to devolve gambling mechanics that exploit their players.

If publishers didn’t do shady, illegal things they wouldn’t have to worry about it and this wouldn’t even be a topic of discussion.

More succinctly: Publishers made their bed, and now they will sooner rather than later have to deal with the consequences of their greed.

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Sally Bowls

+1

Who knows where the pitchfork and torch crowd – and the politicians chasing them – will end up on this or any issue?

My guesses are:

1) If the politicians seize “video game regulation to protect the public” as an issue they want to push, it will at least be as much about regulating minors’ access and hours per day; why protect against gambling addiction and not video game addiction? Minors are great to protect; “think of the children” and while millions of adults buy lockboxes, no minors vote so there is little downside to inconveniencing them with video game addiction protection.

2) Any sort of regulation should further accelerate the consolidation in the MMO industry. A few million dollars in additional legal fees is not nearly as painful for a game with a few million customers that a game with a tenth that. The fact that WoW is getting along currently without lockboxes should especially help them as smaller competitors are both less able to bear the expensive costs as well as losing revenue.

3) MMOs are not a growth industry. If there is a potential cloud on their monetization horizon, then there is one more reason for no AAA MMO in the foreseeable future.

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rafael12104

Agree Serrenity. Wholeheartedly too. What they aren’t seeing is that if right now they get a handle on this and regulated themselves they will be much better off.

All it will take is an opportunist member of congress to see this and whamo. It will be yet another way games are corrupting the youth of America. Lol. And then it will be children, case studies, parents groups, etc. etc. And dare I say hearings. Oh yes, they love those hearings.

And it doesn’t even have to be the government. Just a few lawyers with a need for their version of greenmail. Oh yes, the payoffs would be huge especially if it becomes a class action suit. Because they know about the addictive element. They surely do.

Don’t think it will ever get that far? Yeah, that is what Tobacco companies were thinking in the 50s and 60s.

Andy McAdams
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I think you look at it too narrowly: no one wantsregulation. No one is screaming for the feds to step in — that’s just a side effect of AAA games attempting to fleece their players without providing any additional value to players.

How do they make money in a post-lock-box world, Massively has you covered: http://massivelyop.com/2017/07/27/massively-overthinking-how-should-mmos-make-money-in-a-world-without-lockboxes/

The games industry won’t swing towards full gambling because they’d be cutting into their own profit. The average gamer is 33, but that still leaves quite a few people in the sub-18 not able to gamble crowd. Even if you did have a fair number of publisher move over, there are definitely those who are waiting in the wings to fill that void.

I think the important part of this is that regulation is going to happen whether you or anyone else wants it to or not because the fact of the matter is these publishers are capitalizing on gambling without calling it gambling because the government hasn’t caught up. These publishers are legitimately breaking the law. As I said in my blog posts, eventually someone is going to declare that virtual goods have legal value, and then the jig is up.

This was never going to just go away, and whether we screamed about it or not. Regulation is the inevitably outcome.

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Sally Bowls

1) The Massively article was how MMOs should make money, While interesting, those sort of discussions here are rarely related to how the for-profit businesses are/will be making money. PC MMOs aren’t a desirable market segment; so if the government makes it an even less desirable, why would game companies invest to be in the market rather than just moving on?

2) I would not be surprised if you are correct that virtual goods will someday be considered to have financial value. (Although the law is so slow with catching up to technological modernity, it may take a while.) If/when that happens, the devastation to the gaming business will dwarf the impact of lockboxes. If virtual items have value, then isn’t a boss drop a taxable event since I have received something of financial value? Can I just transfer virtual items with financial value to people in other countries, especially those my government has issues with? Someone defrauding me of something of monetary value is a crime; is it a crime to defraud me of some EVE ships?

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Your point 2) I have no answers here and you bring up a lot of great questions. If we are being honest, the law has no outstanding precedence how virtual goods should be managed if they have value — and how do we calculate that value? We can’t use scarcity and the supply / demand model doesn’t apply here because the number of any available virtual item is infinite. So even if something has value, if you divide that value infinitely, I think you hit a theoretical impossibility (but like I said, complex math was never my forte).

It’s also worth noting that any effective regulation would require a degree of understanding of development and coding practices and let’s be honest–I think most days its a miracle our legislators can turn on their computers by themselves, let alone understand complex development consideration.

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Sally Bowls

Yeah, It is complicated and far from decided.

Although I don’t understand why there would be any need to understand the development cost. The value of a virtual good, or any good really, is not affected by the production cost. Whether it cost ArenaNet $.01 or $0001 to make the lockbox does not change the market – and thus tax – value of the lockbox.