German commission takes up lootbox issue as academics link whaling to gambling markets

Germany has added its voice to the anti-lockbox chorus in the US, UK, and Netherlands. According to an article on the German-language Welt (picked up by GIbiz), The German Youth Protection Commission has said it’s examining the lootbox issue as a potential gambling concern and may ban “certain elements in video games” in the region.

The move is apparently based on an as-yet unpublished University of Hamburg study that analyzes video game sales and business models, ultimately determining what most online gamers already know: that such games actively target whales, who are responsible for the majority of their revenue. This, the researchers reportedly conclude, is “a typical feature of gambling markets.”

The Commission is due to file its determination this coming March.

Source: Welt, GIbiz. Thanks, Veldan and Fabio!
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Sally Bowls

re “whales”, business talks about the “80-20 rule” – 80% of your revenue comes from 20% of your customers. This is the business application of Pareto

The Pareto principle is a principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that 20% of the invested input is responsible for 80% of the results obtained.

I am not sure many businesses could survive without their best customers, whether they are selling airline tickets or beer or MMOs.

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Schmidt.Capela

From what I could understand, the issue isn’t exactly that games get most of their revenues from whales, but that the games are using psychological tricks that create gambling-like addiction to both get normal consumers to spend like whales and to get whales to spend even more.

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Sally Bowls

Again, I see “psychological tricks” thoughout business: advertisements deliberately make the product look as appealing as possible, businesses deliberately timing their sales to when the customer is most likely to have money and buy…

In my lexicon, a “psychological trick” is just something normal done by someone/something you don’t like. When someone on a first date says their new companion has a nice smile/laugh/hair/personality/car: IMO, whether you regard that as a cynical “psychological trick”, probably for carnal gain, or whether you regard that as normal and part of being polite rests more with your opinion of the complimenter than the compliment.

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Schmidt.Capela

And another one in a different European country. According to Sweden’s Minister of Civil Affairs, Ardalan Shekarabi, loot boxes may be classified as gambling as soon as 2019.

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Serrenity

The wording here is interesting to me – recognizing it’s an article about an article about a report – but the wording with the “that a small proportion of players are responsible for the majority of the revenue, noting this is “a typical feature of gambling markets.” actually expands the potential applicable scope of this talk from lockboxes to certain free-to-play games and really basically the entire mobile game market (as I’ve yet to see more than a handful of mobile games that don’t employ abhorrently disgusting monetization tactics).

So the impact of this, depending on the content of the final report, could also have a pretty dramatic impact on F2P games. If Germany starts requiring business report what portions of their revenue are generated from a certain percentage of players, it could have a pretty dramatic impact on the industry.

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Peregrine Falcon

I think it’s unlikely to affect the video game industry much. I think it’s more likely that video game companies will simply close their EU offices. They won’t have to follow the EU’s draconic laws if they don’t have a physical presence in the EU.

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Schmidt.Capela

They have to follow those laws if they want to sell anything to EU citizens.

Just like when Europe decided to force every phone maker to use an USB port to charge their phones (Apple is the only company still resisting this change to the fullest extent they can, though even they now ship their phones with an USB charger, even if their phones still use a proprietary port and have to use a provided adapter to plug into the charger’s USB port), or when Europe decided that electronic devices couldn’t use lead-based solder (which led to all the main electronics companies phasing out this kind of solder worldwide).

Now, if game companies are happy abandoning the European market over lockbox regulations, that is their prerogative. It would be hard to explain to shareholders their decision to stop selling in the third largest global market for games, behind only China and the US, though.

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Serrenity

Agreed. Not selling to the EU is not a good business move. Many of the smaller studios can’t afford to hack off that big of a market and remain open. Big publishers MIGHT be able to soak the hit, but shareholders would get testy about it.

Developing in 3 tracks (Asian Markets, NA/SA Markets, European Markets) would get extra spendy extra fast – so the industry is likely to go with the least disruptive path – complying with EU laws, which are more restrictive than US laws but not substantially impactful to the US market. The Asian markets are still pretty different overall when it comes to MMOs so developing for just Asian markets and expecting to go global well, as we’ve seen, is a risky proposition.

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Michael18

shibby523
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shibby523

Not sure why they need to research it. It’s common knowledge exactly why companies put loot boxes in their games. It’s basically the same as the scammers in the streets that try and entice people with the cup game.

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Arktouros

They put them in their games because lockboxes generate more revenue. That’s it. There isn’t some corporate criminal agenda looking to exploit minors or dupes or addicts. They simply generate more revenue than if they used other methods.

No company is ever going to admit to that because admitting you’re implementing methods to be even more profitable is suicide in the court of public opinion. Instead, being socially unaware engineers, we get these crazy rationalizations or odd claims about how expensive games are to make or how they could be charging so much more! The smart ones just stay quiet cause they know there’s no good that come from talking about it.

Sorata
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Sorata

yeah more revenue… because they scam the people. They use psychological tricks to get the costumers to spent money for things they never would have bought. I hate it

shibby523
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shibby523

Exactly this

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Arktouros

You don’t need to scam anyone or use psychological tricks to make RNG crates work. You simply have to decide how much you want for a particular item then make the drop rates to correspond with that. So if you want $40 for your shiny Reindeer mount you throw it in a $5 gamble crate with a 1:8 chance of getting one. Some will pay less for it. Some will pay more for it. But in the end you’ll get your $40 per Reindeer as the odds work themselves out.

The issue of addiction, child vulnerability, etc are all more or less collateral damage issues rather than the focus.

shibby523
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shibby523

have you not read about Activisions patent? The exact one made to prey on peoples feelings in game. And what job profession is all about peoples feelings?

shibby523
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shibby523

These companies hire psychologists to understand how these mechanics can be best used to generate more money. Therefor, they are basically like the cup game. Prey on the persons gambling instinct to make cash/items.

You are not wrong. They are only there to generate more revenue. It just goes deeper than that beyond the money aspect.

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Arktouros

I have some extreme doubt about those claims and would want to see actual job positions within companies to believe those style claims. What’s far more believable is companies hiring data geeks and analysts to pour over customer data and determine optimum pricing for virtual goods and services based on past purchasing decisions. This way you can see, based on the past, X amount of players are willing to purchase Y items using Z method and project profitability for development time spent.

I mean psychology is all well and good but is entirely redundant when you have hard data of your player’s purchasing habits to make predictions with. The sad truth is things like out of control addicts or vulnerable children are simply collateral damage to the process than the focus.

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Schmidt.Capela

Even if they don’t use actual psychologists, companies like EA and Activision do research ways to get players to spend more, as proved by how they both filed patents related to maximizing how much money players spend on lockboxes and microtransactions. For a patent to be filed it means that employees were doing research on it as part of their job.

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Arktouros

Nor would I ever argue that point that they use data to research and form the basis for future business decisions.

What I would argue is the idea they’re hiring psychologists to target and prey upon people with addictions and vulnerable minors is simply absurd.

shibby523
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shibby523

Not sure what else can be said. I’ve proved that game companies do hire psychologists. I’ve proved that lootboxes are about psychology and with that you agreed. It stands to reason that when you add those two ingredients, you have game companies using psychologists to help maximize profits from lootboxes. Not sure what else I have to prove.

I’m not saying they are purposely trying to target minors, they are just caught in the middle with companies going after whales.

I’ve laid all the facts at your feet yet you still refuse to see reason.

shibby523
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shibby523

They do use psychologists , it’s common knowledge. Lootboxes are all about using psychology to maximize profits. It only stands to reason that they would use those psychologists to design lootboxes. Not many companies are going to come right out and say it directly.

shibby523
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shibby523

Off the top of my head: Portalarium has a psychologist on the team. He analyzes player happiness (among one of his duties) so that they can milk their whales the best they can.

Here’s an article: http://www.apa.org/gradpsych/2012/01/hot-careers.aspx

You can apologize now.

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Arktouros

Again, I have extreme doubt about your claim that they hire psychologists to understand how these mechanics can be best used to generate more money. Your article mostly talks about how they are, in fact, used to design better games to deliver the kinds of experiences game developers want to deliver (IE: Create suspense, etc).

The singular case where they mention business decisions in that entire article it references, exactly as I state above, looking at financial data as the basis for their recommendations. They don’t once mention using their psychology degrees to explain or manipulate human behavior for larger profit.

There’s no smoking gun here, just more evidence to back up my point.

shibby523
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shibby523

Wow. It shows that companies do use psychologists, you know the exact thing you said they don;t use. I’m right and your wrong, at least admit that.

If they use lootboxes, it only stands to reason that they would use them to best make them more appealing to people. They use psychologists and the article proves that. That is exactly the proof you asked for.

Edit: Here you go: https://www.bloomberg.com/research/stocks/private/person.asp?personId=134673947&privcapId=133760638&previousCapId=133760638&previousTitle=Portalarium%2C%20Inc.

That is a direct link to a game developer that has lootbox mechanics that employs a psychologist.

Apology accepted.

xpsync
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xpsync

The term “whale” i find funny, what i don’t find funny is that it glosses over whom they are actually trying to target, people with a serious gambling disorder.

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Arktouros

It glosses over it because no one wants to target addicts. Addicts aren’t a reliable source of long term revenue because they will blow through whatever means they have available to them and then that’s that. It’s like a flash in a pan that’s now empty.

What gaming companies are aiming for are people with disposable income. Most of my coworkers spend thousands of dollars on hunting equipment, outdoor gear or play vehicles (ATVs and such) and the like for their hobbies. I do similar only for gaming instead and have few issues with today’s gaming market because I’m the kind of customer they’re catering to.

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Kickstarter Donor
Serrenity

I would find a middle ground here – the target the people with the disposable income, and just enough of a gambling problem to fall for the traps, but keep the disposable incoming to them.

You are right – people with serious gambling problems don’t have money (people with any sort of serious addiction tend to not have money).

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Arktouros

The issue I take with talking about people “falling for the traps” is that’s based on an assumption. Bree previously linked a study done, for example, where even after learning the odds, fallacies, and other gambling related information they still gambled as much as they did before.

The same goes for me as well in games. I’m aware of why companies are selling gamble boxes. I’m well aware of the fallacies. I still buy them because, ultimately, they contain an item I want and I don’t mind paying the premium to get it. I still have my red lines I won’t cross but so few games even go there anymore it’s not really an issue. Instead I simply view the added items as a luxury service that I can afford. To me it’s the difference between those who buy the air condition and those who have to roll the windows down.

K38FishTacos
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K38FishTacos

It’s worked well for the tobacco industry. I guess the financial hit has to be small enough that it can be repeated over the long term as the addiction builds and gets locked in.

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Arktouros

Comparing something consumable like alchohol or tobacco to something like gambling is entirely different because the rate in which you can consume/participate is different. There’s only so much you can smoke or drink in a night before you physically can’t continue but there’s few physical limitations to simply blowing all your money at once while gambling.

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rafael12104
Sorata
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Sorata

Hope it will be the case!

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BDJ

zzZzZzZz

Kids buy lockboxes.
How do kids get money?
How do kids get credit cards?

Oh thats right. Crap parenting. Gotcha.

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Zora

As a rule of thumb, most parents will favour narratives that lift the burden of responsibility from their shoulders and governments favour policies that take agency away from citizens. It’s a match in heaven, but one where profit stands in between two lovers.

How creatively may the state convince concerned citizens that everything is now “properly regulated” without actually regulating anything?

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agemyth 😩

https://www.gamestop.com/browse/in-game-currency?nav=28-wa2,13fffe8b81

No credit card, identification, or parental consent needed.

The issue is far more complicated than “other people suck and should stop sucking”. Also, the attitude you carry as if you have this figured out and are unaffected by the psychological games at play is harmful to yourself and those around you.

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Schmidt.Capela

Worth noting that Germany is the largest market for games in Europe, over 4x larger than Netherlands, and it’s also the most influential country in Europe right now. If Germany does ban lockboxes the rest of the continent (apart from UK) is likely to follow.

Also worth noting that the arguments used here seems to completely bypass the issue of whether for something to be considered gambling you need to have a risk of losing everything, or that whatever you gain needs to be something you can convert into real money; instead they seem to be focused on features meant to cause addiction and make vulnerable people spend more money on the game than they originally intended. Which, mind, is something lockboxes explicitly are, as many research articles by the developers themselves readily explain.

semugh
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semugh

lolno, case in point: ban of wolfenstein, green blood, swastikas. Whole europe is happily killing nazi zombies while you watch from the sidelines.

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Coolit

With all this up in the air you would be nuts to launch a game with loot boxes going forward.