An academic paper from two UK universities has concluded 5% of lootbox buyers generate 50% of the revenue, and 1/3 of them are problem gamblers.
The paper, Lifting the Lid on Loot-Boxes, was written by Dr James Close (Senior Research Fellow. Faculty of Health, University of Plymouth), and Dr Joanne Lloyd (Senior Lecturer in Psychology. Faculty of Education Health & Wellbeing, University of Wolverhampton).
It was commissioned by the UK’s Gamble Aware in Jnuary 2020; an independent body who work with “the Gambling Commission to deliver the National Strategy to Reduce Gambling Harms within the context of arrangements based on voluntary donations from the gambling industry.”
The paper opens stating that it “aims to inform future UK policy on loot boxes with a robust, evidence-based approach.” In 2018, the UK Gambling Commission refuted the claim made by some media outlets that lootboxes are akin to gambling.
Despite this (or in response to it), in 2019 the UK Digital, Culture, Media and Sport Committee recommended the UK government ban the sale of lootboxes to children, after its nine month inquiry into “immersive and addictive technologies.”
The inquiry involved speaking to industry representatives, including EA and Epic Games. While some felt the proceedings were intentionally badgering, there were blunderous comments made by them.
EA representatives claimed lootboxes were “surprise mechanics,” while an Epic Games representative said they “would disagree with the statement that Epic makes money from people playing the games.“ The UK’s report would later lament that “some representatives” chose to lie, in the committee’s opinion.
The paper cites a 2018 paper (by David Zendle and Paul Cairns) that “identified an association between loot box purchasing and problem gambling scores,” and “Similar surveys soon followed.” The paper’s own research carried out “a systematic review establishing their robustness, reproducibility and effect sizes;” in short, verifying their findings, and find other patterns in the data.
Their review concluded that there is a link between lootbox engagement, and problem gambling. It’s effect size is on par or even stronger than the connections between problem gambling existing along side other disorders; such as depression, or even dependencies on alcohol or drugs.
“Our review demonstrates that relationships between loot box engagement and problem gambling have been robustly verified in around a dozen studies. These draw from various nationalities and cohorts, and now include pre-registered and nationally representative samples.
The effect sizes are ‘moderate’ – a magnitude which bears statistical and practical relevance: they are stronger than or comparable with well-established associations between problem gambling and other co-morbidities, such as depression, alcohol and drug dependencies. Similar relationships have been established with problem video gaming.”
The paper claims that the motivations for buying a lootbox are not well documented academically, while gambling has a wealth of research into its motivations.
Based on “a series of in-depth interviews with a diverse sample of regular loot box purchasers from across the UK,” the paper proposes these motivations are a mix of social interaction (status, approval, being part of a group experience), and improving the gameplay experience (looking or playing better).
The interviewees stated they had a “fear of missing out” in various ways, further amplified by various “well-known” psychological tricks and temptations. These include “endowment effects (by giving away ‘free’ loot boxes, but then charging for opening), price anchoring, special limited-time offers or items, and obfuscation of costs (i.e. via in-game currencies).” The paper claims these have been discussed openly by developers.
The paper also notes the “money’s worth” legal definition (used to define if something is gambling under UK law) may not be sufficient, as they observed the lootboxes have a “value” beyond what they are bought for. Even so, as many gamers feel they have a financial value, it should meet the criteria for gambling.
“Instead, prized items in loot boxes can hold significant social or psychological capital. Nonetheless, many gamers do ascribe discrete financial values to loot box contents – based on purchase or resale price – suggesting that many loot boxes meet existing criteria for gambling regulation.”
Analyzing and aggregating six open access datasets of lootbox surveys (including over 7,700 lootbox buyers), the paper discovered that 5% of them generate half the industry revenue of lootboxes. One third of these top 5%- already spending around $100 USD per month- would be considered problem gamblers.
This higher “investment” into lootboxes does not come from those with more money to spend, as the paper found “no evidence that higher loot box spend is correlated with higher earnings.” The paper suggests that one way or another, lootboxes are making a large amount of money from those prone to gambling addiction, or obsessive behavior over video games.
“Our research therefore demonstrates that games developers, unwittingly or not, appear to be generating outsized loot box profits from at-risk individuals (these are likely to include both people with gambling problems or problematic patterns of video gaming) – but not from wealthy gamers.”
The paper claims that while there is little evidence showing a link between lootbox engagement and psychological distress (with preliminary evidence being “cautiously interpreted“), their own “brief screen” of around 14,000 UK gamers shows that the harms associated with lootboxes have a “disproportionate effect on specific cohorts of gamers.”
Discussing those who have condemned and absolved lootboxes, the paper also addresses not only past moral panics around gaming, but also the ineffectual “surprise mechanics” defense.
“First, there have been a series of arguments rallied in defence of loot boxes as an unproblematic, non-gambling activity. For example, loot boxes have been compared with earlier, unfounded video game-related moral panics, such as links between video gaming and violence. However, these earlier controversies were based on questionable, unrepeated evidence – which contrasts markedly with the loot box evidence. Loot boxes have also been defended as ‘surprise mechanics’ – no different, for example, to a Kinder Egg. Such arguments, however, do not tally with well-established associations between loot boxes and problematic gambling behaviour.”
Attempts at self-regulation by the industry; such as disclosing the contents and odds of the lootboxes, are also rejected by the paper as still failing to be transparent, and “presented in a confusing and incomplete manner.” The paper also claims that “game labelling [content warning] for loot boxes currently falls short of age restrictions” and said age restrictions are “ignored by the majority of parents and children.”
The paper also suggests other nations attempts to implement policies against lootboxes, such as those in China, Belgium, and the Netherlands, have been ineffectual due to inconsistent policies, and the games industry attempting to side-step what is in place.
It should be noted a number of mobile games no longer operate in Belgium [1, 2], after officials declared loot boxes as a form of gambling and vowed to ban them.
The paper concludes that UK policy should clearly define lootboxes (as well as the necessary content warnings and age ratings), with an easily understood full disclosure of odds, spending limits, prices in real currency, and “obligations of gatekeepers (i.e. developers, distributors, content providers) for the trade they enable and profit from.”
However, even the paper admits such legislation may soon be outdated.
“Finally, we conclude with a stark warning: in the rapidly evolving world of video gaming, legislation against loot boxes is liable to be quickly rendered anachronistic. Longer-term mitigation of risk – from the potential dangers of a broad range of psychological nudges, potentially liable to cause unsustainable levels of spending in vulnerable individuals – will require increased provision for consumer protection, child-focused data protection policies, more research, and educational packages that mitigate against these dangers and harms.”
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