Understanding Loot Boxes with Zac Rich - Episode 195

If they’re arguing this say in the United States there is a strict definition of what is considered gambling and if you stack loot boxes up against what that definition is it fails for one very particular purpose and that’s because the definition states that gambling is any activity where an item of value is placed at risk in an attempt to gain greater value.
— Zac Rich (Founder of Press Start Legal)

 
 

EPISODE 195

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Loot box scandals and micro transaction news articles are plastered all over the social timelines of gamers and politicians alike now as the government has had to step in and start actually regulating video game content. This is a very interesting time to be alive, and witness the shifts in game monetization starting to occur. As developers we understand that loot boxes can be profitable, but as consumers we also understand that predatory designs and unethical loot box odds in the wrong hands, have now officially become a menace to society so to speak. Here with us to help break down how things got so bad, offer advice on how to better navigate getting return on investment through loot boxes and other things you might need to know as a game developer or studio working with loot boxes in the near future, we have Zac Rich joining us again from Press Start Legal.

At this point we’re sure everyone more or less knows about loot boxes but could you provide our listeners a slight overview to get caught up?

“Absolutely so everyone knows at least people who would be listening to your podcast that the easiest way to monetize any game whether it be mobile triple-a indie PC you know console is loot boxes, you know microtransactions. And what's happening is all around the world loot boxes are gaining very negative attention and it's because the mechanic itself is presented in a very predatory way that is in effect causing individuals young individuals you know obviously people over the age of I want to say 16 but really it’s age of 18 and up should know better... But young individuals who don't really understand the value of money just using their parents credit card and buy buy buy buy... and now the sudden you have a two three thousand dollar credit card bill on it, you know three thousand dollars from the Epic Games store because of loot boxes or EA or any of them not to just name them individually, you see it all across gaming and you can see it anywhere. Because of that you starting to see Member States of the EU ban the practice outright. You have US senators trying to pass bills that ban it outright in the united states. You have the FTC starting to take comments before they start passing their own regulations on this and now you have the ESA sitting back going “Crap we should ave got in front of this issue” and now similar to what happened with violence in video games they're going to play catch-up and try to shift the narrative to be a self regulated industry. They’re now trying to compare loot boxes to gambling, but there’s a lot of different sides to this story.”

What’s funny is gambling isn't illegal, those countries trying to ban loot boxes aren't trying to ban casinos. Why do we face all the disdain from the EU as to why it cant exist anymore. Why is EA in front of Parliament trying to defend “surprise mechanics”?

“If they're arguing this  say in the United States there is a strict definition of what is considered gambling and if you stack loot boxes up against what that definition is it fails for one very particular purpose and that's because the definition states that gambling is any activity where an item of value is placed at risk in an attempt to gain greater value. So in essence you're betting money to get money. In video games it's you're betting money to get an item, but these items, and this is what the big argument is in the United States is there is no value or right now no monetary value attached to that item. That is the biggest debate. How do you put money on a digital good that you can't resell for more money. I mean there are obviously we used to do it on the grays and the black market per se you could sell your yeah your account on eBay and in essence you sold the value of that item and whatnot but because of that one large stepping point of being able to exchange what you've earned from that risk for a higher value it's not considered gambling per se.”

You know what else is interesting too is like a lot of people say like trading cards is another example of kids who are used to spending the 3 bucks having a good idea of what's inside but not necessarily explicitly knowing. A pack of trading cards will always have and will always be what is inside of that pack, its an actual tangible good there’s no patch update where they're like “Oh sorry hold on a second we’ve pulled magically four cards out of that pack for balancing, and still charging you the same price”. There’s a lot more trust in the physical whereas with the loot box, I’m at the mercy of the code, I’m at the mercy of RNG [Random Number Generation].

 “Absolutely, and the thing with trading cards now this also depends on what type of trading card is, there is also an inherent value attached to those cards. You know those original Pokemon cards from 1994 1995 they're actually worth something today oh good god you know so all that money you've spent after mowing the lawn to go down to Walmart to buy that next pack of cards that just got released you might actually be able to get some of that money back. You’re never going to see that money back from these games.

One interesting story though, that’s starting to break and unfortunately not highlighted as much as it should be, at E3 there is a new game coming out, the name of it completely escapes me at the moment but the article caught my eye. The game will have loot boxes but as the game develops and this is also an evolution of sort of the games as a service. As sequels get released they're going to port those items that are going to be available in the loot boxes to the future iterations of the game.”

Yea, now that’s when I call bulls*** knowing how game development works. Mass Effect 1-3 tried to transfer over your avatar and your journey through all three games… But by the third game people were upset because it didn’t matter. There’s only maybe a few titles that can actually get away with that, they’re just holding your money, because what’s hypocritical in that statement is the idea of sequels carrying over like you have to be moving towards the subscription model of games as a service to make that work. Like if Overwatch became Overwatch the service, then I can see that 10 years down the line I still have my avatars and gear. But as soon as you start saying sequels… It’s a whole new ecosystem, and it’s just a lot of legwork. . . The key wording there though is “IF” they make a sequel. [Laughter ensues]

“Yeah you best believe crafty attorneys are drafting that marketing language. But you do see it now when you look at games like Destiny. That game it's a three four years old and it just hit a milestone of having a million active players you know and they're all about their loot boxes and cosmetic items and it will continue to even today in 2019 and it still holding strong.”

What kills me about loot boxes is.. Like, I don't have a problem with loot boxes when I know that my cost of entry was .99 cents. I don't care that there's loot boxes. I feel even if I'm compelled right and I've spent 30 bucks I always feel less care about that then when I paid the 60 bucks and then I'm paying the like seasonpass fee and then I'm paying the $3 for the loot box I'm like my god how much money are you trying to take from me?

“We can thank EA for this because they were the ones that thought that they could get away with it and the industry told them no you’re not. You're not going to find game mechanics locked behind paywalls and loot boxes I mean let me add a caveat to that statement if it's a free-to-play mobile game or free-to-play MMO sure there's probably some paywalls in they’re but they're not locked behind loot boxes, they might be content locked yea but you know it was really Epic that pioneered that you can make millions of dollars selling virtual clothing / skins at THAT level.”

 
 
 
 

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