We've (Maybe) Reached A Turning Point in the Fight Over Loot Boxes

We've (Maybe) Reached A Turning Point in the Fight Over Loot Boxes

THIS WEEK IN BUSINESS | A U.K. Parliamentary committee report offers another wake-up call for the industry, but the ESA hits snooze once more.

This Week in Business is a collection of stats and quotes from our sister site GamesIndustry.biz that sheds light on console sales, new trends, and more. Check back every Friday for a new entry!

This week, the U.K. Parliament's Digital, Culture, Media and Sport Committee released its report on immersive and addictive technologies after nearly nine months of work. One of the big recommendations to come out of that report is that there should be a ban on sales of loot boxes to children. It also suggested regulating loot boxes as gambling, as well as taxing the industry and using the proceeds to fund research into the potentially harmful effects of playing games. Trade groups of the region like TIGA and PEGI responded in a calculatingly non-contentious tone, but I'd like to look a bit more closely at the Entertainment Software Association's response.

QUOTE | "We take seriously the issues raised in the U.K. Parliament's Digital, Culture, Media and Sport Committee report, but strongly disagree with its findings. As demonstrated by the recent announcement of policies regarding the disclosure of the relative rarity or probability of obtaining virtual items in paid loot boxes as well as the robust parental controls that empower parents to control in-game purchases, the video game industry is a leader in partnering with parents and players to create enjoyable video game experiences. In addition, numerous regulatory bodies around the world, including those in Australia, France, Ireland, Germany, and the U.K., have come to a conclusion starkly different than that of this committee." - The ESA statement on the DCMS Committee report.

The statement starts out great, and then becomes a little less great as soon as you hit that first "but." The tone of the DCMS Committee hearings was pretty clearly contentious, and the MPs were clearly frustrated by the industry's refusal to give full transparency on how loot boxes really worked, as you can see here:

QUOTE |"Gaming contributes to a global industry that generates billions in revenue. It is unacceptable that some companies with millions of users and children among them should be so ill-equipped to talk to us about the potential harm of their products." - Damian Collins MP, chair of the U.K. Parliament's Digital, Culture, Media, and Sport Committee, criticizes the game industry for being "willfully obtuse" in avoiding answering questions about player spending on loot boxes.

The ESA's logo. | ESA

So the relationship here is already a bit strained, and the ESA doesn't seem all that worried about further antagonizing the people who could pass whatever absurd laws to curb the industry they feel like. (Keep in mind, U.K. legislators are *this close* to a no-deal Brexit, so there's very little I would rule out when it comes to what they will or won't do these days.)

But the "strongly disagree" part of the statement isn't what bothers me here. It's the next bit, where the ESA points to loot box odds disclosure policies as evidence it's operating in good faith. The ESA is talking about last month, when it was hauled before the Federal Trade Commission for the U.S. regulator's own day-long workshop on loot boxes. Feeling the need to make some gesture, it announced that Nintendo, Microsoft, and Sony had agreed to mandate loot box odds disclosures on their platforms by the end of 2020. No word about Valve or other major PC storefronts. No explanation of why they need almost a year and a half to implement this, especially when in the mobile world, Apple and Google just added it to their developer terms without warning in 2017 and earlier this year, respectively.

The other thing they point to is robust parental controls, which is a) legitimate and b) the one thing the industry has had in place from the beginning. So one point for you, ESA. (But you really need to add mobile platforms to your website telling people how to set parental controls because I suspect those are ground zero for unsupervised kid spending and it's a really conspicuous omission. Kind of like Google and Apple and Valve not being ESA members when they account for such a huge portion of the industry.)

Also, take another look at that sentence about the odds disclosures and parental controls. The ESA says they demonstrate something, but what? They demonstrate that "the video game industry is a leader in partnering with parents and players to create enjoyable video game experiences," which, unless I've completely misunderstood the past few years of industry debate, is NOT EVEN REMOTELY THE ISSUE HERE. Multiple governments aren't lining up to give your business a colonoscopy because they doubt your ability to create enjoyable video game experiences. They're doing it because what you're doing looks a whole lot like running a gambling operation where the house always wins because the payout isn't in money but imaginary hats for digital people, and a statement like this isn't going to change that.

Finally, there's the reference to regulatory bodies around the world that have determined loot boxes aren't gambling, which is true in that they have determined loot boxes don't fit their regions' current legal definitions of gambling. I don't really know how that's supposed to be convincing, considering part of the point of governments tasking committees and regulators to look into issues like loot boxes is to have them make recommendations on how the problem needs to be solved, perhaps by the addition of new laws, or reclassifying certain activities to fall under existing ones.

If I seem frustrated with the ESA, it's because I very much am. Getting platform holders to mandate loot box odds disclosure was a step in the right direction (or perhaps a slight shuffle, at least), but so much of the industry's response on this subject has been to dig in its heels and repeat the same arguments. They haven't quieted concerns about loot boxes to date, and they're unlikely to do so in the future. The industry needs to take a more substantial and conciliatory move toward addressing this soon, or legislators will do it for them, and I don't think they'll take the industry's feedback very seriously at that point.

STAT | 21 - Number of years it has been since the NPD Group tracked a worse August U.S. game software spending total than last month's $257 million. (August 1998 was a month before the original Metal Gear Solid launched on the original PlayStation. In Japan, because simultaneous worldwide releases were basically unheard of at the time.)

QUOTE | "For this particular exercise, it's not of the utmost importance that we get the mothers of America to want to play Madden, but if they can understand the story and be entertained by it, and be more receptive to their family playing Madden, that's a win for us." - Madden Championship Commissioner Matt Marcou explains the strategy behind getting a Madden Classic special to air on The CW to audiences that don't know Madden.

QUOTE | "I think you can put esports up there with the likes of Bitcoin, cannabis, and a couple other major hot topics within the world." - Dignitas CEO Michael Prindiville says the failure of a number of esports efforts is healthy and expected in any new market that experiences a surge of interest and growth.

QUOTE | "It is sustainable, because the world is big and the number of players that can play our games is immense. What we've seen in the last few years is the number of players that play our games is constantly growing. New markets are opening up and games live a lot longer than before. So at the moment we see that we can continue to increase the investments because we know we can have a return on investment that can be quite long[-tailed]." - Ubisoft CEO Yves Guillemot says the publisher can continue to make bigger and better open-worlds indefinitely.

QUOTE | "We are on track to close between 180 and 200 underperforming stores globally by the end of this fiscal year. And while these closures were more opportunistic, we are applying a more definitive, analytic approach, including profit levels and sales transferability, that we expect will yield a much larger tranche of closures over the coming 12 to 24 months." - GameStop CFO James Bell assures investors it will be closing hella stores in the near future. (GameStop currently operates more than 5,700 stores worldwide.)

QUOTE | "It's a vocal minority, so we don't let our decisions be driven by vocal minorities in that way... We think we're telling great stories with great characters, and so if you have a surface level rejection to this, and you're not even willing to play the game because there's a female protagonist in [it], that's your loss." - Gears 5 campaign designer Matt Searcy addresses people who have a problem with the series adding female protagonists .

QUOTE | "From a SpatialOS perspective, if you're able to build your game, launch it, take it to market, get it out there and doing the things you wanted it to do, that's very exciting and exactly what we exist to do as a technology provider and an engine provider. So while that's unfortunate, we don't look at that as a fundamental problem for a technology provider." - Improbable CEO Herman Narula suggests it's not his company's problem that a handful of the most prominent games using his SpatialOS technology shut down this year, and that the decision to acquire the developer of another prominent SpatialOS title was unrelated.

QUOTE | "It really doesn't feel genuine for me to proceed with the donation at this point... [I] didn't know a lot of things that surfaced throughout this whole thing about the charity that doesn't fit at all. So I understand why people had concerns about it." - Felix "PewDiePie" Kjellberg explains why he is backing off of his pledge to donate $50,000 to the Anti-Defamation League, a Jewish organization fighting anti-Semitism and hate. He did not go into any detail on exactly what he had learned about the ADL.

QUOTE | "Death to all Jews" - A sign Kjellberg paid two men in Sri Lanka to hold up while they made a video of themselves in 2017.

QUOTE | "I didn't mean that in a bad way." - Kjellberg, after dropping the n-word in one of his videos.

QUOTE | "Subscribe to PewDiePie." - The man who murdered 49 people at two mosques in Christchurch, New Zealand, during his livestream of the attacks.

STAT | 100 million - Number of subscribers Kjellberg has on YouTube, as of two weeks ago. He is the first YouTuber to reach that milestone.

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Brendan Sinclair

North American Editor

Brendan joined GamesIndustry International in 2012. Based in Toronto, Ontario, he was previously senior news editor at CBS-owned GameSpot in the US.

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