The New Slot Machine: an International Perspective on Why the United States Should Learn to Stop Loving the Loot Box
| Publication year | 2022 |
The New Slot Machine: An International Perspective on Why the United States Should Learn to Stop Loving the Loot Box
Ajay Harish
Games of chance are woven into the fabric of human culture. Rapid shifts in technology have resulted in the creation of the loot box, a new video game monetization scheme formed from the dregs of slot machines and trading cards. While extremely lucrative, the existence of loot boxes allows game companies to expose children to wager-like behavior, potentially creating a new generation of problem gamblers. The United States is both financially and culturally tied to video games as an industry and has been slow in its regulation of loot boxes. Given the problematic nature of loot boxes, existing regulations in the United States are not enough to curb their negative impact. Similarly, South Korea has deep ties to gaming and has taken a more hands-off approach in its supervision over loot boxes. This Comment argues that South Korea's approach is ineffective, and the United States would be better served by following the example of countries like Belgium. Loot boxes in video games are an egregious abuse of children's susceptibility to predatory marketing schemes and should be banned.
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INTRODUCTION.............................................................................................132
I. WHY IS THIS MONETIZATION SCHEME PROBLEMATIC?....................134
A. Microtransactions and Loot Boxes........................................... 134II. LOOT BOX REGULATION IN THE UNITED STATES..............................150
B. A Brief History of Gambling Regulation in the United States .. 136
C. Are Loot Boxes de facto Gambling?......................................... 140
1. Things of Value................................................................... 141D. Loot Boxes Are Too Easy to Purchase ..................................... 144
2. The Comparison to Collectible Trading Cards .................. 143
E. Game Developers Induce Addictive Behavior by Design ......... 145
F. Skin Gambling Is a Derivative of Loot Boxes........................... 148
G. Recognition of Gaming Disorder ............................................. 149
III. LOOT BOX REGULATION IN SOUTH KOREA.......................................153
A. South Korea's Strange Relationship with Gambling................ 153IV. PROPOSAL AND WORLDWIDE REGULATORY MODELS ......................157
B. South Korea and the Gambling Industry .................................. 154
C. Recent Regulations and Developments in South Korea ............ 156
CONCLUSION.................................................................................................164
Games are an inseparable part of human history.1 Dutch cultural theorist Johan Huizinga, in his seminal 1938 book on play titled Homo Ludens,2 posited "[p]lay is older than culture, for culture, however inadequately defined, always presupposes human society, and animals have not waited for man to teach them their playing."3 Play has evolved as man has evolved—modern technology has caused a paradigm shift, giving play a digital form within the magic circles of video games.4 Today, there are an estimated 2.7 billion gamers worldwide.5
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With such a large consumer base, the video game industry has become highly lucrative, creating a global games market of $159 billion USD.6
To serve gaming corporations' endless pursuit of increasing financial returns, game monetization schemes have become progressively more sophisticated.7 Some of these schemes, such as the loot box, pose ethical concerns and can be considered predatory because these systems are designed to disguise or withhold the true long-term cost of the activity until players are already financially and psychologically committed.8 In particular, loot boxes have been compared to traditional gambling.9 Both traditional and online gambling have been tightly regulated in the United States due to their propensity to cause, among other negative consequences, addictive tendencies.10 The existence of loot boxes allows game companies to expose children to wager-like behavior, potentially creating a new generation of problem gamblers.11
This Comment will explore both the positive and negative effects of microtransactions and loot boxes on the video game industry in the United States and will examine whether these monetization schemes fit the traditional definition for gambling. This Comment will elucidate the problematic nature of loot boxes and how existing regulations in the United States are insufficient to curb their negative impact. Additionally, this Comment will draw a comparison to South Korea, a country possessing a long history with both video games and gambling, to illustrate the feasibility and efficacy of different solutions the United States may incorporate. Moreover, this Comment will investigate countries like Belgium, the Netherlands, and Australia, which have already taken on legislating loot boxes, and how the United States might take a similar approach.
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A. Microtransactions and Loot Boxes
Microtransactions are in-game purchases that unlock specific features or give the user special abilities, characters, or content.12 The purchases are entirely virtual and the cost of these transactions can range from a few cents to more than $99.13 The first instance of microtransactions was offered by Bethesda Softworks in 2006 for their game, The Elder Scrolls IV: Oblivion.14 The $2.50 horse armor was not well received by consumers, who were wary of the new business model.15 Two years later, the App Store launched on Apple iPhones, where users could download games which used microtransactions as their main source of funding.16 In just the first three years, iOS apps made over $3.6 billion in revenue with over eighty percent of that revenue coming from mobile games and their microtransactions.17 Fast forward to today and the global games market is expected to make $117 billion from microtransactions alone, a whopping seventy-seven percent of its total revenue.18 Economically, the use of microtransactions seems to be the best possible model for the industry because game development costs are higher than ever, but the retail prices of AAA19 titles are decreasing in real terms.20 Microtransactions allow companies to incur lower marginal costs while providing broader access to content for consumers.21
Microtransactions can be purely aesthetic (cosmetic), confer in-game advantages (pay-to-win), or contain randomized contents of uncertain value (loot boxes).22 While the former two categories have posed the problem of
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incentivizing game companies to release unfinished games,23 recent focus has been on loot boxes and their resemblance to gambling.24 Loot boxes are containers of randomized digital content holding items with varying degrees of in-game value.25 Given the element of chance is present in both loot boxes and traditional gambling, it is easy to see why such a comparison would be made. Historically, gambling has been highly regulated in the United States,26 so it is important to examine the gaming industry for harmful activity where similar levels of regulation would be appropriate.
The gaming industry is bigger than ever—more than 214 million people play games in the United States today.27 These players spend an average of more than six hours per week playing games.28 Moreover, forty-seven percent of gamers spend money on microtransactions.29 Notably, a significant portion of the video gaming population in the United States is under the age of eighteen.30 Specifically, approximately twenty-one percent of these video game players are minors, totaling more than 44.9 million gamers under the age of eighteen.31 The aforementioned statistics show that gaming companies created an environment which exposed children to a potential new form of gambling at an alarming rate.32
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B. A Brief History of Gambling Regulation in the United States
To better understand how a government can regulate loot boxes, it is important to know how gambling and its regulations developed over time. Games of chance have existed for millennia, from the Royal Game of Ur in 3000 BCE Mesopotamia33 to Senet in ancient Egypt.34 As civilizations industrialized and technology advanced, new and more complex forms of gambling have been produced.
Games of chance were popular even in the colonial era among the first settlers of America.35 By the 1680s, the upper class of Virginia was deeply involved in gambling on horse races in an effort to promote a shared sense of values among the social elite.36 Specifically, their elaborate betting rules and formal codes promoted social disparity and had the consequence of marginalizing those outside their circle of wealth.37 The social, political, and economic disparity caused by gambling was not challenged at all until the mid-eighteenth century, when Baptists and Methodists denounced gambling itself as sinful.38 Additionally, lotteries were used both as sources of entertainment and revenue to fund the original thirteen colonies before Britain restricted them in 1769.39
Technology and gambling intersected in 1894 when Charles August Fey built the first coin-operated gambling machine.40 He later went on to create the first three-reel slot machine with automatic payouts in 1898.41 Both the clergy and law frequently opposed the use of slot machines and eventually had them banned in San Francisco in 190942 —the rest of the country followed suit by banning virtually all gambling by 1910.43 Fey and his market competitors
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circumvented the law by building machines without coin slots, where payout happened covertly across a saloon counter.44 In an effort to fight the Great...
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