What are loot boxes? FTC will investigate $30B video game industry

Games such as "Overwatch" include paid “loot boxes” that some psychologists have called a form of gambling.

A growing backlash against video game “loot boxes” — in which players pay for the chance to win digital goods — has gained a major new backer: the Federal Trade Commission.

The commission's chairman, Joe Simons, said during a congressional oversight hearing on Tuesday that the regulator would look into the in-game loot boxes, a response that came after Sen. Maggie Hassan, D-N.H., sent a letter to the Entertainment and Software Ratings Board (ESRB) asking it to investigate loot box practices.

“The prevalence of in-game micro-transactions, often referred to as ‘loot boxes,’ raises several concerns surrounding the use of psychological principles and enticing mechanics that closely mirror those often found in casinos and games of chance,” Hassan wrote in the letter.

Loot boxes are an almost $30 billion industry, according to tech consultancy firm Juniper Research, and a major source of income for video game companies but have also caused concern among anti-gambling advocacy groups and psychologists, who say consumers can exhibit gambling-like behavior in buying loot boxes.

Loot boxes, which can now be found in many popular video games including “Overwatch,” “Star Wars: Battlefront II” and “Counter Strike,” are a form of micro transactions that cost real-world currency to purchase in-game packages that can include everything from new characters and weapons to character costumes and even dance moves.

Much of the allure of loot boxes comes from the fact that players don’t actually know what they’ll get before they “open” the box. Most loot boxes contain common items, but some offer rare and valuable digital goods — some of which can then be sold on secondary markets for real money. “Skins” for guns in “Counter Strike” — essentially a paint job that does not affect the gun’s in-game effectiveness — are currently up for sale for hundreds and thousands of dollars.

Loot boxes are now a common part of major video games and gaming culture. The U.K. Gambling Commission published a report last week that three in 10 children had opened a loot box in a video game. It was the highest rate of participation in gambling-style activities online by an almost 20 percent margin.

A brief search on YouTube turns up thousands of videos of people opening loot boxes and discussing their contents — including younger gamers. In the video below, a young gamer opens loot boxes. Overwatch is rated by the ESRB to for teens ages 13 and up.

As loot boxes have become more common in video games, consumer advocacy groups and academics have found troubling patterns among some gamers.

Two researchers conducted a survey of more than 7,000 gamers and found "important links between loot box spending and problem gambling” and that gamers who displayed gambling addiction issues typically spent more money on video game loot boxes. The researchers warned that “buying loot boxes may therefore lead to problem gambling amongst gamers."

The video game industry is the new tobacco industry. How many times can prominent industry members say there is no link between gambling addiction and loot boxes? And just like tobacco ads from decades ago, a majority are targeted at kids. Hook em’ young!

Loot boxes have also received pushback from within the gaming community. Electronic Arts’ “Star Wars Battlefront II” included a loot box system that included “Star Cards,” in-game items that made players stronger, sparking outrage after it created what some gamers called a “pay to win” system. After widespread backlash, Electronic Arts removed the ability to purchase loot boxes entirely.

After the community criticism of Electronic Arts, politicians began to take notice. Hawaii state representatives called the Star Wars Battlefront II loot box system a “predatory practice” and compared it to an online casino.

Politicians outside the U.S. have also taken notice. On Tuesday, an Australian Senate committee recommended a “comprehensive review” of loot boxes. Belgium and the Netherlands passed laws in April banning loot boxes entirely, labeling them as gambling.

The ESRB issued a statement to online video game media outlet Kotaku last year, pushing back on the characterization of loot boxes as gambling. “ESRB does not consider loot boxes to be gambling,” said an ESRB spokesperson in an e-mail to Kotaku.

The ESRB was established by the trade association of the video games industry and is a self-regulatory organization.

When asked for comment on the FTC’s discussion with Sen. Hassan, a spokesperson for the ESRB said in an email: “We would be happy to further discuss the matter with Senator Hassan and/or the FTC at any time.”

Editors note: If you are looking for help, please call the National Council on Problem Gambling hotline at 1-800-522-4700.

https://www.nbcnews.com/tech/tech-news/loot-boxes-gambling-video-games-ftc-look-it-n941256