How Loot Boxes Are Transforming Video Games into the Latest Form of Gambling

By Grayson Ruhl

I will never forget the rush of unlocking the 99-rated J.J. Watt in Madden Mobile. The game — a mobile version of the popular Madden football video game series — was at the height of its popularity, and as a 13-year-old, nothing made me more excited than to see the work I had put into the game finally pay off. I returned to school the next day triumphant, ready to show the world the new player I had earned. Despite the strong temptations presented by the game to try my hand at buying a player pack, my eighth-grade budget did not allow for such splurges. My pride came not just from the card, but from knowing I had finally reached a long-awaited goal — without spending a dime.

Unlike its previous iterations, Madden Mobile is free to download, despite a wealth of features and gameplay modes. The central facet of the game, however, is to collect the League’s top players to build the best possible team. A person can build their team in one of two ways: by spending months completing challenges to gain more lucrative players (as I did), or by spending money in the game to unlock “packs” that have the chance of holding a rare player. These packs are how a game such as Madden Mobile profits — through microtransactions that seem inexpensive individually but can rapidly build up. FIFA, the immensely popular soccer video game franchise has the same model through its “Ultimate Team,” and MLB The Show has its “Diamond Dynasty.”

This form of gaming — in which gamers can gain a competitive advantage by choosing to purchase microtransactions — is known as “pay-to-win.” Like Madden Mobile, many of these pay-to-win games are free to download in order to get players hooked on the game’s dynamics before they are asked to pay for these performance enhancing perks. In sports games like FIFA Ultimate Team and Madden Mobile, these perks usually come in the form of player “packs” that offer the promise of gaining a mystery player that may or may not have a better rating than the ones already in your lineup. Yet, it is not solely sports games that have this system in place. In shooting games, players may try their luck to get new weapons, gear, or cosmetic flair. In the larger world of gaming, these are known as loot boxes.

Universal across all genres of games, these loot boxes give players a list of possible options for what they may contain, and after purchase, “randomly” unlock one of the options in the player’s account. However, the probability of unlocking each option is far from equal — more rare or valuable options will have a lower rate of discovery than more common items. Hence, despite costing real money, no individual loot box gives any level of security as to what it may contain. As a result, it can require unlocking a large number of loot boxes to finally obtain the item that a player desires.

It may seem as though there is no feeling quite like happening upon a rare item in a video game loot box, but this feeling has been around long before the advent of video games. This is because the mechanics of these loot boxes — one of the core components of pay-to-win video games — bear a striking resemblance to conventional gambling. At its core, the loot box is little more than an in-game slot machine — players are betting on probabilities stacked heavily against them with the hope that they will cash out with a desired item. Sadly, the similarities between loot boxes and gambling go beyond surface level emulation — engagement with loot boxes has been scientifically linked to an increase in problem gambling behavior.

A study published in Plos One, a peer-reviewed academic journal, found that there is a proven connection between the amount of money that players spend on loot boxes and the extent of their problem gambling behavior. By conducting a survey of 7,422 gamers, the study concluded “that there was a statistically significant effect of problem gambling on loot box spending,” with p<0.001, η2 = 0.054. A p-value is a statistical measurement used to validate a hypothesis against observed data. Generally, a p value of less than 0.05 is considered statistically significant in a study, so the result of p<0.001 fits this. Eta squared, or η2, is a statistical measurement that measures the effect size of variables, with the general rule of thumb being: 0.01 = small effect size, 0.06 = medium effect size, and 0.14 or higher = large effect size. The larger the effect size, the more statistically significant a variable is to the conclusion of the study.

The study goes on to observe that “the relationship observed here is stronger than [the] relationship between problem gambling and several common risk factors…it is stronger than the relationship between problem gambling and depression…and major drug problems. It is comparable in strength to the relationship between problem gambling and current alcohol dependence.” While these results are all significant to conclude that there is a damaging effect that comes with loot boxes, the problem becomes even worse when the focus is narrowed to examine adolescent gamers.

A 2019 study from The Royal Society analyzed adolescent gamers and found that the correlation between loot box spending and problem gambling was actually higher in this population than in adults. Through a survey of 1,155 adolescents, the researchers concluded that there was “a significant positive correlation between loot box spending and problem gambling,” with p < 0.001 and η2 = 0.120. Recalling the rule of thumb, this means that loot box spending has a medium to large effect on problem gambling behavior in adolescents.

For a population that both legally and morally should not be so easily exposed to a gambling mechanic that masquerades as an important function in a game, these results — given the preponderance of loot boxes in popular video games — are highly concerning. As the study concludes, “when video game companies allow adolescents to buy loot boxes, they are potentially exposing them to negative consequences… It may be the case that loot boxes allow games companies to monetize problem gambling in these vulnerable populations for 11-digit annual profits. We believe that both relationships may potentially lead to serious adverse consequences for younger gamers.”

Available data clearly illustrates that gaming companies stake a large portion of their revenue on this exploitative system. Loot boxes accounted for $15 billion in revenue in 2020, and in 2021, EA reported $1.6 billion in earnings from “extra content sales” in its Ultimate Team game modes alone. Activision Blizzard, creator of the highly popular World of Warcraft and Overwatch franchises, reported that 61% of its revenue in 2021 was earned via microtransactions.

There is no sign of this structure going away. This summer, Blizzard released Diablo Immortal, the latest installment in its Diablo series. Unlike previous games in the series, this newest version is available on mobile — bringing with it all of the tenants of a mobile pay-to-win game. It has been projected that a Diablo Immortal player must spend approximately $110,000 to fully max out their character’s power — which is one of the primary objectives of the game. Another report found that it would take a FIFA Ultimate Team player three years of continuous play to earn enough points to have a guaranteed shot at getting the best player without paying — a sharp increase in the pay-to-win mechanic from my Madden Mobile days.

The Entertainment Software Rating Board, the governing body which assigns ratings to video games, has stated that loot boxes do not constitute gambling, comparing them to opening a pack of baseball cards. This oversimplification fails to reconcile with the reality that loot boxes are a predatory practice targeting all age groups — with children being the most vulnerable. With large gaming companies appearing more than comfortable to profit off the impulses and desires of the youngest generation of gamers, it will likely fall on legislators to act and pare back the proliferation of loot boxes. Classifying loot boxes as a form of gambling would be a major first step in this fight and could allow the next generation of kids to experience games as I did — with the pure, untainted joy of games that have goals which can be met through merit and entertaining gameplay, instead of excessive and potentially addictive and harmful spending.

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