In this extended essay I will be discussing the problematic rise in commonality of loot boxes in video games and how they may be harmful to children and secondary school teenagers. Findings in this paper will identify any flaws in relation to loot boxes and microtransactions and any parallels they may draw with gambling in casinos as well as the current regulation these loot boxes have today. It is important to look at the psychology behind gambling and what causes someone to become addicted to a game. This includes the likes of the Skinner Box, the dopamine pathways that enable users to express addictive tendencies and the sunk cost fallacy. I will also be discussing the dangers that gambling can cause and how costly it can be to some individuals and how children can be more susceptible to games of chance. After this, it is also important to highlight sites that influences these practices to children like YouTube and Twitch. I will then reflect on the Irish regulation of these loot boxes and see how this compares to other countries and what can be done to help prevent the excessive use of these loot boxes in Ireland.
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Introduction to Gaming
A video game is defined as games 'played using a specialized electronic gaming device or a computer or mobile device and a television or other display screen, along with a means to control graphic images.' (www.dictionary.com, 2019). Video games have evolved over the past forty-five years. From Pong being the first video game introduced to the public, selling over seven thousand units (History, 2019) in 1972 to the recent Minecraft which has currently sold 122 million copies worldwide. It has even sold copies to Antarctica (The Verge, 2019).
Minecraft began as a small project by one man named Markus (Notch) Persson. The game itself started very basic, requiring the player to simply build whatever they would like in a blocky, earth-like dimension (Fig.1). As the game progressed Notch hired more people to accompany him, seeing how much the game was growing. It later developed into a 'survival' game where players require food and fend off enemies while also letting the user build whatever they like. The game became so popular, it grabbed Microsoft's attention and later was bought for 2.5 billion dollars (Sherr, 2019). Using Minecraft as an example, it is easy to see the immense progress video games have made since 1972, with over 2.5 billion gamers around the world today (The European Mobile Game Market, 2016).
Video games provide endless hours of entertainment for the users. It is a great, fun way to relax after a hard day of work or school. It is something I look forward to every day as a reward after doing college work. Not only does it provide these endless hours of entertainment, but it also provides many benefits in the world of work. The activities on screen provide a lot of mental stimulation and improves coordination. It also improves your memory and problem-solving skills. One study at UC Irvine found that playing 3D video games can improve your spatial memory and memory formation (UCI News, 2019). Another study demonstrated that gamers were better than non-gamers when tasked to fly and land aerial drones. They were essentially as good as trained pilots at this skill (MKinley et al., 2011) (Fig.2). Your multitasking skills also greatly improve (Abbott, 2019).
Unfortunately like most pastimes, video games also have their downsides. Playing certain games can become very stressful, especially against someone online. Some game franchises such as Call of Duty can have a very toxic fanbase, leaving these online games to become incredibly frustrating, notably when you are losing to these people. You can find many 'rage' videos online of people in similar situations breaking their controllers or games consoles from frustration. If people do better than others, they feel good about themselves, (Wills, 1981) and it really shows through gaming, particularly through the online gaming community.
Another downside would be the addictive nature of video games. The World Health Organization recognizes this as "Gaming Disorder" in their International Classification of Diseases (ICD-11) as "a pattern of persistent or recurrent gaming behavior, which may be online or offline, manifested by impaired control over gaming, increasing priority given to gaming to the extent that gaming takes precedence over other life interests and daily activities and continuation or escalation of gaming despite the occurrence of negative consequences." (World Health Organization, 2019). Unfortunately for us, some video games take advantage of this through 'surprise mechanics' or by having fewer rewards in a game, making the experience in finding an item more valuable and something to strive toward when playing. Sadly, most video games nowadays are not designed for fun. They are designed to hook as much of an audience as possible and keep them playing for as long as possible. Armed with behavioral psychologists, game companies deploy state of the art features to draw you in and keep you hooked (Eyal and Hoover, 2014). One way they can attract customers is through microtransactions and loot boxes or, as Electronic Arts infamously called them, "surprise mechanics". (Polygon, 2019)
Microtransactions and Loot Boxes
Microtransactions marked the beginning of a new era of gaming. The implementation of in-game currency meant that players can buy functional or ornamental items that can benefit the player using real money. The first instance of a buyable, in-game item was in Bethesda's The Elder Scrolls IV: Oblivion for PC and Xbox 360 in the year 2006 (USgamer.net, 2019). Although the small microtransaction at the time didn't completely ruin the game as it was simply an ornamental item for your horse, it did however pave the way for the upcoming problem and developers' obsessions with these microtransactions.
Example of in-game purchases (Fig.3)
Functional items are those that provide a clear benefit in the game such as buying a better weapon or stronger armor. Ornamental items are decorative items that have no clear in-game benefit but allow the player to make a more unique character such as a nicer skin for your gun in Call of Duty Modern Warfare. These items can range heavily depending on the type of game. For example, I will be looking further into the game Counter Strike: Global Offensive and the legal issues caused by the game's cosmetic skins for guns. However, some video game developers will take these in-game advantages too far, leaving the player at a major disadvantage compared to those that decided to buy these items.
As I mentioned before, Electronic Art's game Battlefront 2 was hit with major criticism after players found out that it required 4,500 hours of in-game play time to unlock all content, hoping that the players would buy the content instead using in-game currency (Star Wars Gaming news, 2019). Publishers and developers have begun to shift from an upfront, once-off payment method to a variety of paid and free in-game strategies attached, like microtransactions and loot boxes.
This is known as a free to play (F2P). This gives the player a less stressful decision when buying a new game. After all it's free, what could go wrong? However, what they don't realise is that these games are riddled with microtransactions and features that require real life currency to access.
As previously mentioned, publishers and developers seek profit by selling virtual goods via microtransactions within the variety of cosmetic changes or alternative modifications. Alongside this, the developers implement mechanics that give players a competitive advantage over other players, all for a small fee. For example, offering virtual goods which players can invest real money in and that gives players a significant advantage in multiplayer games, rather than earning it with hours of gameplay. This can be referred to as a "pay-to-win" system in the video game industry (Grosso, 2016). In one survey and two experimental scenario-studies, (N=532) there was evidence to suggest that a player using microtransactions will be judged more negatively (R. K. Evers, van de Ven and Weeda, 2015, pg.36), showing the negative impact microtransactions have on the gaming community.
This was especially true during the launch of Fallout 76's annual subscription, where once the player bought this $100 season pass an indicator would appear on their head. Fallout's fanbase was disgusted by this unnecessary pass and purposely tried to hunt down these players in game. Another study shows that 60% of the participants surveyed had spent money on in-game items and the average amount that was spent in the group was 1083 dollars (R. K. Evers, van de Ven and Weeda, 2015, pg.36). This is a huge indicator of just how much gamers are willing to spend in order to increase their gaming experience. These microtransactions spawned a new way to spend money on game items.
In-game purchases in Star Wars: Battlefront II (Fig.4)
From the help of microtransactions, loot boxes began to develop and grow through video games. The book Red Wired: China's Internet Revolution describes these as "virtual treasure boxes, which may contain in-game items worth more than the cost of the box itself" (So and Westland, 2010, pg.144). Researchers have identified Chinese free to play mobile game, MMO ZT Online to be one of the very first games to include the concept of loot boxes (Danwei.org, 2007). Loot boxes have been compared to baseball cards, which in the early 90s generated around $1.2 billion at its peak of sales. It spawned many collectors, buying many packs in hopes of finding something rare which they could sell for profit (Jeff, 2009). Despite the two being similar in terms of collectability, the major difference between these are the fact baseball cards are physical and can be traded, while loot boxes are digital and cannot be traded in most cases.
Another difference between the two is that loot boxes have a significantly larger market. In Activision Blizzard's latest annual report, they revealed a total 7.16 billion profit from sales, 4 billion of that coming from 'in-game net bookings' which covers loot boxes, downloadable content and in-app purchases (Thubron, 2018) (Fig.5). Loot boxes have exploded in popularity, as the hunt for a rare item will drive players to buy more. The purchase of loot boxes takes place within online video games and is seen being like a lottery mechanism in the virtual world (Koeder & Tanaka, 2017, pg.12).
These loot boxes can vary between games. In the Call of Duty franchise, they are portrayed as cases and the player can buy these with a slim chance of acquiring a rare gun. In EA's FIFA 20, the player can buy packs which contain a random assortment of players, varying from common to extremely rare. They are taken through a tunnel with an array of lights, revealing which players they now own. In Counter Strike: Global Offensive (CS:GO), these are also referred to as cases with a random chance of getting an extremely rare skin for their gun. Some games even provide the player with loot boxes for free, just to get you in the rhythm of unboxing them. In games like Overwatch, you can earn your lootbox in-game by saving up enough experience points. In all the games mentioned, these loot boxes are heavily advertised in-game which is where this becomes a problem.
Games such as FIFA have a Pan European Game Information (PEGI) rating of 3 and an Entertainment Software Rating Board (ESRB) rating 'E for everyone'. This rating means these games are accessible to children and young teenagers who are more likely to buy these loot boxes and become addicted. Childhood is "a condition defined by powerlessness and dependence upon the adult communities' directives and guidance" (Jenkins, 1998, p.44). The parents of these children have less time to monitor what they are playing and what their children are purchasing.
This is from the large increase of children living in Ireland of 2002 to 2011 by 13.4% (Cso.ie, 2020) (Department of Children and Youth Affairs, 2012, p.4).
Effects before revealing the random player pack in FIFA 20 (Fig.6)
This leaves children vulnerable to purchasing microtransactions and loot boxes and being sucked into the world of gambling. Many videos online can be found of these kids explaining their addiction at a young age. One instance is of this through a YouTube channel named 'Ruskie', where in his video 'The Dark Truth Behind Loot boxes...' he tells the story of a friend he met online and how this friend's relatives had won a few million pounds in the lottery. He was given 44 thousand pounds towards future college funds and to get him started in life. Over the span of a few months this friend had spent 20 thousand pounds on loot boxes in CS:GO at the age of fourteen. This shows just how vulnerable children are to these features due to their limited cognitive function.
Counter Strike: Global Offensive
One hugely popular game that I will be focusing on is Counter Strike: Global Offensive. It is the fourth game in the Counter-Strike series and released on multiple platforms. However, I will be focusing my attention on the PC version of the game since loot boxes and microtransactions are more prominent in comparison to the console variations. CS:GO is a multiplayer first-person shooter game, pitting two teams against each other with the objective of planting a bomb or defending the bomb site (Fig.7). The game itself has been a major success with a peak number of 850 thousand concurrent players (Steamcharts.com, 2019).
Even since its release in 2012 the game is still consistently pulling in numbers. Throughout the month of August of last year 767 thousand players played online (Steamcharts.com, 2019). It is safe to say that CS:GO has a dedicated fanbase that returns to the game often. Something important to note about the game itself is that upon release, CS:GO cost 15 dollars (Lahti, 2012). However, since then the game's price has declined and in December of 2018 Valve had announced that CS:GO will become free to play, opening the game to more of an audience (Vincent and Vincent, 2018). Although this may seem like a great marketing strategy for the game, it also becomes accessible to children which, in turn, can lead to a financially dangerous scenario much like the YouTube video I mentioned earlier.
For example, if I was under the age of eighteen and wanted to buy this game the only obstacle in my way would be access to a credit card. To buy CS:GO you would need an account with Steam.
Once created you might be greeted with an 'age verification' page once visiting the store to buy the game. However, the user can easily lie and put a false date of birth. In fact, the default date of birth on this page is over the age of eighteen so all you need to do is press 'confirm'.
The game itself is riddled with loot boxes (Fig.8). Many advertisements of special items and loot boxes are spread across the home screen before you start a match. These loot boxes contain one skin for an in-game gun or, if you're lucky, a knife. Even if you are willing to buy a loot box, referred to as 'crate' inside this game, you are greeted with twelve different types of them. Many different types are added regularly, alluring the player to take a closer look. However, these crates are not too expensive, ranging from a few cents to a euro. It is the 'keys' to these crates that become increasingly costly. From around four euro each, it is easy to see why people have lost money on these crates as it would be around 5 euro just for a chance of getting a good skin for your gun.
These skins can then be sold on a market for prices up to several hundred to thousands of euro. The Dragon Lore style of AWP is the most expensive CS:GO skin ever sold – in January 2018 it was sold for 61,052.63 dollars (Skins.cash | Blog, 2018). This of course wasn't an ordinary skin as it had many rare stickers which increased the value absurdly. The skin itself without these stickers can still be sold for over 1500 euro, so you can see why people are tempted to try their luck on these cases. The rarity of these skins can range from 'common' (highlighted by a white tag) to 'exceedingly rare' (highlighted by a golden tag) with many rarities in between (Tobys CounterStrike, 2018) (Fig.9). However, the rarities are not the only factor in the skin's final price.
The quality of the paint job on the weapon skin also has a factor in its price. These include 'factory new' as being the best quality and battle-scarred being the worst. With all of these aspects in mind, you can see why CS:GO has such a big market and how tempting it would be for young teenagers to try their luck in these loot boxes with the expectation to receive a rare skin.
Psychology Behind Gambling and Addiction
In the Cambridge dictionary, the term gambling is defined by 'the activity of risking money on the result of something, such as a game or horserace, hoping to make money' (Dictionary.cambridge.org, 2020). If we compare this term with loot boxes there are many similarities.
The player pays money to acquire these loot boxes in hopes that they receive a rare skin in which they can sell for more money. Much like the definition, loot boxes have many parallels with gambling in terms of the psychology that takes place when gambling.
The Skinner Box was a device invented by behavioral psychologist B.F Skinner. Regarded as the father of Operant Conditioning, Skinner's ideas were based on Thorndike's law of effect (Thorndike, E. L,1898). According to this principle, behavior that is followed by pleasant consequences is likely to be repeated, and behavior followed by unpleasant consequences is less likely to be repeated (Mcleod, 2018). This scenario involved a small box with a lever. Once the lever was pressed, a reward would be dispensed to the subject. The subject, in this case a rat, soon learned that all he needed to do to receive food was to press this lever (Fig.10).
Positive reinforcement strengthens a behavior by providing a consequence an individual finds rewarding (Mcleod, 2018). After a while of pressing the lever for endless amounts of food, the rat would get bored and stop. However, once Skinner introduced a small chance that food will be dispensed, the rat was more inclined to stay for a longer period. This is known as variable ratio reinforcement and can be related to gambling through the unlikelihood of receiving a reward so the player will stay for longer, and thus, becoming more addicted to the game.
Dopamine is the main hormone of developing an addiction. It is the pathway that controls your brain's reward center for performing behaviors that your brain thinks are beneficial (Kim, 1998). The hormone is release when taking risks like gambling. It is also found that waiting for the outcome of a gamble can activate the brain's chemical reward system, releasing endorphins that create pleasure (Rogers P, 1998). This shows us that the dopamine isn't released when the player receives the reward, it is upon the anticipation of getting it. This is further emphasized when there are fancy animations whilst opening the loot box much like in the games FIFA or Overwatch.
Another factor to consider when looking at addiction is the Sunk Cost fallacy. Very similar to the Entrapment Effect (Rogers 1998) which I will discuss further later, the Sunk Cost fallacy is when the player feels obligated to continue gambling because they have already invested too much money to give up their pursuit. In a study by Christopher Y. Olivola, participants were more likely to choose the less enjoyable alternative when they had invested huge amounts of their own time or money to obtain it than when they had invested little or nothing (Olivola, 2018).
During an MRI scan, frequent gamblers and non-frequent gamblers were asked to estimate the probabilities of winning and losing different amounts of money. Not only were frequent gamblers worse at estimating losses, but they experienced an increased blood supply to the regions of the brain associated with reward expectancy when estimating wins (Fig.11). This suggests that frequent gamblers learn to minimise loss and have overly optimistic expectations for win states (van Holst, 2012). This applies to loot boxes in video games too. In CS:GO you might be collecting huge amount of skins and you might be completely invested in those you have so far, so it's not worth devoting time to another game when you have spent so much money in CS:GO. The feeling of envy arises when a person lacks another's superior quality, achievement or possession and either desires it or wishes the other lacked it (Smith & Kim, p.21, 2007).
Humans hate losing. The average human feels twice as worse when they lose than when they win something of equal value. Loss Aversion is related to the Sunk Cost fallacy and takes place when the player believes they will eventually win something good if they just keep going (Poldrack, 2016). This makes the player believe that they will eventually net out if they keep playing, but sadly there is very slim chances of that happening and it turns to an ugly end with them losing even more money. Video game developers will take advantage of this and create different loot boxes to choose from so that the player believes they have better luck on a certain box. As mentioned before, CS:GO does this by having many, many crates to choose from so that the player believes that they have a better chance of receiving something good. Sometimes the loot boxes will become available for a limited time or 'exclusive', forcing an impulse decision from players who are tempted to buy them. Not only will they be exclusive loot boxes, but they will also feature on the front page with bright graphics and colours to entice the player further.
In the field of gambling research there are five cognitive fallacies which would lead a person in a fail state back to gambling. These are Chasing, The Gambler's Fallacy, Self-Corrected and Fair, Cheating the System and the Entrapment Effect.
Chasing (Rogers P, 1998) involves the process of continuing to gamble to recoup losses incurred by gambling. The Gambler's Fallacy (Rogers P, 1998) refers to the mindset that a negative outcome is less likely to happen now that several negative outcomes have occurred. Self-Correcting and Fair (Kahneman et al., 1982) is when people think they are entitled to win as their luck has been poor thus far. Cheating the System (Turney, 2008) is similar to the previous fallacy; however, this is when the player believes that they have tricked the system and figured out a way to win. The Entrapment Effect (Rogers P, 1998) as previously mentioned is when a player feels obliged to continue since they have dedicated time and money.
The Caesars Entertainment Corporation began one of their most successful campaigns in 1997 with their Total Rewards card. This was a membership card that rewarded you every now and then when gambling depending on how much you pay. This could range from free drinks at the bar to free shopping vouchers. However, what the members didn't know was that the casino was tracking the player's every move. They tracked exactly what machines they went to, how long they spent time gambling and when they reached their breaking point. Once the player was about to quit and go home, they would be rewarded with these glamorous gifts making them stay longer. Developers of games are doing exactly this, and since loot boxes aren't considered gambling, they don't need to be discreet about it.
Video games can change the odds of getting a drop any moment they want to. In the game Fire Emblem Heroes, players are guaranteed a good drop after getting continuous bad ones. This means they are still getting rewarded and have a renewed sense of hope right at their breaking point. Scientific Revenue, a mobile development consultant company, creates these specific pieces of software that can track every detail of the player and sells them to game developers. Information about how willing the player is to buy a certain item and when they reach their breaking point are all systematically filed in this software and the developers can automatically rig these loot boxes in their favor. All to make you coming back for more.
Scientific Revenue even states on their website that they alter the prices of microtransactions depending on who is playing; "different people respond to different prices. So why offer the same prices to everyone? To maximise revenues you need sophisticated user profiling and prices that are tailored to specific users". Research finds that 10% of 13 to 18-year olds admitted to gambling on unregulated casinos, Esports, betting or loot boxes. (Hymas and Dodds, 2018). This is alarming since these companies are tracking children's buying habits and progressively pushing them to buy more.
Public Perception and Regulation
Belgium and the Netherlands has been the first European countries to step up to the dangers of loot boxes after an investigation of four games with a heavy use of loot boxes. These included FIFA 18, Overwatch, Counter Strike: Global Offensive and Star Wars Battlefront II. Only Battlefront II was found not to be in violation of the law - after developer EA temporarily halted micro-transactions completely following negative feedback. Games that require the use of real money to buy loot boxes have become illegal and failure to comply may lead to a fine of €800,000 and up to five years in prison for the publishers, which can double if minors are involved (Gerken, 2018). Belgium's Minister of Justice, Koen Geens, was keen to focus on how children are confronted with loot boxes, calling the mix of gaming and gambling "dangerous for mental health" (Gerken, 2018).
Animation whilst opening loot box in the game Overwatch (Fig.13)
Australia have also followed suit. A 2018 investigation led the Australian Environment and Communications Reference Committee to find loot boxes are psychologically similar to gambling, especially to young people (Aph.gov.au, 2018). Now games that contain loot boxes must have a label stating so and that these games are restricted to adults only. However, the UK has opted to let industry self-regulation handle the issue, with Conservative Minister of State MP Margot James expressing trust that organizations like PEGI will speak "to the industry to ensure that those who purchase and play video games are informed and protected" (Hafer, 2018).
Meanwhile here in Ireland not much action has been taken against these mechanics. An in-game purchase description label has been as far as we have gotten, which is close to useless as the game needs to have been bought in order to see it. The Gambling Commission stated: "In our evidence to the select committee we set out our view that under current legislation loot boxes could only be caught as gambling under the Gambling Act where they offered a prize of money or money's worth (The Irish News, 2019). To me, these loot boxes in CS:GO fit this description as each skin has a monetary value and can be resold for real money. They have also stated that for all loot boxes to be classed as gambling under the Gambling Act there would need to be a change to primary legislation. It seems as though this will be another issue pushed aside for years to come.
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Gaming has been hugely popular on sites like YouTube and Twitch. Two of the top five YouTube channels with the most subscribers worldwide are gaming related (Think with Google, 2020). However, some channels will dedicate some of their videos to opening loot boxes, exposing young children to this kind of behavior. Many of these only showcase when they get a rare item and edit out the boring parts.
Thumbnail image of YouTuber opening a random player pack in FIFA 20 (Fig.14)
Some YouTubers are even sponsored by these companies to open loot boxes to the public. These videos get tens of millions of views, influencing children and teenagers to go out and buy these packs or loot boxes, which is exactly how my friends and I began wasting money on loot boxes and packs. The worst part of this is that these influencers know exactly that underage children are more susceptible to these types of videos but choose to ignore this fact since they are profiting from it.
In conclusion, loot boxes have become a huge problem in the gaming community. In this essay I was set out to examine the psychological effects loot boxes have on players and draw similarities between these and the game Counter Strike: Global Offensive. Through use of many tactics such as the sunk cost fallacy and loss aversion, developers make sure that the player is invested in their game through loot boxes. Both loot boxes and gambling operate through the main hormone of developing an addiction which can be financially devastating. I discovered that children are in much more danger when exposed to gambling as they are more likely to continue the addiction throughout later in life. Just like The Caesars Entertainment Corporation, game developers have installed mechanics in their game to track exactly how much each player is willing to spend on loot boxes and what their breaking point is. This is an alarming tactic to make sure players and even children are invested in their game. If it has the same psychological and financial effects to gambling, which I have discovered throughout researching this topic, then it should be regulated as such.
The solution that should be implemented in Ireland is to rate all games that have loot boxes as PEGI 18 or have warning signs on the boxes of these games so that parents know exactly what addictive features are included and to inform the parents of the dangers these loot boxes can cause, especially in games like CS:GO.
One solution to stop underage teens from viewing these YouTube videos where loot boxes take place is for YouTube's algorithm to automatically detects the action of opening loot boxes in games and flag them 'only suitable for people over the age of eighteen'. There are workarounds against this as the teens can create a new YouTube account and mark the age as over eighteen, however doing this expresses the motion to these teenagers that the actions in these videos are not recommended and will shed these loot boxes in a bad light instead of promoting them to teenagers as if they were perfectly okay.
List of Illustrations
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