Are Microtransactions Blurring the Lines Between Gaming and Gambling?
Posted by Harry Kane on Monday, July 9, 2018
Online gaming represents a huge growth market in the current climate, and one that will be worth an estimated $171.96 billion by 2025.
Increasingly, we’re also seeing a crossover between this market and the virtual gambling sector, thanks to a number of innovations and the universal rise of mobile technology. At the heart of this is the use of microtransactions, which are made available to gamers in order to enhance their experience online.
This is a controversial measure, and one that is triggering a different response from regulators across the globe. We’ll explore this further in the post below, while asking what this means for the online gambling industry.
What Are Microtransactions and How Do They Work?
In simple terms, microtransactions refer to optional, in-game purchases that afford players access to additional features and content that improve the online experience. As the name suggests, these are usually characterised by relatively small payments, but they can build incrementally over time and across a number of different games.
These transactions have enabled developers to move away from fixed payments and subscription-based business models. enabling customers to tailor their spending and gameplay experience in the process.
With this in mind, it’s easy to see why the model appeals to both parties, although concerns have been raised by regulators and watchdogs alike.
It has been argued that online games simply create the illusion of free, for example, establishing a system through which the true cost of gameplay is disguised or withheld. The issue in some instances is that the basic level of free gameplay actively incentivised players to invest in recurring, low-cost microtransactions, to the point where they are financially and psychology committed.
Blurring the Lines – The Introduction of Loot Boxes
This was embodied by the controversial loot boxes, which are in-game reward systems that have been categorised as gambling in some jurisdictions throughout the world. These systems essentially enable players to purchase a random selection of virtual, in-game items with real money, in the hoping of securing one or more specific tools.
This has created a serious issue for some regulators, who have argued that the opportunistic nature of loot boxes and the lack of a defined prize or outcome makes them similar to virtual slot games. This is exacerbated an underlying lack of regulation, creating an environment where players may become vulnerable to addictive behaviour and overspending on the pursuit of a particular prize.
Given this, it was little surprise when the Belgian Gambling Commission moved to outlaw loot boxes, citing the practice as “predatory” and “in complete violation of gambling legislation”. The fact that the UK Gambling Commission (failed to follow suit came as something of a shock to the UK market, however, with the UKGC revealing that loot boxes did not fit the description of unlawful gambling as they’re only useable in the games in which they’re won and cannot be cashed out.
However, the random nature of loot boxes and the fact that they encourage repeat spending ahead of skilful gameplay remains a growing concern for the regulator, who may be compelled to take action in the future. The limited disclosure product also creates a regulatory grey area, and one which could ultimately require legislation to clarify.
The Future for Loot Boxes and the Impact on Online Gambling
In the long-term, it’s hard to imagine loot boxes being sustained in their current form, particularly given the UKGC’s renewed commitment to safeguarding players and gamblers who may be vulnerable online.
The Commission also wants to protect the reputation of the online gambling industry, and the crossover with loot boxes and virtual gaming may force them to take decisive action sooner rather than later.
The government may also play a pivotal role in this respect, with the Department for Digital, Culture, Media and Sport (DCMS) also concerned about the impact of loot boxes in the virtual gaming market. The DCMS has already clamped down hard on Fixed-odds Betting Terminals (FOBTs), for example, reducing the maximum betting threshold from £100 to just £2.
With this in mind, it’s likely that online gambling and gaming platforms will also draw the focus of central regulatory bodies, with loot boxes arguably representing the easiest target of all.
This type of approach would not only impact negatively on loot boxes and trigger a shift in the online gaming experience, but it could also prove detrimental to the virtual gambling space.
In instances where there is a crossover between different markets, there’s a chance that both entities will become synonymous with one another over time. This can create a sense of guilt by association, particularly in cases where one market is more stringently regulated to safeguard the interests of customers.
As a result of this, any moves to ban loot boxes would provide another blow to the reputation of online gambling, which is already reeling from the knock-on effects of the FOBT cap and the concerns surrounding self-exclusion and the ability of operators to protect vulnerable gamblers.
The Last Word
In truth, the crossover between online gambling and virtual gambling has been evident for a while now, from mechanisms such as loot boxes and in-app purchases to the deployment of real money wagering within the Grand Theft Auto (GTA) franchise.
While this has boosted revenues for both markets and enriched typical gameplay experiences, however, it may have a decidedly negative impact over time. This is certainly true if loot boxes are banned or heavily regulated, as both industries will be perceived negatively by authorities and their individual audiences due to their increasingly close alignment.
In this respect, the creation of clearer regulatory boundaries between online gaming and gambling platforms would not help to safeguard players, but also protect the integrity of both markets as they look to continue their astonishing growth.