United States Senator Josh Hawley announced on May 8th that he intends to introduce a bill to ban “‘pay-to-win’ and ‘loot box’ monetization schemes” in video games. What does this mean and why would a US senator use his time to regulate video games?

As I’ve written previously, many games can be downloaded and played without cost. These are called “free-to-play” and include games like Candy Crush Saga, Clash of Clans, and Pokémon GO. Because these games do not require an initial payment, potential customers can start playing the game without worrying about wasting their money. This allows the game to build players and social media visibility very quickly; more players means more buzz.

What’s the problem?

Most of their revenue is earned by relying on “whales,” an industry term for the tiny percent of players who choose to spend money on otherwise free games. Even though whales usually constitute less than 5% of all players, they pay enough to subsidize the game for everyone else.  

For example, one journalist interviewed several people who had spent tens of thousands of dollars on “free” games. Many said that they did not regret the money they’d spent, but others said that they had lost control of their lives, spending money on games instead of paying rent or buying food for their children, a pattern often seen in people with gambling addictions.  

The psychology community continues to debate whether this can be considered a true “addiction” or whether it can be sufficiently explained by other, better-understood disorders like depression. (Here are examples of arguments for and against this classification.)  

Regardless of whether or not it is a true addiction, few would argue that this type of game is not a problem, especially because games that include optional spending often specifically target children.  

What is Senator Hawley proposing?

In essence, Senator Hawley is suggesting that children need to be protected from these practices. The media is full of examples of children who spent thousands of dollars on microtransactions (small, optional purchases within a game). These children often either do not understand the value of money, cannot keep track of how many times they have purchased a small item, or are so enticed by the rewards that they cannot help themselves.  

In order to address this problem, proposals have come from both sides of the political spectrum in the United States. In 2018, Hawaii State Representative Sean Quinlan proposed a statewide ban on selling games which include loot boxes to people under 21 and would require games that do to publicize this fact and the exact probability of obtaining different items.  

Hawley’s new proposal is to specifically regulate “‘pay-to-win’ and ‘loot box’ monetization practices” in games that target children.  

Loot boxes

A loot box is a container with a randomized digital prize which players may open by paying real money. For example, a game might allow players to buy a box with a random weapon inside. Most boxes contain weapons of average strength, but some contain an especially powerful weapon which can offer significant advantages during gameplay. Players will likely spend about $30 billion dollars this year on loot boxes alone.  

This is clearly similar to other forms of gambling; money is exchanged for a chance at something valuable. In casinos, the potential reward is money. In games, the reward is either (1) cosmetic, like a cool-looking costume, or (2) practical, like a strong weapon.  

One study confirmed that people who had signs of problem gambling often had similar issues controlling how much they spent on loot boxes, suggesting that it is psychologically similar.  

Pay-to-Win

Some games take this a step further and give a direct advantage to players who choose to pay money. This type of practice receives the harshest criticism for targeting children who have not yet mastered delaying gratification.  

For example, the game Allods Online allows players to purchase better weapons, more useful items, and other bonuses which immediately make their characters more powerful than those of players who choose not to pay. Others use negative reinforcement to make the game less fun for those who do not pay, including making them wait and other “inconvenient gameplay elements.” This waiting period can last anywhere from a few seconds to several days.  

One egregious example of this is the game Harry Potter: Hogwarts Mystery. It is a visual novel, in which players follow a character they create through various adventures as they attend the magical school. Each action the character takes uses up a certain amount of the character’s “energy.” Casting a spell, taking notes in class, talking to other students, and other actions all use small amounts of this energy. This energy automatically refills over an inconvenient length of time. This means that in order to continue advancing the story, the game’s player must stop playing the game and wait for hours for their energy to replenish enough that they are able to to get enough energy to proceed. Alternatively, the player can pay a small amount of money to refill it immediately.  

Like most games in this category, the beginning is designed to be playable without needing to wait; players are offered free energy refills exactly when they are likely to be running out. In Hogwarts Mystery, the game is structured so that the first time they must decide whether to wait or to pay is during a particularly exciting moment, when their character has been trapped in a closet with a life-threatening plant.

Here’s a video of the moment in question. The amount of remaining energy is shown at the top right of the screen, a fraction of 24 total points. Notice that each time the player taps the screen to kick the plant, it decreases this amount one point. As soon as they cast a spell by tracing the movement on the touch screen, the camera zooms to the character’s face as a vine wraps around their neck.  

At this critical moment, the players run out of energy for the very first time and the game asks if they want to refill it for real money. Children now have to decide whether to either put the game down for several hours or pay a dollar or two for an immediate refill to learn what happens next.  

A comprehensive guide to these was presented at an industry conference in 2017. These games take advantage of how difficult it can be for many, particularly young people, to wait for a reward when they could spend money to get it immediately.  

The counter-argument

In response to Senator Hawley’s proposal, the Entertainment Software Association (ESA) noted that numerous countries have established that loot boxes do not constitute gambling. They suggested that most games already include parental controls to allow parents to monitor or restrict their children’s ability to spend money on microtransactions.  

Additionally, many players simply enjoy these free-to-play games; they are accessible to anyone regardless of ability to pay and players never risk wasting money on a game they might end up disliking. If these microtransactions were made illegal, it could force developers to change the way they earn money. This might take these games away from the vast majority of players who enjoy them without spending money irresponsibly.  

Conclusion

It does seem clear that such games have a particularly strong effect on children and can affect not only their parents’ wallets, but also their well-being. In general, this bill seems like a significant, positive step forward toward shielding children and parents from the most problematic parts of video games. However, many questions must be considered before this new bill can be fully evaluated:

1. How does one determine whether a given game is being targeted toward children?  

2. Will protections exist for children who play games that are not specifically designed for them?  

3. What types of microtransactions are acceptable?

4. Would adding an “Are you 18 or older” question be enough to circumvent this legislation?

5. What penalties would exist for game developers who produce this type of game?

Until these and other practical questions are answered, it is too soon to decide whether the bill would protect players without destroying the game industry.