Gambling is Gambling

There have been a lot of posts about loot boxes lately, here and elsewhere. In fact, even the ESRB have weighed in on the subject, determining that:

ESRB does not consider loot boxes to be gambling. While there’s an element of chance in these mechanics, the player is always guaranteed to receive in-game content (even if the player unfortunately receives something they don’t want). We think of it as a similar principle to collectible card games: Sometimes you’ll open a pack and get a brand new holographic card you’ve had your eye on for a while. But other times you’ll end up with a pack of cards you already have.

This is the sort of absurd logic that allows Pachinko parlors to exist in Japan despite more traditional gambling being illegal. “It’s not real gambling because you’re buying and winning steel balls… and trading them for prizes… which you then sell for real cash at a sketchy booth literally 5 feet from the parlor doors. But no slot machines!”

Maybe all the casinos in the US should start giving out commemorative business cards or wooden nickles to people who lose, so that they can avoid gambling regulations. You wanted X, and spent real money to get it, but got Y instead. #TotallyNotGambling

Look, we can have the semantic argument if you want. But you know it, I know it, the devs know it, scientists know it: loot boxes are gambling.

“The player is basically working for reward by making a series of responses, but the rewards are delivered unpredictably,” Dr. Luke Clark, director at the Center for Gambling Research at the University of British Columbia, told PC Gamer recently. “We know that the dopamine system, which is targeted by drugs of abuse, is also very interested in unpredictable rewards. Dopamine cells are most active when there is maximum uncertainty, and the dopamine system responds more to an uncertain reward than the same reward delivered on a predictable basis.”

Psychologists call this “variable rate reinforcement.” Essentially, the brain kicks into high gear when you’re opening a loot box or pulling the lever on a slot machine or opening a Christmas present because the outcome is uncertain. This is exciting and, for many people, addictive.

“What about Magic and Pokemon cards then!?”

Also gambling. In my replies on the subject up to this point, I played the role of TCG Apologist a bit. You know, all “these games feature pack opening as a central conceit, which is completely different than in Star Wars Battlefront 2, in which the system is just bolted on as a cynical revenue stream.” But… honestly? The gameplay of paper Magic exists completely independently of how you acquire the cards. If everyone who played had every card available by default, the only real things that would change would be the game being more fair (e.g. less P2W) and WotC making less money.

Keen replied in the comments of his own post:

I think what most people are conveniently ignoring is that with loot boxes and card booster packs you are trading one form of base value for another form of base value.

I put in $5, I get back a guaranteed set of cards that I must be willing to accept as worth $5, otherwise the exchange would never have happened.

Even Bhagpuss stated:

Lockboxes contain precisely the value you pay for them: if you buy $5 worth of lockboxes you have, de facto, agreed that there’s $5 value in them – you just proved that by paying $5, after all.

Please excuse my tone, but that is some Econ 101 perfectly rational economic actor bullshit. And a complete tautology besides. Like, how do you conceptualize a reality in which that is true, and yet the concept of Buyer’s Remorse exists? People make dumb economic decisions all the time. Are the people buying $2 lottery tickets doing so because they expect at least $2 of value in return? If they are, and they’re buying them when the jackpot is less than $500 million, they are irrational. The expected value of a $2 Powerball ticket is -$1.38. Similarly, the expected value of any given paper Magic booster pack will quickly (if not instantly) fall into the negatives, considering that the alternative means anyone can make free money by just opening the packs.

We can try and put a value on the “hope” and “dreams” of getting X instead of Y, but the bottom line is always the same: by virtue of paying real cash money, you had a chance at getting X and instead got Y. That’s gambling whether its a Charizard, a Black Lotus, or Boba Fett’s Rank IV Death from Above star card.

Is it legally gambling right now? No. Does the ESRB consider it gambling? No. But we all know what’s happening here, and the psychological mechanisms involved. Rational people do not buy loot boxes – the entire target market is for irrational people. And its profoundly sad, in a sort of “did we seriously give little kids candy cigarettes for Halloween?” way.

What do I want to see happen? Simple: a spade gets called a spade. Games that feature gambling as a revenue stream get labeled AO by the ESRB,  and the exact odds of any loot box are posted on a company’s website. If that also means people have to show ID to pick up Magic boosters, then okay. The less odious things would still survive, e.g. TCGs most likely, and the more odious loot box offenders would shift on to their next novel revenue stream. Hopefully one that does not specifically and (arguably) maliciously target people who can’t help themselves.

Do you guys remember when video game designers only got paid more when they made their game worth purchasing by more people? You know, that golden age of gaming in which producer and consumer interests aligned? Those were good days. I’d like to get back there at some point, without all the Consumer Surplus erosion.

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Posted on October 18, 2017, in Commentary and tagged , , , , . Bookmark the permalink. 17 Comments.

  1. The problem is that what you call a tautology is the basis of our economic system. A dollar bill has no inherent value, it is just a piece of paper. Yet we can trade it for goods and services. And before you go, “yeah, but virtual goods…” what do you think money in your bank account is? You don’t even have a flimsy piece of paper to support the value of that.

    So it is not gambling. It preys on the same sort of human frailties and I hate that. But if somebody pays $5 for a virtual item, it is then established that it is worth $5 to somebody.

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    • And when someone buys a $2 lotto ticket, that ticket becomes worth $2, win or lose. So it’s not gambling. Am I understanding you correctly?

      The tautology is claiming that everything in the loot box is worth X just because someone spent X. What the buyer of the loot box is “purchasing” is the chance of Y, which evaporates the moment they open the loot box and get vendor trash instead. And the purchase of that chance is precisely what makes it gambling, same as the purchase of any chance.

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      • The only function a lotto ticket has is to be (hopefully) converted into more money than you paid. That’s it.

        The items in a lock box have a function beyond just value. Most sales of boxes aren’t to people hoping against the odds that X amount of money will turn into Y, they are spending X amount for something they want. It’s a pretty significant difference.

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      • Most sales of boxes aren’t to people hoping against the odds that X amount of money will turn into Y, they are spending X amount for something they want.

        Could you possibly give some examples? I don’t know anyone who is buying, say, Black Lion Chest keys in GW2 expressly for the Merchant Express or Mystic Forge Stones. Or buying Overwatch crates for all the sweet, sweet Sprays or Icons. The Expected Value of these loot boxes are negative in almost all cases, especially over time.

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      • If we all agreed that a losing lotto ticket had value, that would be correct. But we do not, so that is silly.

        You are trying to prove that only SOME virtual goods have value. That is also silly. They either ALL have value or NONE of them have value. You cannot argue that just the one YOU want has value. Either way every lockbox is a winner because you get something of value or every lockbox is a loser because none of it has value. Nit picking the value of individual prizes doesn’t enter into it.

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      • If all loot box items were of equal value, why are there different odds on obtaining any specific item? Are the Legendary drops the same value as the Common ones? If the account which received the Legendary drop was sold on eBay (etc), do you imagine that the price would be the same as the account which got the Common drop?

        The assertion that they all have the same value is absurd. Magic cards (paper & digital) have different values than the booster price it cost to purchase them – sometimes much higher, more likely much lower.

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  2. Leaving aside collectible trading cards, which have always seemed to me to be as bad as, if not worse when it comes to exploiting irrational expectations, the principle of lockboxes is exactly the same as the principle of Raid or Boss Chests or whatever your MMO of choice has used for the last two decades. You know there’s something in there, every time. You know it might be that thing you want but you don’t know the exact chance and you won’t find out until you open it.

    You pay for lockboxes with money, mostly the real life kind, but you pay for raid chests with something even more valuable – time. And, indeed, we had much of the same hysteria over that, back in the day, based around the need to protect vulnerable adults. People whose obsession led them to neglect their work, their relatives, their health…

    There were some high-profile examples but I think most of us who played felt the problem was overstated. Now we’re concerned with people ruining their lives bankrupting themselves buying lockboxes. Whether it’s actually happening, and if so to what degree, who knows?

    I imagine we can all agree that some people will spend more than they wished they had and get less than they feel they should have done. I agree that purchases will not always be rational. We do not, most of us, however, live under regimes that seek entirely to prohibit irrational consumer behavior and, I surmise, nor would we, most of us again.

    Which doesn’t mean lockboxes shouldn’t be regulated – in theory. In practice, though, just how much legislation is directed at video games? How likely is it that more resources will be directed there in the future? And, were governments and regulatory authorities to begin to take that kind of serious and detailed interest in our hobby, is that something we would welcome?

    I dispute that lockboxes are “gambling”. As I said in reply to Keen, opening them is a gamble but that doesn’t make doing so “gambling”. If, for the sake of argument, we accept the term, however, we come to another problem: gambling is not universally reviled. Attitudes to it vary from culture to culture and within cultures. In the U.K., for example, there are bookmakers on every high street, often several within yards of each other, while in some countries just about all forms of gambling are illegal.

    The strong opinions going around on this topic right now mostly seem to come from people with an already-established antipathy towards gambling per se. The surface argument is that since lockboxes are gambling they should be included in the oversight of gambling regulators but I feel the subtext is always that, were this to happen, video game companies would see it as a red line and would desist in using lockboxes so as to avoid that regulation.

    Would you be entirely happy to see lokboxes come under the relevant gambling regulation, to see video game companies embrace that and to see the games that contain them re-marketed towards the huge market of actual online gamblers? No-one seems to consider that possible outcome, which could be far more damaging to the tone and content of the kind of video games we enjoy than the status quo.

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    • The difference between loot boxes and traditional boss drops is precisely the cash money payment. Yes, people pay in the time it takes to defeat the boss, or farm the rare spawn, or whatever. But that ostensibly correlates with playing the game. If people aren’t logging in every day to do some group activity, the entire MMO edifice starts collapsing. What exactly do loot boxes bought with cash encourage? Moving more development resources away from the game and into psychologically wheedling the playerbase with the best (random!) rewards.

      I’m especially against loot boxes for precisely the reason why we’re having this conversation now: they have expanded as a revenue stream. Microtransactions and DLC and cash shops were bad before, but now you don’t even know what you’re getting. The costs of these items – be it armor, costumes, whatever – were once fixed, but now they are variable, with the chance itself obfuscated. The deal is getting worse all the time, and most people are siding with Darth Vader for some reason.

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    • “…the principle of lockboxes is exactly the same as the principle of Raid or Boss Chests or whatever your MMO of choice has used for the last two decades. You know there’s something in there, every time.”

      Not in the traditional sense, though. Virtual goods, being account bound (and in general wrapped up in the whole license-rather-than-ownership paradigm of online games) are perfectly illiquid. You do not own them, and you cannot resell them, which precludes the usual economic arguments applied to a commodity. Their only value is what Marx would term use-value, determined by the individual.

      Raid drops, at least, used to benefit the team (including through disenchantment) and sped up the ultimate acquisition of the ‘goods’ you personally wanted. They were essentially corporate revenue, and the old DKP model crudely simulated wages. Even in these times of LFR and all that, when bosses are as similar to lootboxes as they’re likely to get, your consolation prizes tend to be reputation, tokens, etc., which you can, over time, convert into something of value to you. Not so with lootboxes.

      “And, were governments and regulatory authorities to begin to take that kind of serious and detailed interest in our hobby, is that something we would welcome?”

      Speaking for myself, yes. I would be okay with a relevant regulatory agency in the EU or the US taking a look at games with cash-purchasable lootboxes and classifying them as an equivalent of AO, as Azuriel suggests. Or, if we are really stuck on the gambling classification, introducing a whole new set of regulatory requirements (those pesky governments are good at that, after all) addressing this specific form of dopamine-to-cash conversion. The Chinese government has done this recently, forcing companies to publish and display the odds in prominent places within the game, much like what Helistar suggested below.

      Maybe it’s because I lack the requisite American mistrust of centralised authority, but I do not see it as an infringement of liberty for the government to make sure that citizens know precisely what they’re getting into before they engage in self-destructive entertainment.

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  3. you had a chance at getting X and instead got Y

    I see a lot of people making this argument and I feel it’s basically starting with a fallacy, because it assumes that X is the only thing worth getting. People are happy to buy lootboxes because they’d be happy to get X or Y (even if they would have liked X a bit more, but then again some will be actively hoping to get Y instead). Admittedly some games do this better than others, but the point is that it is absolutely possible to never really lose when buying lockboxes if you find all the box contents useful.

    Also, if purchasing anything without knowing the exact contents of the package counts as gambling, where do you draw the line? Are Kinder Eggs gambling because the toy inside is random? What about Lootcrates? Each month’s crate may contain the same things, but you won’t know in advance whether the items inside are something you would like. One person’s treasure might be another one’s junk.

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    • It’s true that sometimes the Expected Value of a loot box can be positive. That almost never lasts though, and begs the question of why a loot box is necessary in the first place, e.g. why aren’t the items being sold individually for a set price? The answer is because the seller is exploiting the monetary value of the chance of a better reward. That’s what is being sold.

      As for where the line is drawn, I can’t say that I care all that much. I care about what loot boxes as a revenue stream does to game design. If Kinder Eggs and Magic cards get caught in the net, then oh well. Actually, I don’t see anything wrong with Kinder Eggs having to have a website that lists the possible outcomes and at what odds. Is more information not better? Although Kinder Eggs are an interesting example to use, seeing as how they are illegal in the US.

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      • why aren’t the items being sold individually for a set price?

        Because what’s being sold is the experience of giving yourself a Christmas present, not knowing what exactly you’re getting.

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      • Because what’s being sold is the experience of giving yourself a Christmas present, not knowing what exactly you’re getting.

        Well, in this case publishing the odds and putting up for sale items found in lootboxes should not be a problem, right?
        I mean: someone wants the object -> buys it. Someone else wants the “present experience” -> buys the lootbox.
        Why I’m ready to bet (gambling!!!) that it will not happen? :)

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      • Well, it would kind of ruin the surprise a bit… :P

        I’m not against publishing the odds, but to be honest I don’t see how it would help much. People who genuinely enjoy buying lockboxes aren’t that fussed about the odds. But if you only care about that one item and it’s described as “rare”, it’s a bad idea for you to start buying boxes just to get that one thing whether the drop chance is 10% or 0.1%.

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      • Well, considering that the publisher usually lists up-front the contents of the lootboxes, I’d say that the “surprise” part is non-existent.

        As for publishing the odds, my guess is that knowing that a drop has a 0.1% chance would turn off a significant number of players……

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