Loot Boxes and How We Got Here

Loot boxes, am I right? Not since the Hot Coffee scandal has the general populace been so up in arms with regard to some aspect of the gaming industry. With games like Star Wars Battlefront 2 and Forza Motorsport 7 abusing the model to the point that countries around the world have begun to consider or implement their own ways to protect consumers, the idea that maybe the industry has goofed in ways that will shape it permanently going forward has been expressed and is gaining traction. But why? Game developers employ very smart people, and they usually aren’t as caught off-guard by backlash as they appear to be. EA must have known that by implementing the now-infamous progression system (which as of this writing they have just overhauled to the point that it basically no longer exists) they would be facing consequences with their fans. So why take such a risk? Well, your first instinct is mostly right. It is definitely about the money. But blind avarice alone isn’t the only reason. The realities of game development have shifted in the last few years, and any understanding of how we got here requires an understanding of why.

The modern gaming industry is a bottom line-oriented business, as indeed it must be. With the margin between runaway hit and studio-busting flop being so razor thin as it is a typical developer has to balance between paying the bills, hiring talent, and at some point actually releasing a completed game. Sometimes, this goes spectacularly wrong in innocent, hilarious ways. 2006’s Sonic The Hedgehog shall forever remain an accessible punchline for anyone who was around and gaming at the time, but that glitch-ridden, frustrating, human/hedgehog kiss-depicting mess happened at least partly because Sega and Sonic Team needed to ship something in time for the holiday rush. They reasoned (not incorrectly) that a terrible, broken, insult of a game sold in time for Christmas would sell better than a somewhat competent game sold in March or whenever. In the end, that decision resulted in a critical low point for Sega, but at least for the employees no one involved had to watch Sega or Sonic Team dramatically turn off the lights and shut the doors on the company.

Fate was not so kind, however, to the employees of Team Bondi. This Australian developer was founded in 2003 and went bust in 2011, having only published one game and becoming entangled in allegations of exploitative working conditions, “insane” direction, and needing Rockstar to help carry them over the development finish line. That game, however, was L.A. Noire, which still sits on a commendable 89% rating on Metacritic and recently was ported to the Switch. This lovingly detailed 1940s detective thriller set in post-war Los Angeles boasted an impressive story, a flawed but sympathetic protagonist, and gameplay that was a combination of GTA, point-and-click adventure games, and browser-based found object games. Yet the studio that made it collapsed almost immediately after it was released.

It is understandable to wonder how it’s fair that a company which produced a game like L.A. Noire failed but the people behind what has become colloquially known as Sonic 06 kept on going. The sad truth is that realities unrelated to the quality of the games being produced affected both studios. Sega were still able to bring in revenue to support themselves, whereas Team Bondi (who had invested heavily in developing a new motion capture system which enabled actors’ faces to be mapped onto their characters, and then invested further in recognized talent to take advantage of that system) could not.

We now finally arrive at the modern loot box. PC Gamer reports that the first game in the world to offer a paid loot box-style system was China’s ZT Onlineback in 2007. This emergent trend was combined with the Western market’s shifting reliance on so-called “social games” such as Zynga’s Skinner Box/Facebook game FarmVille, which did not charge a fee to play but thrust micro transactions in the player’s direction to encourage them to expedite their progression and show it off to their friends, who hopefully would see how impressive it was that their friend recreated Super Bowl XLIV using farm animals and other items (I may have done this, but I promise I didn’t pay anything for it and at any rate if you’re going to be trapped in a Skinner Box you might as well put up some nice curtains inside it) and decide to spend more money to make something comparable. Somewhere along the line, either Valve or EA was the first to realize that similar techniques could be used on bigger titles.

Thus, mainstream gaming began to slowly embrace the loot box whether it wanted to or not. Valve famously made Team Fortress 2 free-to-play and introduced crates which contained hats and other gear for in-game use, then sold players the keys to these crates separately. EA took this idea and introduced it in different ways to two very different series: Mass Effect and FIFA. Now players of Mass Effect 3 could unlock items for online multiplayer much more quickly if they were willing to pay for enough rolls of the metaphorical dice (sound familiar?) and FIFA players were treated to an all-new mode called Ultimate Team in which players acquired cards which added real-world players to their created teams for a certain amount of games. Now you could actually own Messi! Of course, you could already play as Messi by picking either Barcelona or the Argentina national team, and you could already make any team you wanted with any colors or badge or name or combination of real and custom players using EA’s excellent free online tools, but those team creation tools were quickly swept under the rug and phased out, as was the ability to play as a team of former greats like Pele and Maradonna. Now, if you wanted to play as any of the old-timers you would have to get lucky by purchasing packs of cards. And now that EA and Valve were basically printing more money for very little additional investment, Blizzard just had to get involved with games like Overwatch and their special character skins (now available as a jersey for your favorite Overwatch League team!).

So is the moral of the story that EA, Valve, Blizzard, and everyone else who ever made a game with a loot box are heartless greedy entities motivated only by profit? Well maybe, but probably not. Making games is expensive. Like, so expensive that I’m about to italicize the word expensive. But the standard price of a new game in America is $60, and has been since at least before the launch of the seventh generation of consoles (Xbox 360, PS3, Wii). The Bureau of Labor Statistics’ incredibly handy inflation calculator tells me that $60 in November 2005 (when the 360 was launched) had the same buying power as $75.60 in February 2018. That’s over 25% inflation, and that means roughly 25% more revenue is required to still justify a $60 price point. Knowing that post-launch sales could support the costs of a game from the trends we’ve looked back at, and knowing that simply bumping up the cost of a new game to even $70 probably wouldn’t go over so well, the industry got its money the most effective way it knew how.

This isn’t that different from a company like Wizards of the Coast making money off booster packs for Magic: the Gathering, but when a card game player gets something they don’t need there is an agreed upon value for which they can sell it back. The fact that loot boxes don’t have that option is what leads us to the current most pressing issue about them: do they constitute gambling? China (which if you remember from a few paragraphs ago has been dealing with these things longer than anybody) along with Japan, Australia, and the Isle of Man already regulate the practice under gambling laws. More recently, Belgium has ruled as well that loot boxes are indeed a form of gambling. Furthermore, the practice of “skin gambling” has been established to use items from loot boxes as currency with which to gamble on eSports or other events, sometimes against actual currency. Hawaiian State Representative Chris Lee has said he is currently working on legislation to address the loot box situation as well. It is up to the reader to determine what side of this argument they come down on, but if loot boxes are somehow outlawed or restricted effectively, we in the gaming community will have to be prepared for whatever method the industry chooses to recoup the revenue it will lose as a result.