User:Gregory Zacharko/Microtransaction

History

Initially, microtransactions in games took the form of exchanging real-life money for the virtual currency used in the game that the user was playing. Notable examples of games that used this model in the early 2000s include the social networking site Habbo Hotel (2001), developed by the Finnish company 'Sulake', and Linden Lab's 2003 'virtual world' game Second Life. Both free games allow users to customize the clothing and style of their characters, buy and collect furniture, and purchase special, 'flashy' animations to show off to others using some type of virtual currency. Habbo Hotel uses 3 different kinds of currency: Credits (or coins), Duckets (which are earned through accomplishing specific achievements during gameplay), and Diamonds. Diamonds are only obtained through buying Credits with real-life money. In Second Life, the "Linden Dollar (L$)" is the virtual currency used to power the game's internal economy. L$ can be bought with real money through a marketplace developed by Linden Lab themselves, LindeX. Second Life in particular have generated massive amounts of economic activity and profits for both Linden Lab and Second Life's users. In September 2005, $3,596,674 worth of transactions were processed on the platform. Both games are still active today.

In the late 2000s and early 2010s, games like Facebook's Farmville (2009) and Electronic Arts's The Simpsons: Tapped Out (2012) pioneered a new approach to implanting microtransactions into games. In conjunction with having virtual currency be used to purchase items, tools, furniture, and animals, These mobile games made it so users can purchase currency and then use that currency to reduce or eliminate the wait times attached to certain actions, like planting and growing carrots or collecting taxes from the townspeople.

More recently, however, another major transition in how microtransactions are implemented in games occurred. "Live-service" games, like the Ultimate Team game mode in Electronic Arts's FIFA series and Epic Games's worldwide phenomenon Fortnite, with constantly changing and updating content, became more prevalent in the video game market. These types of games heavily employ the use of the "Loot Box" microtransaction type. According to the September 2019 report by the UK Parliament's House of Commons and the Digital, Culture, Media, and Sport Committee, they define loot boxes as “... items in video games that may be bought for real-world money, but which provide players with a randomised reward of uncertain value.'' The widespread usage of loot boxes by game developers and publishers have garnered a great amount of criticism from gamers in the past decade. Currently, though, game developing corporations, like Electronic Arts (EA) and Activision Blizzard, make over billions of dollars through the purchase of their microtransactions. In FY2017, EA raked in around $1.68 billion and Activision Blizzard earned over $4 billion respectively.

Criticism and regulation

(Originally in the Article: With the increasing popularity of loot boxes in the mid 2010s, several games that implemented their own with varying approaches to the concept became highly criticized by the gaming media. In particular, Electronic Arts' Star Wars Battlefront II in 2017 drew widespread criticism for giving players significant gameplay advantages when purchasing loot boxes with real money, resulting in renewed discussion of the legality of the systems. A number of governing bodies, such as Belgium's Gaming Commission, have subsequently considered loot boxes to be a form of gambling, and from the late 2010s became highly regulated under gambling laws of certain regions such as China, Japan, Australia, and the Low Countries. While most game publishers agreed to modify their games' loot boxes in accordance with governmental laws, or otherwise as a result of negative reactions, others, such as Electronic Arts, have contested that they do not constitute as gambling; in late 2018, the publisher initially resisted the efforts of Belgium's Gaming Commission by refusing to remove the ability to purchase FIFA points in FIFA 19, but later complied in early 2019 after legal proceedings were brought against them.

In May 2019, Republican Senator Josh Hawley of Missouri introduced a bill named "The Protecting Children from Abusive Games Act" to ban loot boxes and pay-to-win microtransactions in games played by minors, using similar conditions previously outlined in the Children's Online Privacy Protection Act.)

My Additions:

In the mid and late 2010s, gamers became increasingly aware of how microtransactions operate in their games, and they have become much more critical of their usage. The commonly cited issues of microtransactions from gamers are:

• "Loot Box" rewards are determined by random chance and percentages, plus they can directly influence gameplay via the items they bestow.
• They sometimes cost too much money for what they are worth. For example, a bundle of 50 loot boxes in Blizzard's first-person shooter game and worldwide phenomenon Overwatch costs $39.99.
• They may facilitate gambling behaviors in people already suffering from gambling issues. Plus, they can make people overspend money on the game, whether or not they are able to do so.
• Games with loot boxes, like FIFA, can become "pay-to-win" (in order to advance past certain points, or to become the best in the game, it is virtually required to pay real money to receive in-game currency to purchase items or to pay for bigger and better items directly).
• Microtransactions in games mean that gamers are paying more money after already paying $60 for the game to experience and play the full game.

Legislative efforts to regulate microtransactions

The implementation of microtransactions and the subsequent backlash from gamers and the gaming media have caused governments from all around the world to look into these games and their microtransaction mechanics. In April 2018, the Netherlands and Belgium both banned the sale of microtransactions in games sold in their countries. The specific games Belgium looked closer at were EA's Star Wars Battlefront II (2017) and FIFA 18, Overwatch, and Counter-Strike: Global Offensive developed by Valve. All of those game's microtransactions, except for Star Wars Battlefront II which removed their gameplay-altering microtransactions in March 2018 (but kept cosmetic microtransactions) due to players calculating that it would take over 48 hours of playing to obtain Luke Skywalker and then complaining about this extreme threshold to unlock popular characters to EA, have been determined to be "games of chance" by the Belgian government. As such, they are now highly regulated by the Belgian government under their gambling laws. Games would have to remove their microtransactions in order for it to be sold in their country. If the game companies refuse to comply, then Belgium's government said that it will enact "a prison sentence of up to five years and a fine of up to 800,000 euros". While most game publishers agreed to modify their games' loot boxes in accordance with governmental laws, or otherwise as a result of negative reactions, others, such as Electronic Arts, have contested that they do not constitute as gambling. However, EA eventually complied with the Belgian government's declaration and made it so players in Belgium can not purchase FIFA Points, the premium (obtained by buying it with real money) in-game currency used in FIFA's "Ultimate Team" game mode. Professional FIFA players in Belgium were a little disappointed because not being able to buy FIFA Points makes it harder for them to compete and succeed in the FIFA Global Series, the EA-sponsored e-sports competition for FIFA games, showing just how "pay-to-win" they feel FIFA Ultimate Team is.

In the United States, there have been some calls to introduce legislation to regulate microtransactions in video games, whether on mobile, consoles, or PC, and numerous attempts have been made recently to pass such legislation. In November 2017, Hawaii representatives Chris Lee and Sean Quinlan, during a news conference, explained how loot boxes and microtransactions prey on children and that they are working to introduce bills into their state's house and senate. A few months later, in February 2018, they successfully put four bills onto the floor of Hawaii State Legislature. Two of those bills would make it so games containing loot boxes can not be sold to people under the age of 21, and the other two would force game publishers to put labels on the case of their games that have loot boxes in them, as well as make them be transparent about the item drop rates for the rewards in their game's loot boxes. However, all four bills failed to pass through the Hawaii State Legislature in March 2018. In May 2019, Republican Senator Josh Hawley of Missouri introduced a bill named "The Protecting Children from Abusive Games Act" to ban loot boxes and pay-to-win microtransactions in games played by minors, using similar conditions previously outlined in the Children's Online Privacy Protection Act. The bill received some bi-partisan support in the form of two co-sponsors from Democrats Richard Blumenthal of Connecticut and Ed Markey of Massachusetts. As of November 2019, nothing more has been heard on the progress of this effort.

The United Kingdom has also been closely observing microtransactions, especially loot boxes, and their effects on children. A major report by the UK Parliament's House of Commons and the Digital, Culture, Media, and Sport Committee, released in September 2019, called for the banning or regulation of microtransactions and loot boxes to children as well as having the games industry to take up more responsibility with regards to protecting players from the harms of microtransactions that simulate gambling. Specifically, the committee's conclusion is that microtransactions should be classified as gambling in the UK and therefore subject to current gambling and age-restriction laws. In October 2019, the Children's Commissioner for England, which promotes and protects children's rights, released a report describing the experiences, thoughts, and effects, positive and negative, of gaming on children ages 10-16. Within the report, some of the children directly stated to the interviewers that the microtransactions and loot boxes that they encounter and subsequently buy, are just like gambling. The report concludes that showing the odds and percentages of certain microtransactions to players does not go far enough and does not actually solve the problem. Instead, they suggest that certain new features to protect children should be implemented in all games featuring microtransactions, like showing the all-time spending on a child's in-game account and having limits on the amount someone can spend daily. Additionally, they push for game developers and publishers to stop pressuring children to spend money on microtransactions in their games in order to progress through the game and for Parliament to change their current gambling laws to declare loot boxes as gambling and subject to gambling laws. However, like with the U.S., as of November 2019, no more progress towards regulation has been reported by the U.K. Parliament.

Psychology and ethics

Alongside questioning the legality of the extensive use of microtransactions, some gamers are also questioning the morality and ethics of selling microtransactions, especially to children. There is also a natural psychology behind both the selling of microtransactions and why people keep buying them.

Psychology

According to a post made by Gabe Duverge on the Touro University Worldwide (TUW) website, impulse buying is a good part of the psychology behind people buying microtransactions. Essentially, many games, especially in the realm of mobile games and the "free-to-play" market, force a decision from the player to keep playing or not via a limited time pop-up on the screen that tells them that if they pay a certain amount of money (usually about 99 cents or a dollar), they can keep playing where they left off. This is another type of microtransaction and it has become increasingly common in the mobile games sphere as of late. Another psychological aspect that is used to get players to continue playing and buying microtransactions is called loss aversion. When a player continues to lose over and over again, they begin to crave the dopamine-filled, positive feelings that they feel when they win. As such, they become more inclined to spend money for items that will help them achieve that elusive win. Then when they do win, the player attributes their win with the item that they just bought, making it more likely that they will spend money whenever the player gets on a losing streak, and so the cycle continues on.

Ethics of selling microtransactions to children

During the past two decades, gaming has emerged as one of the top options children go to as a mean of alleviating boredom. In a August 2019 report conducted by Parent Zone in the U.K, they studied and gathered data directly from children between the ages of 10-16 years old about their experiences with online gaming and the microtransactions that the games that they play hold, as well as ask about how the microtransactions in these games have affected them (and/or their parents) socially and financially.

Statistics

According to the Parent Zone study, in the United Kingdom, 97% of boys and 90% of girls ages 10-16 years old play video games. About 93% of the entire 10-16 years old age group in the U.K. play video games, and many of them like to play games through online play. A numerous amount of the common online games that children tend to play, like Roblox, Minecraft, and Fortnite, contain and push some sort of microtransaction for the children, or their parents, to buy. The primary items bought by children in these games are largely cosmetic items, specifically "skins", which are simply costumes for their in-game avatar. In the case of Fortnite, many of the skins are locked behind a "battle pass" that the player must pay for. A "battle pass" is a tiered system where the player buy the pass and by completing challenges and missions, they earn in-game items like weapons, skins, experience, emotes (special animations used to taunt opponents, celebrate victories, dance, and show-off), and more. It is about $9.50 (or 950 of Fornite's in-game virtual currency, V-Bucks), but the player can pay about $28 (or 2,800 V-Bucks) instead to unlock the battle pass and they automatically complete the first 25 tiers (out of 100 tiers) of it.

A majority of the children surveyed feel that these kinds of microtransaction systems in their online games are complete rip-offs. 76% of them also believe that these online games purposely try to squeeze as much money as possible from them when they play the game. About half of the children expressed that they need to spend money on the game in order for it to be fun to them; this is due to many of these games' features, which are modes that the children want to play and experience, being locked behind microtransaction paywalls. As such, there is a large gap between the gaming experiences that non-paying players have and the experiences that paying players have.

Some other statistics and thoughts regarding loot boxes specifically were also collected from the children. Out of the 60% of children that know about loot boxes, a overwhelming majority (91%) stated that the online games they play contain loot boxes in them, 59% of them would rather pay for in-game content individually and directly instead of through a collective and randomized loot box, and 44% believe that if loot boxes were eliminated from their online games the games would actually be a lot better. Plus, 40% of the children who played a game with loot boxes in them paid for one, too. Overall, the report stated that of the children who were generally unhappy with the games they paid for or were gifted, 18% felt that way because certain features had to be bought after paying for the game already, effectively making is so they had to pay more than the normal, full-price of the game in order to play the full game. The game was simply just not worth paying for to 35% of the unsatisfied children and 18% of them also felt that in-game microtransactions were not worth paying for either. Ultimately, children feel that spending money on microtransactions has become the norm and an expectation when playing modern video games.

Effects

The effects of microtransactions on children have been a massive talking point in recent years, especially in regards to the debate over if microtransactions and loot boxes should be banned and eliminated from video games. As such, numerous official studies and research has been conducted to help gather data on the effects that in-game microtransactions have on children's social lives and their financial statuses.

Social

For many children, the excitement that they feel when they open loot boxes, packs, and obtain items through microtransactions is very addictive to them. Opening these random boxes without knowing what is inside, to them, is the same as opening presents on Christmas Day. The excitement and suspense is amplified when the experience is felt alongside friends. In the U.K. Children's Commissioner's report, the children who played FIFA feel that opening player packs are a game within the game. To them, opening packs creates variety because they can play some football games in the Ultimate Team game mode and then open some packs when they get bored of playing normal football matches. The children also want to become the 'cool guy' by paying for microtransactions and loot boxes and then obtaining very rare items in front of their friends, creating a lot of hype and excitement among them. This makes paying for microtransactions a very positive experience for them. However, when children buy items in front of their friends, peer pressure often set in. Friends pressuring the player to continue buying packs hoping that they will be able to see them get a rare item can cause the player to spend more than they may actually be able to. The pressure to spend money on in-game content also stems from children seeing their friends have these special, rare items, and them wanting to have it themselves. Essentially, when everyone around them has it, they will want it too in order to feel like a part of the group.

Peer pressure is not the only way children's social gaming experiences are altered. As noted in both the Parent Zone report and the Children's Commissioner's assessment, children who play the popular game, Fortnite, explained that classism, as in discrimination against people of different economic and social classes, exists among the players of the game. Some children fear that if they have the free 'default' skin in Fortnite, no one, friends nor random strangers, will want to play with them as the default skin is seen as a symbol of a player being bad at the game. The default skin is used as judgement and an insult against the player who's in-game avatar wears it, too. Players wearing default skins are considered 'financially poor' and very 'uncool' by their peers and the game's community, so children spend money on microtransactions in order to avoid having that 'tag' or target on them.

The media that children consume outside of the game can also effect their social interactions and in-game spending. A popular mode of entertainment for children is watching YouTube videos of other people playing their favorite games. In the case of FIFA, children watch their favorite and most popular YouTubers constantly open player packs in the Ultimate Team game mode. Unlike the children however, the YouTubers have a lot more money to spend on packs as creating entertaining YouTube videos are their jobs and major source of income. The children watch in anticipation, wondering what rare players the pack may produce. Then, they see the jubilant, over-the-top screaming and reactions from the YouTuber, which makes the children happy, too, despite them not actually getting the player themselves. As a result, they go into the game and spend a lot of money buying player packs hoping to get a rare player just like the YouTuber that they just watched.

Financial

The amount of money that children spend on microtransactions has continued to grow because the design of these online games, as well as other outside influences, have made spending money for in-game content an essential aspect of the game itself. In the U.K., many different cases of children unknowingly spending a ton of their parents and their own money in order to get what they want or need to progress through the game have surfaced. In one instance, the father of a family with four children all under 10 years old, bought an ₤8 ($1.29) FIFA Ultimate Team player pack for them. Then, in the span of three weeks, the children kept spending money on packs, eventually spending ₤550 ($709.91) altogether, completely emptying their parents' bank account, but never receiving one of the best players in the game as well as the children's favorite player: Lionel Messi. The children apologized to their parents and explained that at the time they did not understand how much they were impacting the family's financial situation. There have been other situations where U.K. children spent ₤700 ($903.53), ₤1,000 ($1290.75), ₤2,000 ($2581.50), and even ₤3,160 ($4078.77) on microtransactions in various mobile games, usually as a result of them getting tricked by the game to pay for something in-game or just not understanding that real money was being taken out of their, or their parents', bank accounts when the bought items in-game. Spending such large amounts of money on microtransactions have devastated some families financially, including some who had to pay a bill full of microtransaction payments with college savings and even money in life savings accounts.

In the Children's Commissioner's study, children reported spending more and more money with each coming year, despite also feeling that because they are rewarded completely unknown items, they feel like they may be wasting money, too. Most of the children that played FIFA in the study said that they spend anywhere from ₤10 ($12.91) a day to upwards of ₤300 ($387.23) in one year, sometimes even buying multiple player packs at one time. Some children have also stated that they have seen friends, their siblings, and acquaintances who have mental disorders spend all of their birthday money on in-game microtransactions, all while feeling like spending that money has not been a waste despite them not receiving any valuable items.