How the ESRB is Promoting Children's Gambling

“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).”

--Official ESRB statement explaining why these mechanics are good for children

It occurs to me that the ESRB may not understand what “an element of chance” implies, and some readers may not either. It's actually the case that these systems don't need to have any element of chance. In other cases, the chance is implied to be one rate, and is actually a very different rate. I thought this was a good time to explain what “an element of chance” means in gaming, and hopefully the ESRB will read this and have a moment of remorse for throwing our children under the bus.

Let's say I send my child, GamerX, to the store to buy a loaf of bread and some other things. I know the bread costs $2 but I gave my child a list of things to buy and equipped them with my debit card. When they get there the store has decided it can make more money on bread by using “an element of chance”. GamerX is asked to put my card in a slot and then spin on a roulette wheel for the bread. The store could have set up the “game” in a variety of ways:

Truly Random: In this situation, there are 20 slots, on the wheel, with 10 of them “rewarding” with a small pretzel. The other 10 “reward” a loaf of bread. The odds look 50/50 and actually are. If you have to pay $1 per spin, on average you will pay $2 per loaf of bread, but you could pay as little as $1 and as much as...well you might run out of money before you get a loaf. While this system still exists in real regulated gambling establishments, it does not exist in online gaming!

Truly Non-Random: The wheel is set to always give a pretzel the first 5 spins. On the sixth spin a loaf of bread is always awarded. So the price of bread is $12 but only if you made it to the sixth spin. If you quit early, the price was essentially infinite since you paid and only got a small pretzel.

Compounding Non-Random: Here the roulette wheel has 20 slots, and each time it lands, that slot is removed from play. So after 20 tries you will get each item on the wheel exactly once. Since there is only one slot that gives bread, the first spin only costs $0.10. So if it was random, the bread would cost $2 at most. But this is not random, it just looks random. Every spin after the first costs twice as much as the previous spin, and the bread is only awarded on the 20^th spin. The cost is $0.10 per spin times (2^X-1) where X is the number of slots on the wheel, which is 20 in this case. So $0.10*(2^20-1) or $104,857.50 for one loaf of bread.

Rigged: There is so much going on here that I'm just going to call it what it is. This is actually the most common version of “element of chance” in gaming today. Here you see three people ahead of you spin once and get a loaf of bread every time. You are like “oh wow, this is going to be easy, the odds of winning appear to be 100%!” You don't know that the three people ahead of you were store employees. The buyer is encouraged to keep spinning, thinking the odds must be good, when they actually might be zero, a very small positive number, or a combination of the two.

In gaming this normally looks like a new player starting with four characters/avatars but they only see the first three initially. Then the player spins/opens a wheel or chest and a fourth avatar pops out, and it happens to miraculously be way more powerful than the first three. If the customer is subject to inductive reasoning (almost everyone uses inductive reasoning unless trained not to) they will make the following assumptions:

While #1 is probably true, #2 always is false but is made to look true. Since the odds or payouts are never disclosed (as opposed to regulated gambling) they could be any rate or even zero in a non-random setup.

Psychometric Sandwich: This is today's special and only the biggest players have access to it. Here my debit card was scanned when it was inserted to see how much money I had. Then the odds of winning are set to zero or almost zero until I am almost out of money and then I win automatically. Or if I give up some store employees rush up and win bread on the first try until I go back to gambling for my bread.

While gaming companies can't literally read your bank account, the biggest players are starting to use something called “psychometric modeling” which allows the developer to predict very accurately your behavior by gathering data from a variety of sources, like your Facebook “likes”. The technology has gotten amazingly accurate in predicting consumer behavior. While it can't figure out exactly how much money you have (it can get close), it can tell pretty accurately if you will quit after 2 tries, or keep going for 100 spins on the bread wheel. Stores (and casinos) will pay good money to get the latter compulsive bread wheel spinner to walk into their store.

Facebook just happens to have this technology, and for the right price can also send customers to your store. So Facebook is currently the best “all in one” partner for psychometric modeling. Eventually they really will do it all, and so will the other platform providers, and then this won't be just available to the biggest companies.

...........

So bread prices are skyrocketing for gamers, and they will keep going up as long as there is no regulation. Game developers using “elements of chance” in their games can do pretty much anything they want. But how can regulators regulate this without actually regulating anything? Well I am sure they consulted with platform holders and major gaming companies prior to making their determination, just like EU regulators did in 2013. Except that EU regulators actually then regulated gaming in the EU.

The ESRB, after talking to industry, told us “This isn't the gambling you are looking for”, and used their Jedi Mind Trick on consumers. We didn't really need help from our regulators because these “elements of chance” (which sometimes aren't) are not gambling. They just look like gambling and cause the brains of consumers to act in the same way as gambling. But it's not gambling. Why?

Because you got a pretzel.

So these “elements of chance” are fine for children of all ages, and there is absolutely no need to warn parents of children about these systems either. If it was possible some parents might object to their children being tricked out of their bread money, then yes a warning would be in order. But no rational parent would object to such wholesome and benevolent content in their children's games, so no need to burden parents with such decisions.

I also heard a rumor that the ESRB has set up a pretzel factory in an undisclosed location.

So what happened in China recently when they required gacha loot box reward payouts and odds to be made public to consumers? Some game developers went to extreme lengths to avoid doing so. Activision Blizzard scrapped their gacha box system completely in Overwatch rather than reveal how it worked. They replaced it with a system of giving a “free random gift” with every premium currency purchase. So when paid bread spinners were outlawed, they set up a system where you get a “free spin” on the bread wheel for every $20 you spent on other groceries. Rational shoppers don't buy bread, so there is no chance they might be forcing consumers to buy other groceries to spin on the bread wheel.

Why would Activision Blizzard redesign their game just to move the bread spinner to a different part of the store? They may have had no choice. Asking a company to show their odds implies that those odds don't change, but in games we can change anything we want constantly in response to analytics. This is the hottest thing in the gaming industry right now. So Activision Blizzard might literally have been unable to comply with the regulations because the regulations were created with 20^th Century technology in mind and we are way past that now.

So the bread spinner got moved from aisle 3 to the checkout. Problem solved...

I use Overwatch as an example here not because this is the only such product. It is possibly the biggest product and as such it is the alpha trend setter. Other developers will follow the lead of the alpha. Chinese regulators, despite their best intentions, got gamed. American regulators did nothing other than open up a pretzel factory. The next move is on the part of EU regulators, who seem to be approaching the situation cautiously but deliberately. I warned them in 2013 when they summoned me to the ICPEN summit in Panama that they would be playing regulatory Whack-a-Mole with our industry for years to come, and they are finally realizing just what I meant. I am going to pull up a chair and watch the show, while I eat my popcorn. This show has been going on for years now but it can't go on forever. I'm guessing it lasts longer than Benny Hill but not as long as Dr. Who.