Senate Bill Could Mean Game Over For Microtransactions And Loot Boxes

When I was young, game companies made money by selling game cartridges or through merchandising. For me at the time, this was a substantial one-time, up-front cost since I was at the financial mercy of my parents. Today, game companies have several ways to monetize their games. In addition to selling the game software up front, game companies can allow customers to download the game for free and charge them as they play either through a monthly subscription fee or in-game microtransactions where in-game goods or services are purchased for real money.

One controversial form of microtransaction is the loot box. A loot box is basically an in-game treasure chest that can be redeemed for a chance at winning one of several randomly selected virtual items. Some of the items are more valuable than others because it is more powerful, looks cool, or just because of the rarity itself. It’s analogous to purchasing a pack of Magic the Gathering or Pokémon cards, hoping one of them will be the rare card that gives you the edge over your opponents. Some people think this is tantamount to gambling as people can and will spend a large amount of money (sometimes in the hundreds of dollars) in order to maximize their chances of getting the shiny new weapon or Pokémon.

A few weeks ago, Senator Josh Hawley (R-Mo.) introduced the Protecting Children from Abusive Games Act, a bill that bans “pay-to-win” microtransactions and loot boxes in games geared toward children.

According to the bill, a pay-to-win microtransaction in a typical video game is defined as an in-game transaction that 1) helps a player progress through the game; 2) helps a player accomplish an achievement in the game; 3) helps a player receive an award in the game; or 4) permits the player to continue to play the game after the expiration of a timer or a number of gameplay attempts.

In a competitive game, a pay-to-win microtransaction is defined as an in-game transaction that gives a player a competitive advantage over others.

The bill provides some exclusions to the ban. Microtransactions will be allowed for accessing more difficult content, additional game content, and for cosmetic in-game improvements. So this means that in-game expansion packs, and alternate character costumes are safe.

I should note that I think I understand what the senator is trying to do with this bill. First, he does not want children engaging in in-game microtransactions (including purchasing loot boxes) because they may not understand the difference between in-game currency and real currency. There are numerous stories of parents being surprised with large credit card bills because their children purchased loot boxes not knowing that they did it with real money. One famous story was where a child racked up a $1,400 bill from a Smurfs game. Some video game deliberately deceive children into making purchases thinking that the parents not complain and will blame the child when the bill comes.

Second, he does not want video game companies creating games that can be addictive to children.

With that being said, I see several problems with this bill. First, how can one determine whether a game is targeted to children? In some cases, it is obvious – such as any game made by Disney. But let’s look at a game like Mortal Kombat 11 where the graphic fatality moves expose interesting cross-sections of the human anatomy. While the creators intended the game to be marketed to adults, I get a strange feeling that a significant number of players will be boys between the ages of 12-17. Why? Because it is heavily marketed on every gaming website and store. The game is also featured in the prestigious EVO fighting game tournament and will be streamed on Twitch worldwide. And let’s face it, if teenage boys want to play this game, they will find a way to play it.

Another problem with this bill is that the definition of pay-to-win microtransaction is very broad and can result in unintended consequences. If you think about it, any in-game transaction can help the player accomplish an achievement or progress in the game. You buy weapons to kill enemies and buy armor to protect yourself and avoid taking an arrow in the knee. Video game arcades would be illegal since their very business model depends on customers feeding quarters to arcade machines.

More importantly, this will chill video game companies’ attempts to find new ways to monetize games while providing maximum value and entertainment to their customers.

It is also possible that the public will do a better and faster job at fixing the problem. Thanks to social media, companies that engage in predatory and unfair monetization tactics will be exposed and shamed by the public and the gaming media. For example, Star Wars Battlefront 2’s loot box system has been removed before release due to intense public criticism.

Finally, it is questionable whether this bill will prevent children from being addicted to video games. Video game addiction is real and has been a problem with some people for as long as I can remember. Ultimately, parents need to control which games their children play and prevent their children from using their credit card without their permission. I realize this is a lot easier said than done.

Video game companies should understand why this bill was created and take steps to fix the senator’s concerns. Companies should make it easy for children to understand which transactions require real money or avoid microtransactions altogether. If microtransations are a vital part of the game, a system should be set up so that a parent approves the transactions. Companies should also be generous about giving refunds if parents complain.

The Protecting Children from Abusive Games Act tries to address a legitimate problem. But the proposed legislation is poorly written and as a result can create unintended consequences. It can also stifle creative attempts to monetize the gaming experience. Sometimes, the pay-as-you-go microtransaction model can provide a better value than paying a fixed amount per month or an up-front fee. Despite its flaws, this might incentivize video game companies to fix their games to prevent children from accidentally (or not) maxing out their parents’ credit cards to purchase random loot boxes.

This column is also featured in the legal website Above The Law.