Fake Stuff, Real Money: The Big, Sometimes Shady Business of Microtransactions

Star Wars has been in the news in the last few weeks – and not just because of the big movie that was just released. The latest video game based on Star Wars, EA’s Star Wars Battlefront II, has found itself at the center of a controversy about video games, consumer protection and kids. For parents and others who just finished shopping for holiday gifts  – and who are still trying to keep their cellphone and credit card bills under control – the controversy is also a reminder that the true cost of products in the digital age can often be much more than the sticker price.

In EA’s previous Battlefront game, players earned new characters, game modes, and other in-game goods as a function of playing the game – x number of hours gets you Han Solo, x gets you Luke Skywalker, and so on. But players beta-testing Battlefront II discovered that something major had changed. Instead of directly earning new characters, outfits and other items, players now earned credits that could be used to buy so-called “loot boxes.”

A loot box is like a virtual slot machine: there’s no guarantee you’ll get something good, and it’s engineered to give you a rush during the moment of anticipation, before you find out what you’ve got. And the kicker is: if you get tired of playing the game to earn virtual money, you can open your real-world wallet and pay for these loot boxes with real money. These kinds of small purchases you can make in a game are called “microtransactions.”

Loot boxes aren’t new. Many popular games, like Blizzard Entertainment’s Overwatch, give players rewards using this system. But what got Battlefront fans up in arms is that, in contrast to games like Overwatch, in which the boxes only contain “cosmetic” items – like new outfits for a character to wear, or icons that show up next to your username – the items inside Battlefront II’s loot boxes would have directly affected how well you’d perform in the game, meaning that players willing to spend more cash would get an unfair advantage. And furthermore, the math on how long it would have taken to unlock everything without paying was not promising – more than 4,500 hours by some estimates –  and that box which might well have contained items you already own. All of this makes it very easy and attractive to spend additional money on a game which you’ve already paid $60 just to play.

Couple this with the fact that the game is based on one of kids’ most-beloved franchises and you had a potential recipe for disaster. Loot boxes and other randomized reward systems are more effective on kids because children are impulsive – they have more trouble delaying gratification and saying no to emotional impulses like “I want this.” Moreover, kids have different perceptions of the difference between the real and unreal – for example items in a game and real-world things – making them more willing to spend money on things that might seem worthless to adults.

Episodes in the past have established that these kinds of practices work. Last year, Faisall Shugaa, 7 years old at the time, spent almost 4,000 British pounds (about $5,000) on microtransactions within the Jurassic World iPad game. A few months before that, a 17-year old spent $7,000 of his parents’ money on microtransactions in FIFA, a popular soccer game. And in 2014, a 15-year-old Belgian kid racked up a 37,000 Euro ($46,000) bill in the iPhone game Game of War. In all these cases, no direct parental approval – nor, importantly, any re-entry of credit card information – was necessary for these purchases to occur. And in most cases, it’s also impossible to get a refund, because most software companies’ end-user license agreements – those things you click “agree” on when you sign up for an account on iTunes, Facebook or any other digital platform – often state that purchases of digital goods can’t be refunded.

Even when the bills are in the tens of dollars as opposed to the tens of thousands, unexpected charges for in-app purchases can be the bane of many parents’ existence. While it’s hard to get a clear idea of how much money is spent on microtransactions across the industry, one of the industry’s largest publishers, Activision-Blizzard, made about half its money ($3.6 billion) from microtransactions and other in-game purchases last year.

EA eventually responded to the outcry by temporarily pulling all microtransactions from Battlefront II, but the overall picture is troubling. Game developers and the owners of distribution platforms could easily reduce the risk of in-app purchases by simply requiring that every payment within a game be approved by a parent, requiring credit card information to be re-entered for every payment, or offering refunds for in-game items – but most of them haven’t yet done so. The video games industry’s ratings board, the ESRB, recently released a statement in which it flatly denied that loot boxes should be counted as gambling (which could, in many areas of the country, make them illegal) – but this flies in the face of common sense.

What started as a small news story in the niche world of video games journalism has exploded into mainstream outlets like CNBC and NPR. Policy-makers are also beginning to take notice: Hawaii’s Attorney General has expressed interest in regulating microtransactions generally, and loot boxes in particular.

Because the issue is with a kids’ game, it’s tempting to trivialize the consumer protection issues raised by microtransactions. That would be a mistake. Not only is it not true that “only kids” play video games, which are now a multi-billion-dollar industry, but the nature of in-game microtransactions makes it difficult to impossible for players (and parents) to understand the cost of fully enjoying a game at the time it is purchased – something that could easily become an issue with other tech-based products and services, and make it more difficult for consumers to make informed decisions in the marketplace.

Current “parental controls” are clearly not enough. Billions of dollars are at stake. It’s time for a conversation about how policy-makers can protect young consumers and their parents in the online world.

Image: Thousands of fans attend Blizzard’s Overwatch competition in 2017. kenzi via Flickr, CC BY-ND 2.0