Parents Beware: That Videogame Under the Tree Might Ask for More Money
December 14 2017 - 9:29AM
Dow Jones News
By Sarah E. Needleman
This holiday season, children firing up new videogames will
encounter one of the industry's most contentious moneymaking
tactics in years: the "loot box," an in-game reward that is also
for sale.
Like packs of baseball cards, loot boxes hold a random
assortment of mostly generic though sometimes rare virtual goodies
such as decorative weapons and souped-up skills. They are doled out
to players who accomplish certain tasks, or they can be purchased
with in-game virtual currency usually for the equivalent of $1 or
$2 a pop.
Critics say loot boxes give gamers with deep pockets an edge,
particularly in multiplayer games. The more significant charge,
though, comes from people who liken loot boxes to slot machines --
pay money, hope to win a valuable item, repeat.
Loot boxes are drawing greater scrutiny as they appear more
frequently in games that often cost around $60. Many popular games
feature them, including Activision Blizzard Inc.'s "Call of Duty:
WWII" and "Destiny 2," Warner Bros. Interactive Inc.'s
"Middle-Earth: Shadow of War," and Ubisoft Entertainment SA's
"Assassin's Creed Origins."
A Hawaii state representative caused a stir last month when in a
YouTube video he called loot boxes a trap that shouldn't be
available to minors.
Loot boxes, which also go by names such as crates and supply
drops, usually materialize when players complete tasks.
Alternatively, players can go to digital storefronts and buy the
boxes, which often look like digital treasure chests or
gift-wrapped presents -- designs that evoke excitement over not
knowing what is inside.
Players buy them with real money or in-game currency such as
gold coins that can be obtained free as rewards or purchased from
the in-game store via credit cards, gift cards and the like.
Wall Street has cheered the money generated from loot boxes, one
part of a valuable strategy known as microtransactions. While there
is no official tally of loot-box spending, microtransactions are
expected to exceed $3 billion in global revenue in console games
alone in 2018, according to Wedbush Securities analyst Michael
Pachter. Console games are expected to generate $33.3 billion in
revenue world-wide this year, up 3.7% from 2016, according to
industry tracker Newzoo BV.
"These videogame models are this perfect price discrimination
where the gamer decides how much to spend," Jefferies analyst Tim
O'Shea said. "Some people opt for the first-class experience and
others want to fly coach."
Most loot-box systems are governed by finely tuned algorithms
that award rare items a certain percentage of the time. There
typically is no guarantee a box will yield a rare item, and some
items appear only for a limited time -- a way to tap into people's
fear of missing out. Activision Blizzard's "Overwatch," for
example, offers special boxes during themed events such as the
current Winter Wonderland, which lasts nearly three weeks.
Loot-box critics say children often lack impulse control and
don't understand the odds, making them susceptible to repeated
buying in hopes of acquiring desirable items. Peer pressure can
raise the stakes.
"Competition is a really powerful motivator for anyone, but
especially adolescents," said Matthew Johnson, director of
education at MediaSmarts, a Canadian nonprofit that develops
literacy programs for families and schools. "They're very sensitive
to their status within a social group."
He advises parents to look for PlayStation and Xbox controls
that set limits on spending.
The Entertainment Software Association, a U.S. trade group, said
in a statement loot boxes are a voluntarily feature in some
videogames and aren't gambling.
Activision Blizzard and Warner Bros. declined to comment. A
Ubisoft spokesman said loot-box transactions in "Assassin's Creed
Origins" give players a way to advance quickly.
Loot boxes and other microtransactions have been around for
years as a way to generate revenue in mobile and PC games that are
free to play. While they only recently started gaining traction in
console games, players are starting to push back. Last month,
players panned Electronic Arts Inc. over concerns loot boxes would
give big spenders an edge in the high-profile sequel "Star Wars
Battlefront II."
Electronic Arts, under pressure from its licensing partner Walt
Disney Co., removed the ability to buy the boxes on the eve of the
game's launch. The company declined to comment but has said it
eventually plans to add back that functionality after making
changes.
(END) Dow Jones Newswires
December 14, 2017 10:14 ET (15:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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