Loot boxes have become a multibillion dollar industry. What tricks do gaming companies use to keep players spending thousands on seemingly insignificant in-game items?
Loot boxes have generated billions in profits for gaming giants such as EA, Take-Two and many others. They’ve become a lucrative mechanic to drastically increase the returns for gaming franchises. However, the practice has been controversial. Microtransactions such as loot boxes have been labeled as a cover for gambling geared toward minors and young adults.
Adults have been spending obscene amounts of in-game content such as FIFA Ultimate Team, succumbing to the addictive mechanics that invite customers to spend more and more. What is the psychology behind microtransactions that motivates gamers to reach the limits of their bank accounts month over month?
Addicted to FIFA
In October 2023 British video game journalism website Rock Paper Shotgun spoke with several gamers about their addiction with FIFA Ultimate Team and how it impacted their daily lives. Gaurav (anonymized), a husband and father, had spent thousands on the in-gaming trading card game. He admitted to spending at least $5.545, playing hours on end over the last eight years. Missing sleep to get the best loot box. During the day, Gaurav is a software engineer from Nepal, residing in Dresden since 2013. Living a modest life with his family. Gaurav has been football obsessed since his youth. With his parents having no means to afford gaming consoles, he spent his time at a friend’s house playing FIFA 1998 on the original PlayStation.
After many years of not being able to play, his newfound riches allowed him to play the game once again. In 2016, Gaurav purchased FIFA. Ultimate Team had been around for some years, with countless players engaging with the trading game. Gaurav was next in line who was willing to draw the wallet to get the best players. The amounts were modest, but soon, they started to grow. He started with small purchases around $26. Eventually, Gaurav spent over $130 every evening. He was hooked on the trading card game. His bank balance became irrelevant.
During ‘Weekend Leagues’, a special mode for dedicated fans, gamers were encouraged to open new packs. The Weekend League consists of 30 consecutive matches, each taking 20 minutes in length. Players such as Gaurav dedicated entire weekends to improve their odds of winning better trading card packs. Gaurav sacrificed sleep over family time in order to partake in the ten-hour long playing session. This, he explained, negatively impacted his mood. However, on weekends without any commitments, Gaurav sank into playing the grueling competition.
Not participating in the Weekend League would spar a fear of missing out with Gaurav. He would wake up at 4AM, before his family woke up, to start playing. Gaurav did everything he could to hide his addiction with the videogame. His secret routine has been haunting him for the better part of eight years, spending thousands of dollars whilst doing so. Gaurav’s experiences with gambling in FIFA are left with regret, questioning how one could spend so much money on in-game content. EA meanwhile knows that it can keep players in the loop by releasing a game every year.
Thousands of dollars
Gaurav’s experiences aren’t unique. Others like him have been struggling with the game for years. In July 2018, Eurogamer spoke with Michael (anonymized), who spent an eye watering $10,000 on FIFA’s in-game content in just two years. Michael uncovered his addiction by requesting his personal data under the GDPR law, mandating companies to hand over any data they’ve collected from their customers. After some back and forth, Michael recalls, he received a 100-page PDF document, detailing all interactions he had with the company, including phone calls, device information. and even statistics collected during his many gaming sessions.
The data accumulated by EA is enormous as Michael had been playing FIFA Ultimate Team nearly everyday over those years, labeling it as a hobby to wind down. Sessions varied between 30 minutes to a worrying six hours at a time. Over the weekends, he said, Michael would play the Weekend League. Michael didn’t bat an eye about the amounts he was spending, stating he and his partner lived comfortably. During each special event, Michael was there, spending exorbitant amounts without a second thought. While he, just like Gaurav, might have the disposable income to play for hours on end. Others see their savings evaporate, with every last penny disappearing in EA’s virtual, unregulated, slot machine.
Gambling and loot boxes
In recent years a variety of studies have explored the mechanics of loot boxes, microtransactions in video games and their effects on promoting gambling behavior and addiction. In June 2022, the Australian governmental organization, The Australian Institute of Family Studies, published an evidence review related to in-game purchases. The paper opens by saying that publishers have been rolling out in-game gambling mechanics in the past decade to enhance monetization of their games.
This sparked fears with policymakers, researchers and addiction communities, who were worried about the harmful effects of these chance-based minigames, primarily in children and young adults who are the primary target audience for these entertainment products. The researchers observed that the in-game purchases resembled commercial gambling, but remained unregulated in Australia, despite submissions being handed to policymakers as early as 2018. However, no action had been taken at that stage.
The evidence provided to the Australian government showed the different psychological and functional mechanisms used by loot box developers that could cause addiction-like behavior resulting in monetary losses and promote gambling problems. The researchers discovered evidence that gamers engaging with loot boxes, ranging from view to purchasing, were more prone to problematic gambling and developing an internet gaming disorder. In-game purchases made in casino-style games were at higher risk of developing problematic gambling.
Literature revealed that the risk of developing gambling addiction was increased through the mechanics used in loot boxes. Increased engagement with loot boxes, which followed the same repetitive sequence of opening and purchasing, led to increased risk of developing problematic gambling behavior. This has been especially prevalent among males, with adolescents being more at risk compared to adults who purchased loot boxes. A correlation was found between already having an internet gaming disorder and spending patterns on loot boxes.
In August 2024, The Commons Library in the U.K. published a review for the ongoing discussions around the possible harmful effects of loot boxes in relation to developing gambling behavior. The U.K. government had requested evidence for potential harms of loot boxes back in July 2022. At the time, evidence was sparse and inconclusive. Despite lacking evidence, the government had put in several guardrails to protect players and restrict access to loot boxes to all children and young people without prior consent from their parents or guardians.
In May 2024, the U.K. government announced that it partnered up with the games industry to improve player protection. Reasons for implementing guard rails and intensifying its cooperation with the gaming industry have been sounding alarms from academics who warned of the harmful effects of loot boxes which applied many of the same mechanics found in gambling products. Loot boxes used their randomized items to keep players engaged with the game, using the chance mechanism as their unique selling proposition. The games would keep players hooked on the off-chance to win exclusive in-game items such as clothing or power-ups.
The psychology of gambling
The psychology of gambling is complex as many factors determine spending habits on in-game content. Individuals display a variety of reasons why they engage in gambling. Academics at Yale found that the majority of people engage with gambling for a limited amount of time and disengage after a short while. This leisurely gambler leaves the venue without compulsion or distress. Healthy gamblers play for enjoyment, excitement or as a social activity, engaging with multiple players during poker sessions. Others want to impress crowds or like the attention when spending large sums of money or it’s a challenge that puts their skills to the test.
These are fairly normal behaviors, but according to researchers, there’s a subset of traits that serve as precursors for problematic gambling behavior. Players who use gambling as a form of escapism to remove themselves from the stresses of life, are prone to develop problematic gambling habits. Additionally, certain gamblers believe they have a certain control over the outcome, such as near-misses, that tempt the player to try again. The near-miss mechanic is well documented and raised by policymakers in countries such as the Netherlands and Belgium in relation to EA’s loot boxes.
Gamblers believe they can make up for the losses by trying again, expecting that the next round will recover their earnings. This phenomenon is noteworthy as microtransactions in video games provide no apparent return on investment, hence they seem to wholly tap into a limited range of behaviors. A neurological study published by Dr. Mark Potenza from the Yale School of Medicine found that recreational gamblers reacted indifferent to images of casinos and betting, whilst brain activity spiked in pathological gamblers.
Loss chasing
Researchers at the University of Cambridge, UK, had similar observations back in April 2007. They noted gambling had been part of everyday life for centuries. However, with changing legislation in the UK, gambling was expected to become more popular, with gambling venturing out to online venues. While many who engage in gambling, don’t develop a troubled relationship with it, a subset of people will develop gambling disorders. Gambling, as the researchers describe, is a set of paradoxical behaviors, known as ‘the house always wins’.
Slot machines, blackjack, roulette and other games that involve gambling are created to deliver a profit to the venue. Hence, the large profits witnessed at video games, where the in-game trading games deliver billions in profits. Meanwhile, the gambler will always be met with a loss, with an occasional win here and there. But never will the house lose money. Despite these odds, gamblers remain engaged with these games. Doctor at the Department of Experimental Psychology, Luke Clark, found that many elements of gambling games tap into a limited set of behaviors.
Gambling games give the participants an illusion of control, where gamblers are made to believe that by using their particular skill set, they can turn their losses into a profit in due time. MRI brain scans run at the Wolfson Brain Imaging Centre at Addenbrooke’s Hospital in Cambridge, Dr. Clark’s research showed that certain parts of the brain were being activated when receiving a monetary reward. This region, called the striatum, uses the circuitry that evokes hunger and sexual desire and receives stimuli from substance abuse, such as hard drugs.
Phenomena such as near-misses and personal choice, researchers found, entice users to play games for longer. We’ve seen this with certain FIFA Ultimate Team players earlier in the article, who spend hours on end trying to win the best in-game trading card. As the losses compound, gamblers develop a new behavior called ‘loss chasing’. Gamblers who reach this stage will continue playing to recoup previous losses. Loss chasing is one of the primary mechanisms of problematic gambling behavior, the university notes.
However, problematic gambling isn’t always a result of game’s design. In certain instances, as the chemical composition of the brain changes due to neurological disorders, where a chemical imbalance occurs, patients can display a sudden interest in gambling. This behavior has been observed in patients with Parkinson’s disease, where degeneration of dopamine cells, spark a sudden urge to gamble, in part caused by the prescribed medications which increases dopamine transmission.
The loot box industry
Loot boxes, one of many forms of in-game microtransactions, have become a multibillion dollar business. Hence the reasons why publishers are reluctant to remove them are easy to spot. Their emergence however, has caused great damage to many individuals around the world, setting in motion many discussions, motivating regulators to limit access wherever possible. This raises a large question whether modern games have turned into modern slot machines, unable to be enjoyed without spending vast amounts?
In April 2023, Assistant professor at Harvard Business School, Tomomichi Amano and Andrey Simonov, associate professor at Columbia Business School investigated this rapidly evolving and expanding industry. The industry had grown to an astounding $15 billion market, catching the attention of the US Federal Trade Commission, who announced an investigation into the practice. Meanwhile, the gaming industry has been lobbying to defend the game mechanic, arguing that loot boxes are an essential part of modern day video games.
The primary issue lies not with the many customers who spend a few dollars here and there and call it a day. Instead, regulators are concerned that whales, players who are susceptible to the techniques deployed by developers to generate more revenue, are spiraling into problematic gambling behavior. Researchers show that publishers concentrate their attention to capture as many whales as possible. The cases earlier in the article are a good representation of how seemingly innocent gaming mechanics can cause tremendous damage. Therefore, protections such as spending limits would be deemed the most effective.
Amano and Simonov analyzed datasets containing millions of records to analyze behavior across a variety of games. They discovered that two-thirds of Americans play video games, with an upward of 3 billion of players worldwide. Amano warns that few see how pervasive games can be, especially considering the size of the industry which exceeds that of the music and movie market combined. The usage of loot boxes is especially prevalent in free-to-play mobile games, which are created to extract as much revenue as possible from its players.
In Japanese mobile games, Amano and Simonov found that loot boxes accounted for 96 percent of the revenue generated. Japan has for long been on the forefront of mobile gaming. During each stage of the game’s progression, the developer aims to persuade players to buy a loot box, speeding up the completion process for the players. Whales are particularly susceptible to this mechanic as they experience the thrill from its randomness. The researchers found that whales were more likely to open multiple boxes in rapid order.
This leads them to believe that this player cohort pays little attention to the contents, enjoying the process rather than the reward. The reasoning behind this theory could be traced back to the minimal rate of progression. Whales, despite spending far greater amounts than their more casual counterparts, only advanced in 3 percent of instances. This in contrast to casual players who carefully weighed and used the rewards retrieved from loot boxes. Players who spend enormous amounts on seemingly trivial content is nothing new, how the rate of the industry’s expansion and the audience it aims to target has accelerated the debate.
Advertising loot boxes
The gaming industry itself is aggressively pushing loot boxes. In February 2024, The Guardian spoke with professional gamer, Jeff, who accumulated an audience of 750,000 followers on YouTube for his uncanny performance in the global multiplayer shooter Counter-Strike: Global Offensive (CS:GO). Counter-Strike has a lively community to this day, with many microtransactions built-in such as skins and other in-game items. One day, a company came to Jeff offering him $280,000 over two months to create several 30-second long ads to promote the company’s products.
However, instead of taking the cash prize and running off, Jeff took an unorthodox stance, deciding to expose the industry where it hurts. He went on a mission to expose CS:GO’s infamous skin gambling market, a large unregulated online community, where gamers bet to acquire the most prestigious skins. Jeff told The Guardian he wanted to showcase how toxic the market of unregulated gambling was to young players. The skins themselves meanwhile can be obtained through loot boxes, but they can also be purchased through marketplaces, where gamers skip the wait and uncertainty of chance based games.
Within these marketplaces, gamers can exchange, sell and buy items obtained through loot boxes. For CS:GO, this meant skins. The loot boxes themselves had spawned an industry beyond the games they were integrated within. A market where millions of players gambled for in-game items. An unwanted byproduct of a mechanic designed to cover more of the publisher’s costs, now running rampant beyond its initial purpose.
The market places, The Guardian detailed, offer the same experience as an online casino. An easy to use interface, welcoming players with an easy sign-up flow and flashy colors. However, while regular casinos need a license to operate, skin markets are mostly left unregulated, with little checks in place to prevent minors from engaging on their platforms. Furthermore, there are no cash prices involved. Members use real life currency, cryptocurrency or other skins for a chance to win virtual skins.
One might argue that the purchases made are of little value, but as we’ve seen with whales, the amounts spent can become enormous, even debilitating. Skins can cost thousands of dollars, with one limited item fetching an eye-water $1.5 million. The overall skin gambling market, the newsoutlet notes, is estimated to be $3 billion back in 2016, with CS:GO taking the largest chunk of the market. Guardrails should therefore be put in place to safeguard players and ensure that gaming publishers oversee the transactions made.
Protecting gamers
Loot boxes have turned into a multibillion dollar industry. From their inception, game publishers such as EA have seen the massive potential of these in-game microtransactions. They generated many billions of dollars and became a reliable and lucrative revenue stream. Hence publishers have been aggressively expanding the practice across their franchises, luring in millions of players. While many players won’t succumb to the randomness of loot boxes, with their flashy visuals and copy, a cohort of gamers is prone to develop debilitating gambling behavior.
They are unable to stop, pouring thousands upon thousands into in-game microtransactions. Having little regard for their savings account. These players have fallen victim to a practice that has largely gone unregulated. A wild west where gaming companies use every psychological trick in the book to lure players in and extract as much money as humanly possible. This practice has caught the attention from advocacy groups and regulators who are trying to limit the exposure of these mechanics.
Reading this article on a marketing website might seem paradoxical to some. But, marketing doesn’t mean no moral code should be taken into account. Revenue generation is the primary target of any marketing strategy and microtransactions is one avenue that gaming companies can explore to optimize revenue. However, without the necessary guardrails and the inability of players to protect themselves, the practice will do more harm than good to an organization’s reputation.