“There is an elaborate story to get you into this world.” The thrill of the loot box “When we got the data, we were fascinated by how complex the games are,” Amano says, pointing to the “multiple stages and multiple forms of currency” used in the puzzle game and in many video games now. The loot boxes are big business, amounting to 96 percent of in-game revenue. Players advance in the game, which has 173 game stages, by building up their virtual characters, using either in-game or real money to purchase the loot boxes. “They are larger than music and movies combined.”Īmano and Simonov analyzed the decisions made by 2.5 million players of a free-to-play Japanese mobile puzzle game on whether to open loot boxes and pay money. “People don’t realize how pervasive games are,” Amano says. Roughly two-thirds of Americans play video games, from Fortnite to Pokémon, while the number of players globally tops 3 billion, the paper says. “What’s fascinating about this category is that people are thinking about ways to design policies and products so you can actually engage with the product in more responsible ways without getting people too overinvolved in playing and spending,” Amano says. The duo’s work also provides a window into what data-driven regulation of digital platforms should look like in the future-deeply grounded both in the analysis of consumers behavior on the platform and complementing existing regulatory standards. The work resonates beyond entertainment to offer insights for the many industries facing regulatory pressures and weighing business models that broadly work, but that trigger occasional misuse and ethical dilemmas. Given the concentration of overspending among whales, spending caps are the best way to rein in loot boxes and protect consumers, the authors suggest. The results suggest that companies generate revenue by exploiting behavioral biases of whales, leading them to overspend on loot boxes. But those worries do not apply for the vast majority of the players, they add. Regulators’ and consumer protection groups’ concerns are justified for whales, for whom opening loot boxes is an in-game casino that has little to do with the game itself, the authors find. But 90 percent of that money comes from a small group of particularly in-game-spending-obsessed customers, known in industry parlance as “whales,” who make up just a small percentage of players. Loot boxes generate $15 billion a year revenue for gaming companies. "People are thinking about ways to design policies and products so you can actually engage with the product in more responsible ways without getting people too overinvolved in playing and spending."Ī new paper by Tomomichi Amano, assistant professor at Harvard Business School, and Andrey Simonov, associate professor at Columbia Business School, analyzes the loot box business using data from millions of players. The video game industry pushed back hard, arguing that loot boxes are an integral part of the strategy and skills players use to compete. That same year, the US Federal Trade Commission said it would investigate loot boxes, which critics liken to a slot machine or a scratch ticket that's more accessible to children. But Nintendo raised the ire of parents and regulators in 2018 when it added so-called loot boxes-a virtual lottery for in-game items-to its kid-friendly Animal Crossing: Pocket Camp. Players have long been able to buy virtual items with real money in video games, such as special weapons and features.
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