Pay to Win — The History of Microtransactions in Video Games

This article will explore the lucrative and legally dubious history of gambling and microtransactions in video games. From FIFA to candy crush, over the years, game companies have perfected the exploitive psychology of microtransactions, loot chests, and premium game currencies, squeezing every last cent out of their players, sidestepping gambling restrictions in the United States, and eventually producing the most downvoted comment in Reddit history.

The gaming industry is worth over 138 billion dollars. Microtransactions and Loot Boxes make up for 30 billion of that total. Although best known today for their controversial usage in games like Battlefront II, CS GO, and Overwatch, microtransactions in video games have existed for over a decade. The success of microtransactions rests on the fact that there are two kinds of players: those willing to invest time to advance in a game, and those who are more willing to invest money than time.

Premium Currencies

A common strategy developers employ to make microtransactions more appealing is the use of alternative, or “premium” currencies in their game’s economy, such as gems, gold, or tickets, which can be bought with real money. Once the player has acquired this premium currency, they can spend it at any time in-game without having to be reminded that they are spending their real money.

Premium currency shop for the mobile game ‘Candy Crush’

Premium currencies are designed to make players feel like they’re making an advantageous resource trade — For example, you pay one dollar, and receive 100 diamonds. Not only do diamonds seem more valuable than dollars, but the conversion rate between dollars and diamonds is 1 to 100. Would you rather have one measly dollar, or ONE HUNDRED DIAMONDS? Developers exploit our intuitions to peddle their premium currencies effectively.

Loot Boxes

In 1993, EA acquired exclusive rights to the FIFA license. Among EA’s hundred plus games, FIFA makes up 26% of EA’s total revenue. In 2007, EA released UEFA Champions League, a Canadian FIFA spinoff which included a new game mode, “Ultimate Team Mode”. As described by one of the game’s creators, “This new mode allows you to collect and trade virtual player cards to build a team.” Users could earn credits through playing matches, then spend those credits on card packs, which came in bronze, silver, and gold, respectively denoting the chance of acquiring a powerful player card. Although there was no way to purchase these packs with real money, this model had all the elements of modern-day loot boxes. EA was sitting on an untapped goldmine.

In 2009, EA CEO Andrew Wilson decided to introduce Ultimate Team Mode to their flagship FIFA, this time with the option to buy packs with real money. This essentially gave users two ways to succeed — invest time, or invest money. Credits for card packs could be slowly earned through gameplay, or, players could punch in their credit card information and get the packs right away. Famously titled the “Wilson Loot Box”, this was the first implementation of a gambling-based microtransaction economy in video games. It was massively profitable. In 2010, FIFA Ultimate microtransaction revenue generated 100 million dollars. By 2014 they had more than tripled that number, with revenues reaching 380 million. In 2012, an EA executive Frank Gibbo announced they were planning to “export learnings” from Ultimate team to their other franchises, like Mass Effect, where some users reported spending over $15,000 on loot crates.

Loot crate in ‘Paragon’

In 2017, EA released Battlefront II, the sequel to their first successful Star Wars game Battlefront. Although Wilson-style loot boxes had been available in the first Battlefront game, a success track existed for players acquire the more powerful items necessary to beat the game through playing. In Battlefront II, EA made it so difficult to acquire rare items through normal means that players were practically forced into loot box purchases in order to succeed. This is what separates the Wilson loot boxes from those found in games like Overwatch. In Overwatch, loot boxes contain character skins and other cosmetic upgrades, but never contain items which give the player a competitive advantage. EA’s loot boxes are ingrained into the core progression systems of their games, epitomizing the Pay-To-Win model. Users were outraged at the exploitive greed of Battlefront II. In November of 2017, a disgruntled player voiced frustration at BattleFront II’s loot box system, after spending $80 on 12,000 crystals to unlock Darth Vader, only to learn the character was exclusively unlockable using a different in-game currency, ‘credits’. Crystals can only unlock loot boxes, which do not guarantee any particular item. Within the thread, a PR representative for EA responded to the post, becomming the most downvoted comment in Reddit History:

“The intent is to provide players with a sense of pride and accomplishment for unlocking different heroes. As for cost, we selected initial values based upon data from the Open Beta and other adjustments made to milestone rewards before launch. We’ll be making constant adjustments to ensure that players have challenges that are compelling, rewarding, and of course attainable via gameplay.”

The Psychology

Humans are just not equipped to comprehend the kind of odds usually presented in lottery events. Psychology studies have demonstrated that people will overvalue a product if there is a chance, however small, of a huge payoff. This emotional response to the chance of winning is so strong, researchers have found that gambling addicts even get a high from losing. These are the kind of cognitive weaknesses that gambling games exploit. Emil Hodzic, the president of the Video Game Addiction Treatment Clinic, explains:

“In behavioural psychology, that randomised system of rewards is the one that creates the most addiction.”

Hodzic connects this theory to loot boxes in games. He explains that by offering a player free loot boxes at periodical landmarks, the player is subliminally trained to expect a reward, and therefore a high, from opening a loot box.

It gets [players] to either play the game longer or spend more money on in-game purchases if they have to rely on chance, and they have to pull the slot machine arm every time they want to get something, rather than just paying for it up-front.

If a player receives a valuable item even once from a loot box, it reinforces their emotional response and attachment to opening future boxes. Hodzic calls this the “poker-machine motivation system.” Because games are using the same psychological tactics as slot-machines to entice players, there is legal precedent to investigate the efficacy of loot boxes in video games.

In defense, game companies have often likened their loot boxes to the randomized “card loot” of trading-card-game packs. But critics point to a key difference between loot boxes and collectible card games — in card games you receive a tangible product. You own something that has intrinsic value. It can be kept, sold, or traded. In video games, the item is irrelevant outside that game. In the game’s closed economy, players are prevented from re-selling an item they don’t need to someone else.

The Law

Outside of Nevada, Louisiana, and Native American reservations, gambling and other monetary games of chance are illegal In the United States, and the government has been historically strict on this law. The law primarily targets casino games, but other kinds of games have been suppressed in the past. Pinball was banned beginning in the 1946’s, following its classification as a gambling game. In response, pinball makers added flippers, transforming pinball into a game of skill. The supreme court recognized this addition and legalized the game in 1976.

Up until 2017, virtually no limits had been placed on the usage of loot boxes and other gambling-based products in video games. Last year, Belgium ruled that Loot boxes were essentially no different than gambling, and banned their use. Two days since the release of this article, EA announced they would also cease sales of FIFA’s premium currency in Belgium.

The Belgium ban prompted other countries to follow suit. In November of last year, the FTC launched an investigation into loot boxes in video games, incited by a letter from Senator Maggie Hassan, who wrote,

“The prevalence of in-game micro-transactions, often referred to as ‘loot boxes,’ raises several concerns surrounding the use of psychological principles and enticing mechanics that closely mirror those often found in casinos and games of chance.”

‘Golden’ Loot box in popular MOBA “Overwatch”

“Pain Point” Microtransactions

Since the advent of microtransactions, a new industry trend has emerged, especially in the mobile market — games are sold at reduced prices or for free, minimizing the barrier to entry for new players. Once the player feels invested in the game, situations will arise where the player can pay a small amount of money to eliminate a “pain point” that impedes their progress, e.g. (25 cents to speed up building a foundry, or, 50 cents to refill stamina).

“Rush production” style microtransaction in mobile game “Dungeon Keeper”

The revenue generated by these microtransactions offsets what developers lose by offering the game at a reduced price. EA executive Michael Moore sees this trend as becoming ubiquitous in the coming years:

“I think, ultimately, those microtransactions will be in every game, but the game itself or the access to the game will be free. It is no different than me walking into The Gap in my local shopping mall. They don’t charge me to walk in there, but if I want to buy something I have to pay for it.”

Secondary Markets & Underground Game Economies

In any game with acquirable resources, the emergence of a player economy is inevitable. Game companies wary of this reality implement controlled, unexploitable trading systems. Examples of this are 1 on 1 trading, auction markets, and trading markets. But when users find ways around these systems, the results are vibrant black-market game economies, with real money on the line.

Perhaps the most infamous underground game economy was that of World of Warcraft, an MMORPG made by Blizzard. The primary currency in WoW is gold, which can be acquired through questing and killing monsters. To suppress underground markets, WoW included a gold trade option, which allowed players to exchange the resource legally through the game system. However, the most desirable items were not acquirable by gold purchase, only through the completion of special, mega-challenging dungeons requiring large teams to clear. Unsatisfied with the current system, players created an unofficial system called “gold party”, where raid members auction off chase items to the highest bidder for gold. This caused the underground market value for gold to skyrocket. Clever users capitalizing on this shift were making huge profits, while cornering the market and influencing prices. Bot accounts popped up in droves to mine gold and sell it to desperate players.

At the same time, users were buying and selling entire Warcraft accounts. Often these accounts were filled with max-level characters, a result of weeks of grinding. This widened the divide between wealthier and poorer players, as it meant success could either be achieved by devoting hours every day for months, or by purchasing a high-profile account, immediately obtaining the most powerful characters and items in the game.

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