New bill proposes to end loot boxes in kid-focused games to prevent addiction

For the last two decades, loot boxes have been a major revenue stream for computer, console, and mobile games publishers. However, a new congressional proposal might prohibit studios from utilizing the controversial revenue driver. On May 8, Sen. John Hawley (R-MO) announced his intention to introduce a bill that would ban “manipulative” game features in titles marketed toward minors.

The Proposal to End Loot Boxes

Hawley’s bill, if approved, will disallow loot boxes in games marketed to underage gamers. The legislation also calls for the Federal Trade Commission (FTC) to fine studios that knowingly sell randomized item crates to kids in general audience titles. The proposal would also prohibit pay-to-win mechanics in games targeted to the younger demographic. It would also outlaw the sale of performing-enhancing power-ups in children-centric multiplayer games.

The Missouri Senator harshly criticized the popular games business model when unveiling his proposal. “When a game is designed for kids, game developers shouldn’t be allowed to monetize addiction.” The Protecting Children from Abusive Games Act would use the same criteria as the Children’s Online Privacy Protection Act to determine which games are aimed at a child audience.

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While the current political climate makes the passage of new legislation difficult, Hawley might find support for his bill in Democratic circles. Sen. Maggie Hassan (D-NH), who publicly criticized loot boxes in 2018, said she found her colleague’s proposal encouraging.

The Entertainment Software Association (ESA), a video game industry trade group, pushed back against Hawley’s proposal. The ESA noted regulators in Germany, Ireland, and the United Kingdom found that loot boxes aren’t a form of gambling. The group also stated parents can restrict their children’s access to in-game purchases via parental controls.

Controversial but Lucrative

Since their advent in the mid-2000s, loot boxes and other in-game monetization features have been highly controversial and lucrative.

Inspired by vending machine-distributed capsule toys, loot boxes first went mainstream with a Chinese free-to-play title called the “ZT Online.” Initially, the massively multiplayer online role-playing game was unprofitable due to ubiquitous piracy and internet cafés. But after its publisher introduced loot boxes to the title, “ZT” began generating monthly revenues of $15 million.

Following the title’s success, the design feature became wildly popular in the global gaming sector. In 2011, Japanese mobile game “Puzzles & Dragons” racked up $1 billion in loot box grosses. However, critics of microtransaction game mechanics have said randomized item crates feed compulsive gaming and gambling addiction.

Australia, Belgium, China, Japan, and the Netherlands have all banned or restricted the sale of loot boxes. The Verge attributes the lack of United States legislation regarding loot boxes to lobbying efforts of the American games sector.

Given the remarkable revenues involved, game developers have a significant incentive to fight for microtransactions. In 2017, “Overwatch” maker Activision Blizzard made $4 billion on loot boxes, downloadable content, and other in-game purchasing features. Epic Games’ free-to-play juggernaut “Fortnite” grossed a record-breaking $2.4 billion in digital transactions last year.

Market intelligence firm Juniper Research stated the global loot box market will be worth $50 billion in 2022. As such, Sen. Hawley will face an uphill battle trying to perform the game industry version of the Thanos snap.

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