Singapore recently formed a new regulatory body called the Gambling Regulatory Authority (GRA) to address the increasing convergence of gambling and gaming, especially in video games where loot boxes are standard.
To prevent the inducement effect of high-value items and the normalisation of gambling among youth, a $100 prize cap on loot boxes, previously proposed by the Ministry of Home Affairs (MHA), could come into effect as early as 2023.
The country has seen a rise in teenagers spending up to five-figure amounts on their parents’ credit cards on in-app purchases, such as loot boxes to upgrade their game avatars. For example, The Straits Times reported that a teen spent $20,000 on her father’s credit card over six weeks upgrading her avatar on Genshin Impact.
Will Anstee, TotallyAwesome
Will Anstee, chief executive officer at TotallyAwesome, notes loot boxes are associated more so with problem gaming than problem gambling.
However, online and offline gambling associations often confront children through ‘blind bag’ toys, which they will seek out from a young age, such as LOL dolls and Lego Minifigure blind bags. Blind bags are akin to an old-fashioned ‘lucky dip’. However, they differ depending on a company’s commercial interest in creating them.
“Due to their still-developing brain, children are vulnerable to the effects of loot boxes,” Anstee tells Campaign Asia-Pacific. “Their engagement with such gaming features exposes them to a cycle of behaviour similar to using a slot coin machine to pay money for an unknown outcome. These gaming features can then encourage the process to repeat so the individual can either re-experience the ‘dopamine hit’ of a positive development or attempt to overcome a negative effect by continuing the drive for the positive outcome.”
Anstee adds that in-game purchasing of loot boxes differs from gambling in a critical factor—gamers are not relying on financial returns, as is the case in gambling. Therefore, the overspending of loot boxes and in-app purchases is perhaps positioned more as a norm of problematic gaming than gambling.
Research on the effects of loot boxes on children due to the impact of exposure and subsequent normalisation of gambling is mixed. However, Anstee says the best solution for children and teens is to avoid loot boxes altogether as they are the most vulnerable group to the effects of the similarities between loot boxes and gambling, structurally and psychologically.
TotallyAwesome’s psychology departrment recommends loot box limits will need to be followed up with the implementation of other loot box recommendations to support a reduction in the normalisation of gambling among youth.
These include, and may not be limited to:
● Gambling and age ratings – New game labels should include worded adult ratings for loot box games, applying across shop-purchased games and digital downloads.
● Odds disclosures
● Using real currency – Loot boxes – and in-game currencies more generally – represent an obfuscation of underlying costs. Pricing of all game-related items should be displayed in local currencies. Pricing items in ‘gold coins’ (with confusing and inconsistent exchange rates) is not an acceptable practice
● Provisions for oversight and enforcement – Loot boxes involve new layers of regulatory complexity. Parallels with traditional gambling are often vague and difficult to interpret. Existing gambling bodies are currently ill-equipped to deal with such challenges. Any legislation will necessitate increased provisions for monitoring, oversight, and enforcement
● Provisions for research and education – Despite some notable recent findings, research into game monetisation remains in its infancy. With an increasing convergence of gambling and gaming, any future research should be sensitive to ongoing trends in the evolution of the gaming and gambling ecosystems. Furthermore, longer-term mitigation of risk around loot boxes and game-related purchases will require provisions for broader research, consumer protection, development of child-focused data protection, and finally, educational approaches designed to curb the exploitation of psychological nudges and biases.
However, this does not mean all gaming is terrible, as Anstee points to research that found that games which do not have loot box features have little to no association with increased gambling behaviours.
“Prize cap or not, we still need to consider the individual motivation behind the gameplay. Where problematic gaming habits exist, examining the reason behind online gaming can provide valuable insights, rather than making a causal link between gaming and gambling behaviours,” he says.
“For instance, kids’ and teens’ motivation for gaming can include entertainment, socialisation, the joy of competition, the opportunity to lead, youth teaching each other, curiosity, and experimentation with identities, to name a few. All these have valuable skills, interests and tools for healthy prosocial development and are not characteristics of problem gaming or gambling.”
Impact on game publishers
For physical rewards, such as the chance to win a mobile device or game console, the $100 price cap will have a more measurable limiting impact on the demand for such games or services.
Kelly Chiew, international public relations lead at Moonton Games, reckons the $100 price cap will reduce the value of high-value items.
“It remains to be seen if it will help shift the normalisation of gambling among youth, as there is no cap spent on purchasing multiple items or variations of an in-game item at a time. More research and understanding are required to delve deeper into youths’ purchasing and buying behaviour to understand their spending expenditure,” Chiew tells Campaign Asia-Pacific.
However, Donny Kristianto, the principal market insights manager for gaming at Data.ai, says the new rules are less clear for virtual games or services where real-world objects do not define the value of such virtual items. Instead, market sentiments and the perceived rarity of such things value these items.
For example, a five-star item in Genshin Impact drives up the valuation of rare characters. It may encourage secondary selling and buying of gamer accounts because there is a 1% probability rate. This practice would be trickier to regulate, and it may not be a clear case of assigning an upper cap on the value of the rewards, but perhaps on other measures such as limiting the number of money players can spend in-game.
Donny Kristianto, Data.Ai
Game publishers can also look to Japan for guidance, where in 2012, major publishers like DeNa and Gree laid out measures to set monthly limits for what younger players can spend in-game per month to prevent overspending.
“This is one area that could empower publishers to play their part in protecting younger consumers. Also, many game publishers are actively clamping down on third-party marketplaces for virtual items, limiting the motivation behind irresponsible acquisition of high-value virtual items and reducing cases of fraud. In turn, doing this will help them protect their brand in the long run,” Kristianto tells Campaign Asia-Pacific.
He points out the Apple App Store and Google Play store already have a built-in mechanism to regulate gambling-related apps. In addition, developers who submit apps for publication undergo a rigorous editorial review and must fulfil compliance guidelines that align with regional regulations.
For example, Google Play helps parents decide what entertainment options are suitable for their children with reviews and the family star badge on selected apps and games. The star badge signifies that developers created the content with kids in mind, the content was carefully reviewed and suggests an age range for the content.
According to Data.AI, the most expensive crystal bundle on Genshin Impact is priced at S$149.88 currently. However, only around 6% of purchase volume in July 2022 for Genshin Impact on the iOS App Store in Singapore went to the in-app purchase (IAP) item called 6480 Genesis Crystals, which is priced at S$148.98, while most of the purchases were for items priced $6.98 and below.
For popular game Mobile Legends: Bang Bang, only 2.8% of total purchase volume went to the most expensive IAP item called 2,500 Diamonds at S$ 68.98, and 43% of transactions were for items priced $1.48 and below.
These transactions suggest that for free-to-play games, many gamers are quite conservative in spending habits, and high-spending whales make up a smaller percentage of the gaming audience among these top games.
“Many game publishers are actively clamping down on third-party marketplaces for virtual items. Doing this will limit the motivation behind irresponsible acquisition of high-value virtual items, reduce fraud cases, and in turn, help them protect their brand in the long run,” says Kristianto.
What does this mean for brands in a gaming environment?
Under the national advertising codes, brands are not to exploit children commercially. However, the regulations suggest informing children of the risks associated with engaging with their product is required.
Avoiding commercial exploitation in this sense can refer to reducing the compulsive features designed to prolong user engagement or cultivate dependency on games, apps or platforms so that children’s immersive play is intrinsically motivated and freely chosen.
Anstee says the recommendations from research are clear in heavily encouraging brands and advertisers to take responsibility for possible implications of loot boxes and to implement changes subsequently.
He suggests brands should engage with game publishers who are transparent and informative about prospective policies that include provisions for precise definitions of loot boxes, game labelling and age ratings, and full disclosure of odds presented in an easy-to-understand way. In addition, brands should also work with publishers that implement spending limits and prices in real currency and the obligations of gatekeepers for the trade they enable and profit from.
Kelly Chiew, Moonton Games
Brands should also consider age-appropriate gaming, he adds. For example, is the brand targeting young children when gaming content is developmentally inappropriate for a certain age? Is the gaming brand clear about the gaming platform? Is the gaming platform clear about elements of the game that may constitute gambling forms of gaming?
“Brands who want to do the right thing will find developmentally appropriate ways to educate children and explain the opportunity cost to them in a meaningful way. For example, research recommends implementing odds disclosures to help children understand the opportunity cost of the money they are spending,” Anstee explains.
“However, it is essential to note that children are a group that is particularly vulnerable to the effects of loot boxes, as they cannot comprehend and judge risk and opportunity at the same level, despite disclosing the odds. For example, research has recommended that worded adult ratings for shop-purchased games and digital downloads for loot box games are implemented with new game labels.”
Campaign Asia-Pacific is producing Game Changers 2022, a conference on gaming that will explore how brands are gaining experience and crucial insights to authentically connect, interact, and engage with gaming audiences. Find out more about the event here.