Gaming the system: suboptimal compliance with loot box probability disclosure regulations in China

Abstract

Loot boxes provide randomized rewards in video games; their purchase is linked to disordered gambling and they are present in approximately half of UK video games. The relative novelty of loot boxes means that regulators and policymakers in various jurisdictions are still deciding how to regulate them. The People's Republic of China (PRC) is the first, and presently only, jurisdiction to legally require companies to disclose the probabilities of obtaining randomized loot box rewards – an approach that is also favored by the industry as self-regulation. This study is the first to assess paid loot box prevalence in the PRC and companies’ discretionary interpretations of probability disclosure regulations. Loot boxes were found in 91 of the 100 highest-grossing PRC iPhone games. Of games deemed suitable for children aged 12+, 90.5% contained loot boxes. Probability disclosures could not be found for 4.4% of games containing loot boxes. Disclosures were implemented through various methods both in-game and on the games’ official websites; however, consistent with the concept of ‘sludge,’ only 5.5% used the most prominent format of automatically displaying the probabilities on the in-game loot box purchase page. Loot box probability disclosures should be uniform and visually prominent to best help inform consumers.

Loot Boxes, Gambling-Like Mechanics in Video Games

“…Presently, loot boxes are prevalent in video games, particularly on mobile platforms, e.g., Android and iOS: in 2019, 59% of the highestgrossing iPhone games in the UK contained loot boxes, whilst 36% of the 50 Highest grossing PC games on Steam contained loot boxes [14]. Compared to in the UK, which represents the Western video game market, loot boxes are significantly more prevalent in China: in 2020, 91% of the 100 highest-grossing iPhone games contained loot boxes [15]. This reflects that video game markets in different countries may implement loot boxes to different degrees.…”

“…The video game industry has increasingly imposed this requirement as self-regulation, e.g., by Apple [39], Google [40], and the major hardware providers and game publishers [41]. This measure has also been adopted as law in China (presently the only country to do so), which has led to widespread compliance; however, the prominence and accessibility of disclosure have been identified as being suboptimal [15]. A survey of Chinese video game players found that 85% of loot box purchasers reported seeing probability disclosures (meaning that they have been reasonably widely seen by players); however, only 19% of this group reported spending less money on loot boxes as a result of seeing the disclosures [24].…”

What’s in the box? Exploring UK players’ experiences of loot boxes in games; the conceptualisation and parallels with gambling

“…Although the items revealed may appear random from the player’s perspective, they are often predetermined by game developers. This has led to questions around the lack of transparency from gaming companies in the algorithms used in loot boxes (which are often not disclosed) as well as in their strategies to use them to create competitive advantage [ 17 ]. Then, from a player’s perspective, they may feel lured and at times pressured to buy them [ 18 – 20 ].…”

“…For example, developers could make a game deliberately boring and nudge players towards loot boxes as in-game accelerator mechanisms. This has led to the observation that loot boxes are predatory and aim to manipulate the player [ 38 ] or seen as a ‘sludge’, a dark form of nudging [ 17 ]. Hence, the People’s Republic of China have legislated that the probabilities/chances of obtaining items from loot boxes is disclosed, in which Xiao et al suggest should be a standard requirement of loot boxes [ 17 ], with ethical design considerations [ 39 ].…”

“…This has led to the observation that loot boxes are predatory and aim to manipulate the player [ 38 ] or seen as a ‘sludge’, a dark form of nudging [ 17 ]. Hence, the People’s Republic of China have legislated that the probabilities/chances of obtaining items from loot boxes is disclosed, in which Xiao et al suggest should be a standard requirement of loot boxes [ 17 ], with ethical design considerations [ 39 ]. More research is needed to explore the role of long-term effects of the exposure to loot boxes and in-game gambling.…”