ESRB’s new ‘in-game purchases’ label, explained

On Tuesday, the Entertainment Software Rating Board — created 24 years ago to address violent content in mainstream console video games — announced a new initiative to label video games with in-application purchase systems. The move addresses a controversy over “loot boxes,” or bonus systems where players can buy the chance for additional items used within a game, that blew up in the fall of 2017.

OK, so what? Players have, for years, disliked and distrusted microtransactions in video games, even if many still willingly buy premium extensions that add chapters to a game’s story or more characters to its roster. Here, we’ll try to break down the competing interests, why the ESRB has stepped in, and why the many governments over the jurisdictions where video games are sold still may not go away.

What’s going on here, really?

In-game purchases are nothing new to video games, even ones on consoles. But they’ve become a big deal recently because of “loot crates,” which straddle the line between random in-game bonuses and premium content that players can buy for money.

Users don’t know what’s inside a loot crate, which is fine if it’s purely a bonus item awarded for performance or tenure within the game. But many video games with loot crates also offer a secondary currency, which can be acquired for real money, to buy the crate up front and skip the time necessary to earn one. Critics say this monetizes a compulsory behavior similar to gambling.

While most loot crates offer optional cosmetics or other tchotchkes, a couple of big-name titles at the end of 2017 — Electronic Arts’ Star Wars Battlefront 2 and Need For Speed: Payback, especially — had them woven into their main games and players’ long-term progression. Players felt compelled to acquire loot crates either to become successful within the games or to see all of the content they have to offer, and the quickest path to that was to pay money.

Electronic Arts suspended real-money sales of currency that buys loot crates in Battlefront 2 the day before its full launch in November, but the damage was done: The consumer base felt obligated to pay up indefinitely, and it had had enough.

PUBG Corp./Bluehole

Why should parents be warned about this?

Mainly because lawmakers have gotten involved. Because Battlefront 2 is a Star Wars game (and because it launched around the time of Star Wars: The Last Jedi), it attracted a lot of attention with its loot crate system. So while, technically, the material inside a Battlefront 2 loot crate is optional, players found acquiring them essential to their progression through all modes of the game.

Initially, Battlefront 2 offered a second currency — acquired only with real money — that could be redeemed for loot crates. The proposition is that let players who didn’t have the kind of time to play the game still buy their way into higher levels of performance. But others felt the availability of this virtual currency sold for real money encouraged a kind of gambling-like behavior, since no one knew for sure what they were buying.

Why is the ESRB stepping in?

A cynic would say it’s for PR purposes. More realistically, it’s because governments have taken notice and can crack down on sales in their jurisdictions that affect how games are sold elsewhere.

In Hawaii, state Rep. Chris Lee has led the effort to introduce four bills prohibiting the sale of games with loot crates to minor children, and also to require publishers to label games that have loot crate systems and to disclose the rates of “payout,” or the odds that someone will get a specific item.

Soon after Lee introduced his legislation, Sen. Maggie Hassan (D-New Hampshire) sent a letter to the ESRB’s president, Patricia Vance, asking her to account for loot crates’ presence within video games and what the ratings board — which is a non-governmental entity — intended to do to warn consumers about them. The Federal Trade Commission has secured big settlements from Apple —$32.5 million to consumers in 2014 — and Google — $19 million later that year — over in-app purchases made without account holders’ full knowledge or consent. Hassan is a member of the Senate’s Commerce, Labor and Consumer Protection Committee. The FTC can get involved in video game publishers’ business more immediately than state lawmakers can.

Clearly, the ESRB’s move announced this week is meant to get in front of government regulation before it is imposed on the consumers they represent. The ESRB is a creation of the Entertainment Software Association, which is the lobbying organization for video game makers in the United States. The ESRB itself is an act of industry self-regulation that arose out of the moral panic over violent video games in the mid-1990s.

Is this good enough for lawmakers?

As of now, Hawaii is the only state debating proposed legislation addressing the sale of video games that carry in-game purchases. The state’s Legislature this week conducted hearings, with testimony from ESRB representatives, and exchanged the bills introduced by its senate and house for comparison and resolution.

Rep. Lee, in remarks to Polygon, isn’t satisfied with the ESRB’s labeling initiative or outreach campaign.

“It’s a missed opportunity, and perhaps even a step backward for the ESRB and the ESA,” he said. “They could have taken meaningful and proactive steps but this seems to be a doubling down on a defense of loot boxes and simulated gambling mechanics.”

Lee conceded that “it’s good for the industry to start to acknowledge there are problems,” but said the ESRB is still “content to specifically ignore the risks to children and consumers in order to continue to maximize revenue from in-game purchases.” He seemed particularly bothered by resistance to exposing the rates at which players will receive items through loot crates. Some publishers have published these odds, but the ESRB will not require them of games that have in-app purchases or similar mechanisms.

“When the ESA testified (in Hawaii) against requiring or disclosing the odds of winning items from loot boxes, they could not answer any meaningful question that justified their position,” Lee told Polygon. “So, in context of this announcement today, the ESA still can’t answer how players know the items that are available from gambling in loot boxes, or whether they’re blatantly ripped off by odds even worse than most seedy, back-alley casinos.”

Chris Lee/Facebook

What does this mean to me, the player?

For now, very little. In a call with reporters this week, Vance said that publishers offered zero pushback when told of the ESRB’s intent to label games with in-app purchases and launch a public awareness campaign for parents on what this all means. That means that the folks who have created loot boxes and sell them are fine with this. So it’s unlikely that the campaign is going to chill the introduction or spread of loot boxes in console video games. Lee said that the legislative process in Hawaii will continue with the four bills introduced there.

Video game publishers, especially those who are publicly traded corporations, have a constant need to show revenue growth and “MTX” or “recurrent consumer spending” microtransactions are increasingly a part of their bottom line. For Electronic Arts, MTX from Ultimate Team modes across its EA Sports franchise accounted for $800 million in annual revenue as of one year ago. For Take-Two Interactive, the parent company Grand Theft Auto and NBA 2K, microtransactions are dragging in more than 40 percent of the company’s reported revenue. Earlier this month, Ubisoft told investors that annual launches of video games are no longer a focus. Games with “long-term engagement,” and systems that monetize that, are.

Vance told reporters on Tuesday morning that a label for in-app purchases will not affect a game’s rating. She said the ESRB had considered whether to flag loot crates, virtual currencies or other systems as gambling or simulated gambling — two “content descriptors” that accompany the game’s age rating so buyers know what’s in it — but decided against such a move.