Monetizing in Video Games

Monetizing in Video Games

On August 3rd, 2020, Sony and developer Crystal Dynamics announced that their upcoming Marvel’s Avengers game would feature exclusive content on Sony’s hardware as part of a new exclusivity-based game monetization strategy called “PlayStation Advantage”.


PlayStation players will apparently have exclusive access to Marvel Comics’ most popular character: Spiderman, leaving many players angry, feeling that buying the same for Microsoft’s Xbox One would mean be paying the same for less content.

This move to a new exclusivity-based game monetization strategy is only one of many attempts to make games lucrative. Given the backlash Sony experienced for this move, choosing the right monetization strategy for your game, while catering to your base and staying within legal confides, is crucial. Hence, I’ll take a shot at helping devs navigate the two current reigning post-purchase monetization strategies—Loot Boxes and Battle Passes.

What is Video Game Monetization?

Video Game Monetization (most commonly) refers to strategies of video game developers and publishers to increase the fiduciary lifespan of already-released games. In the 1990s and early 2000s, we had expansion content for PC and certain console games; followed by a trend towards smaller-scope DLC and “microtransactions”, lest we forget all of the FPS multiplayer map packs. Microtransactions became (and still are) the main money-maker for mobile “freemium” gaming, with the developers of Candy Crush Saga reporting that microtransactions accounted for $1.5 billion in revenue from microtransactions alone in 2018. Soon, developers and publishers would bundle these maps, in-game weapons, and other extra content into “season passes”—larger chunks of content for a higher price to be distributed over the course of a several months. For one purchase, you get all the DLC content a game is likely to receive.

The diverse options were unified by two key approaches: either permit a player the freedom to purchase something small for a low price, but incentivize them to do so repeatedly (microtransactions), OR promise a player access to a broad array of content for a higher one time set price (DLC and season passes). Recently, however, the approaches to these monetization strategies have shifted towards making the game itself more of a service (“Game as a Service”; as seen through the likes of Destiny/Destiny 2 and, of course, Fortnite), rather than a discrete title. The new aspect of this paradigm is the introduction of Loot Boxes and Battle Passes.

Loot Boxes. It’s Gambling—for Kids!

Just kidding, but as you will see, you might want to prepare to rebut this assumption if you want to implement loot boxes in your game.

A loot box is a collection of randomized in-game rewards of varying scarcity—in which rarer rewards will be unlocked at a rate of 5% or lower. While their origins likely date back to freemium games through app stores, their use and popularity among AA and AAA developers exploded when Overwatch implemented them as a way of obtaining in-game cosmetics. The idea is to provide players an organic gameplay mechanism to earn “keys” with which they can unlock a loot box. What makes loot boxes profitable is that these keys or the boxes themselves will also be earnable through the spending of real-world currency.

Although this sounds like a recipe for success, the practice has come under stark scrutiny over the past few years, as seen when Star Wars: Battlefront 2 and Middle Earth: Shadow of War were met with widespread criticism over their less-than-ideal implementation. Soon thereafter, policy makers started to react: Belgium went so far as to designate loot boxes as violative of their gambling legislation; and Hawaii considered passing a similar bill, as did the United States Senate. So, what are Loot Boxes legally, and are they unlawful?

Are (or when are) Loot Boxes unlawful?

While there isn’t a yes or no answer to this question (yet), the issue is whether gating player progress behind loot boxes could constitute gambling, which in most states around the world requires a (hard to get) license. But what is gambling in a legal sense? Different states answer this question by statute, but in general you need three things: 1) a player risking something of value (effectively a “bet”); 2) an outcome based on chance; and 3) a result in which the player either loses or gains something of value. The crux being: “something of value,” which refers to property, usually currency, that holds value beyond the confines of the game itself.

So are loot boxes gambling then? Well, probably not. While a player may be risking the waste of their hard-earned money by purchasing a loot box, it is highly unlikely that the ordinary Loot Box scheme will be considered as to having to place a “bet” on “something of value”. Courts like the one in Kater v. Churchill Downs have found that loot boxes and digital currency are akin to buying chips granting a license for entertainment, rather than actually risking something of value—unless the digital currency could later be re-merchandised into things of value in the real world. Another apt comparison would be like purchasing a package of trading cards. It’s not gambling, and one is fully aware of the fact that they are playing a game of chance for the particular card they want. Therefore, the purchase price is not a “bet”, but rather a license for entertainment.

How can I play it safe with Loot Boxes?

Because ordinary Loot Boxes are not considered gambling, a developer ought to ensure that their terms design and their terms and conditions actually achieve that. Here is some advice you can follow to ensure that policy-makers don’t confuse your loot-boxes for gambling.

1. Do not design your game to gate player progression behind loot boxes. Yes, such a strategy could potentially make you more money, but it might also smack of gambling to the wandering eye of the law. Better to keep the contents of your loot boxes restricted to cosmetic items.

2. Publicly disclose the drop rate percentages of the loot boxes’ contents. A regular fixture of most anti-loot box legislation, publicizing drop rates gives players proper notice as to what they are risking with their money. The FTC advises making such disclosures as “accurate and non-misleading” as possible, so the more transparent the better.

3. NEVER make real-world currency an exclusive mechanism to unlock your loot boxes. Always make sure that you offer players a means of earning keys organically through gameplay, and with enough frequency to make that progression meaningful.

4. Carefully craft an End User License Agreement (EULA) to give your players proper notice as to exactly what your loot boxes contain, and how the model works with or without the use of real-world cash to purchase them. Further, make sure you expressly prohibit any after-market exchange of the loot box prizes. If players find a way to turn your game’s digital rewards into something they can exchange for value, a court might find your loot boxes to constitute gambling.

Battle Passes—Season Passes, but Forever!

Battle Passes are the new, popular kid in school when it comes to monetization. Combining some elements of the older DLC “season passes” approach with some elements of the newer “Games as a Service” approach, the idea is that a “base game” exists where players may explore content to their hearts’ content either for free or for sticker price. However, a player will also have the option to purchase that season’s “season pass”, which will entitle them to the enjoyment of certain additional content like new maps, weapons and the ability to unlock otherwise exclusive rewards through play. This method of monetization offers a more play-focused approach with less-random results, since battle passes freely advertise what a player pays for, which circumvents the gambling concern present with loot boxes.

On the whole, battle passes have been received much more warmly by players, developers, and legal experts alike. Here’s why:

1. You know exactly what you’re getting. Key to the improvement in the legal world over loot boxes is the lack of randomness involved. Sure, you may be paying a premium to purchase a battle pass, but you get exactly what it says on the box (or online marketplace or wherever you are purchasing your battle passes).

2. Battle passes are finite—at least per individual season of content. A parent may not be thrilled that their young daughter pays for each season of Fortnite, but at least they can rest assured they she won’t rack up an $8,000 bill in doing so.

However, be warned that battle passes tend to involve a bigger ask from the developer than a loot box might. The success or failure of a battle pass model lives and dies on 1) the attachment the game gets with its player base (AKA, how many people actually buy a battle pass); and 2) the developer’s ability to keep developing additional content for the game indefinitely. A game can’t be a service if the service doesn’t provide any benefit, after all. In sum, we have yet to see any significant challenges or concerns regarding battle passes in the legal world, but for making sure to manage player and community expectations and delivering to that.

Author: Edward Baxter and Daniel Koburger

First Published: 09/21/2020

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Roche Legal, PLLC

New York

Roche Legal, PLLC

Munich

Alexandre Leturgez-Coïaniz, Esq., LL.M.

Daniel B. Koburger, Esq., LL.M.

Côme Laffay, Esq., LL.M.