Microtransactions are big business.
Microtransactions are nothing new in the gaming world, but in 2018, the controversial business practice underwent a number of changes and evolutions from what we've seen in the past. As part of GameSpot's year-end features, we're looking at the current state of microtransactions in video games, including how they've been used in the big games of 2018, what's different, better, and worse than before, and other relevant topics.
Going back to 2017 is important to set the stage for what happened in 2018. At the end of 2017, Electronic Arts launched Star Wars: Battlefront II, a sequel to its massively successful multiplayer game from 2015. The game looked gorgeous and, in a move that fans generally enjoyed, it introduced a single-player campaign after the earlier title left it out due it part so it could launch alongside Star Wars: The Force Awakens and piggyback on the hype. Things did not go to plan for EA, as much of the conversation surrounding Battlefront II focused on its use of microtransactions. Specifically, people took issue with how the game allowed players to spend real money on loot boxes that could contain items that affect gameplay.
It wasn't as direct as paying for specific weapons or other game-affecting upgrades, but paying for the chance to get something that gave players the upper hand on the battlefield understandably rubbed some players the wrong way. And it also brought up concerns that Battlefront II was, in essence, a form of gambling (more on that later). In response to an avalanche of criticism and concern stemming from the game's early access, pre-release play period, EA removed all forms of microtransactions from Battlefront II on the eve of the game's public launch.
Microtransactions were reinstated months later, but in a very different way. In their new and current form, players can only spend money on cosmetic items; that is, skins and other items that have no bearing on how a player performs on the battlefield. Although EA changed course, the high-profile nature of Battlefront II--it's a Star Wars game, after all--led to a ripple effect that heated up in 2018 and affected the future output from EA and other publishers. Thanks to the Disney/Star Wars connection, the discussion around loot boxes extended beyond gaming circles and into mainstream media coverage around the world. In turn, this meant that basically every company that implements microtransactions in their games faced an increased level of scrutiny, and one can hope this led to more pro-consumer tactics as it relates to MTX.
Lawmakers from the United States and around the world took aim at Battlefront II (and other titles), with politicians calling paid-for loot boxes a form of gambling and seeking to create a legal precedent that could stop the business practice from spreading and holding offending companies accountable. Proposals for new laws relating to loot boxes were put forth in places like Hawaii, where state senator Chris Lee proposed a bill that would limit the sale of video games with "gambling-like mechanisms" to people under the age of 21. Lee, who worked with other politicians from other states in America, said he believed the legislation could have a snowball effect and spread to other parts of the country that enact their own similar laws. Nothing ever came of this bill, which is no surprise given that only around 4 percent of bills ever become law. Internationally, Belgium's Gambling Commission declared that some video game loot boxes amounted to illegal gambling. In the wake of this decision, Blizzard yanked loot boxes from Overwatch in the country. EA reportedly defied Belgium's Gambling Commission, refusing to take action, a move that could lead to further legal action down the road.
EA, as well industry groups like the ESRB, ESA, and IGDA, have publicly come out to say loot boxes are not a form of gambling, while regulators in New Zealand and France also stated this year that loot boxes in video games do not constitute gambling. In Australia, a recent Senate inquiry called for a "comprehensive review" of loot box mechanics to determine what action to take. Another major development came in November when the United States Federal Trade Commission said it agreed to the idea of investigating loot boxes at the request of Democratic senator Maggie Hassan.
What will be done about loot boxes in the future? Trade groups like the ESA and IGDA believe the industry should self-regulate when it comes to loot boxes. Politicians, meanwhile, will argue that laws are necessary to ensure that something is being done to protect young people from falling into dangerous gambling habits. Self-regulation may be a good idea in theory, but actual laws or regulations would put more pressure on developers and publishers.
Those who believe loot boxes are a form of gambling come to that conclusion by asserting that, like a slot machine, people are encouraged to pay real money for the chance to get something they want. Some video games, like Overwatch, disclose odds, but only in some regions such as China. For its part, Blizzard believes its loot box system is not problematic because the items contained within its loot boxes are cosmetic only.
Parent company Activision Blizzard is likely happy to keep things the way they are, as the company pulled in $4 billion from microtransactions in 2017 alone. This figure covers all of Activision's business units, including Candy Crush giant King, but Overwatch certainly contributed as well. It's not just Activision Blizzard that makes buckets of money from microtransactions. Every major publisher has posted year-over-year gains in the money it makes from selling extra content, whether that be beyond the initial sale price for full-price games or as optional add-ons in free-to-play titles. In 2018 (and years prior) it was more newsworthy and noteworthy when a major game did not feature a MTX system of some sort.
The evidence seems to suggest that microtransactions, or recurring consumer spending, or whatever you want to call it, is only going to increase in the time to come. For example, Take-Two, the parent publisher of games like Red Dead Redemption, GTA, Borderlands, NBA 2K, and others, reiterated this year that it wants microtransactions in every game it makes. (This apparently does not extend to Take-Two's indie publishing label, Private Division, as Obsidian's new game won't have any microtransactions).
Another high-profile microtransaction story this year came from Microsoft and Halo developer 343 Industries. 343 is hiring an "online experience designer" who will, among other things, use psychology to encourage players to spend more time in Halo Infinite--and spend more money. Going back to Activision, management at the company recently said that it is looking at how it can put more microtransactions in Destiny 2 after the game's Forsaken expansion failed to sell up to the company's expectations, though developer Bungie has said it's not disappointed with Forsaken's performance.
While loot boxes as a form of microtransactions may be fading away, publishers are constantly looking into how they can keep players engaged with their games--and spending money--over a longer period of time. One trend in 2018 that became even more popular was letting players spend money on cosmetic items, and some of this growth might have been driven by the overwhelming success of Fortnite. Epic's battle royale game features a store where players can spend real money on all manner of things from tomato head skins to Oktoberfest-themed gliders to, more recently, NFL jersey skins. None of these items affect gameplay, and instead act as another way for fans to express themselves.
From a business perspective, these types of add-ons are likely very margin-rich, and as such, quite lucrative. Another wrinkle that Fortnite executes so well is how its skins and other cosmetic items are only available for a short period of time, creating a feeling of scarcity regardless of whether or not it's true. The game effectively tells you, "Here's a cool skin; buy it now or you may never have another chance." There is even a countdown timer that informs players when skins and other items are set to rotate out of the store. In reality, skins and other cosmetic items are often re-circulated at a later date, but Epic doesn't give much heads up. In turn, this encourages players to keep coming back to see what's new. It's a smart system, and it seems to be paying off for Epic.
Part of the reason so many people feel uneasy about microtransactions is because of the speculation and reports that some games are purposefully designed to push players towards spending more money on microtransactions. In 2018, this trend continued. NBA 2K19 and NBA Live 19 were criticised for their microtransaction elements, specifically how some of the game's modes can feel like a grind if you don't pay up. The Ultimate Team modes in EA's Madden and FIFA franchises have been criticised for years about this, and in 2018, EA CFO Blake Jorgensen revealed in an earnings call what many had always suspected. He confirmed that FIFA 19 was designed to steer players towards the microtransaction-filled Ultimate Team mode. "We know the game is designed to ultimately steer [players] into Ultimate Team," Jorgensen said during an earnings call in October.
Microtransactions in video games are here to stay, but (messaging issues aside) it appears EA is keen to avoid making the same mistake twice, with other publishers taking note, too. At E3 this year, DICE developers spoke frankly about Battlefront II's failings as it relates to microtransactions. And when other DICE developers got on stage to talk about Battlefield 5, the studio opened by proclaiming the game won't feature any loot boxes. Not only that, but the game launched in November without any form of microtransactions whatsoever. Cosmetic microtransactions are coming to the World War II shooter sometime after launch, with the aim of giving players the opportunity to dress up their soldier and weapons in unique and personalised ways. This seems to be the middle-ground EA is content with, as BioWare has said its 2019 game Anthem won't have loot boxes but will instead feature cosmetic-only microtransactions. It's not the same for every publisher and game. For example, Blizzard's popular hero shooter Overwatch has used loot boxes since launch to drive extra revenue, and former Blizzard executive Mike Morhaime spoke frequently and passionately about how loot boxes are here to stay. Flipping back again, Microsoft's racing game Forza Motorsport 7 released an update this year to remove loot boxes (though microtransactions are still featured in the store).
Another big-time example of microtransactions in video games this year was Assassin's Creed: Odyssey. While the franchise has implemented microtransactions in some capacity for many years already, Odyssey was the first entry to allow players to pay a fee--$10 USD--to get a permanent double XP boost. This allows players to effectively level twice as fast, and some argued the $10 XP boost was the game's best feature. That's up for debate, but what's clear is the game was a big hit--and microtransactions played a part. Ubisoft disclosed that Odyssey's launch was the most successful Assassin's Creed release in half a decade thanks in part to the extra revenue that the game's microtransactions brought in.
Some say it is icky for big-budget, AAA games to ask for more money beyond the initial sale price, which can be $60 USD or more depending on where you live and what you're after. Publishers will say microtransactions are completely optional, and because they do not impact gameplay--or, if they do, are limited to single-player--they don't affect balance or the general integrity of the game. Being able to craft a character that is uniquely you is part of the appeal of many games today. The issue for many is that games now offer the ability to buy content that, in the past, might have been included on the disc right out of the gate. Publishers might counter that the price of games has not gone up, despite inflation and rising development costs.
Whatever the case, regulatory bodies and other industry groups are taking notice of the discussion and enacting some changes in response. The Entertainment Software Rating Board this year announced that it would introduce a new label on some games with microtransaction systems. The overall goal is to inform consumers--and in particular, parents--about which games offer a way to spend additional real-world money from right within the game itself, but whether or not this has any actual impact remains to be seen.
The ESRB's new label, which will read "In-Game Purchases," is located near the rating category (E for Everyone, M for Mature, etc.) but will not be housed inside the same box as content descriptors (Sexual Content, Comic Mischief, etc.). What's more, the ESRB launched a new website intended to inform parents about the ESRB's ratings system, how in-game purchases work, and how to use parental tools to control what and how children play games. Disappointingly, the new label will offer no specifics about the type of in-game purchases available so as to avoid overwhelming parents with too much information, the ESRB says.
Another notable development this year in the world of microtransactions came from the Entertainment Software Association, which lobbies on behalf of the video game industry and runs E3 every year. Generating some amount of controversy, the organisation said it would rather see self-regulation by video game groups like the ESRB than the kind of government-mandated changes that the lawmakers are proposing. This reaction is understandable. Any law that would, even in some small way, limit the sale of video games is not something that the ESA would so easily or willingly get behind. The IGDA's Jen MacLean echoed the ESA's sentiment in her own statement where she called on the industry to address the loot box controversy to avoid government intervention.
2018 was a fast-moving and news-filled year when it came to microtransactions, and it is reasonable to expect that microtransaction systems will remain in all of the major franchises, and ramp up. Every major publisher in video games is investing in microtransaction systems, and they'll remain attractive to them because they consistently deliver a steady stream of revenue at a high margin. One of the key elements in this discussion is how microtransaction systems are delivered, and while publishers like EA, Ubisoft, and others are saying the right things when it comes to their implementation, what happens in practice as we move into 2019, remains to be seen.