Latest University Essay

Hi everyone. It's been a long time since I last updated my blog. I just wanted to share with you an essay that I have recently finished an essay for module on my Masters. The essay goes into a brief history of the Video Game Industry along with the appraisal and discussion of Microtransactions within Video Games and also explores ethical considerations.  I thought some people might find it interesting to read, so here it is below. Enjoy.

A brief history of the Video Game Industry, including the appraisal of Video Game Microtransactions and ethical considerations.

The Use of Microtransactions in Video Games

There have been many important trends that have developed in the video game industry. This report will appraise and discuss the different approaches to microtransaction implementation in video games. In addition, it will explore the ethics of microtransactions as a form of gambling, and its use to entice players to spend money. Currently within the games industry, the gaming community and politics there has been a great amount of debate and discussion surrounding microtransactions, which will also be examined.

The Oxford Dictionary defines a microtransaction as ‘a very small financial transaction conducted online’. However, microtransactions in games are more frequently used as a payment model to buy in-game virtual currency to spend on items within the game, this could be a cosmetic change to a player’s character or weapon, loot boxes which give the player a random chance of receiving items of different rarities, or something that gives the player an advantage against others. In mobile games microtransactions are also used in this way, however, there is a much stronger presence, such as mobile games giving you the choice to pay to skip levels.

Microtransactions in games have been a prominent feature for a long time. That being said, microtransactions were primarily used in free-to-play games to provide a revenue source for developers. However, over the past years, more video game companies have taken this opportunity to include microtransactions in paid games to entice players to purchase in-game currency which can be used to buy loot boxes which contain random virtual items, power-ups or abilities. The loot box system used in many games contain random probabilities of receiving certain items rarity.

The History of the Video Game Industry

The video game industry has undergone major evolution since the 1970s. The start of video games began around the 1950’s with two notable scientists. British professor A.S Douglas, who created OXO, known as noughts and crosses, and William B. Higinbotham who created Tennis for Two, which was a game that could be controlled in real-time with analogue. (Kent, 2001; Stanton, 2015)

In the 1970s Atari was formed and introduced the game PONG into the Arcades which saw massive popularity and led to growing popularity in gaming. During this time Atari also released the Atari 2600 (also known as the Atari VCS) which sold over thirty million consoles, it is acclaimed to be the godfather of modern video game systems to launch the video game industry into the multi-billion-pound industry there is today. (Atari Age, 2018)

In the 1980s, the Commodore 64 was introduced into the PC market and sold
around 12.5 million units which saw the rise of PC Gaming. Soon after Nintendo launched the Nintendo Entertainment System. In 1990 Sony entered the video game market and released the PlayStation console which led to Sony dominating the console market due to the PlayStation technological advancements in real-time 3D graphics. The technological advance in 3D graphics from pixels was used to develop the game DOOM for PC and contributed to the birth of the first-person shooter genre. (Desjardins, 2017)

In the 1990s, Sega introduced the Dreamcast to the video game industry which was the first console of the sixth generation. Unfortunately, the Dreamcast was ahead of its time, coming with revolutionary features consisting of; PAL 60 resolution, an analogue controller and a console dashboard. (Richardson, 2016) Sega was unable to compete with Sony’s market of the PlayStation 1 and left the console market. However, Sega still to this day provides software as third-party developers. Entering 2000, Sony launched the PlayStation 2, as well as Microsoft entering the industry with the Xbox a year later alongside Nintendo’s GameCube. The PlayStation 2 saw massive popularity and is the best-selling console of all time, selling around 150 million units, surpassing the sales of Xbox and Nintendo. (VG Chartz, 2018)

In 2005, Microsoft released the Xbox 360 which saw the start of the seventh generation of consoles. The Xbox 360 gained strong popularity with gamers, Microsoft soon launched an online service; Xbox Live. Players could now connect online with each other and game together. Soon after, Sony released the PlayStation 3 as well as Nintendo launching the Wii in 2006. Each console brought ground-breaking technology to the table which later would pave the way for the current, eighth generation of consoles. To date Sony, Microsoft and Nintendo continue to create video game consoles, being in the eighth generation which began in 2012 which saw the release of the Wii U, later followed by the PlayStation 4 and Xbox One. Mid-generation refreshes of the consoles have also been released due to the constant improvement of technology with the PlayStation 4 Pro, Xbox One X, and Nintendo Switch launching from 2016 to 2017. (Desjardins, 2017; Preceden, 2018)

Controversy Surrounding Ethical use of Microinstructions

Recently Microtransactions in Video Games has caused an incredible amount of controversy. In November of 2017 Electronic Arts released Star Wars Battlefront 2, which was met with overwhelming backlash from gamers, additionally, this caught the attention of mainstream news as well as politicians around the world. In Star Wars Battlefront 2, players can buy in-game currency known as crystals which are exclusively used to purchase loot crates. Players have the option to buy crystals ranking from $4.99 for 500 to $99.99 for 12000 crystals. From these loot crates, players receive 5 Star Cards, items which allow them to customise their character, add perks such as; health regeneration and damage boosts to their characters along with new skills and weapon loadouts. Each Star Card has four tiers of rarity ranks – common, uncommon, rare and epic. (Gamespot, 2017). EA was heavily criticized for its un-ethical use of microtransactions with Battlefront 2, a few to note are; locking portions behind a paywall and presenting them as loot boxes, locking items from being earned naturally and only being bought with money as well as giving players a power advantage against others in multiplayer through the purchase of loot boxes. (D’Argenio, 2017)

The heavy presence of microtransactions in Star Wars Battlefront 2 led to anger within the gaming community. One player expressed their frustration on the Star Wars Battlefront 2 Reddit page. After buying one of the microtransaction options of 12000 Crystals for $80 at a 10% discount as an EA Access member, he found that he could not use the Crystals to buy Star Wars hero characters within the game, the heroes were only available to buy in the form of ‘credits’, which were earned by playing the game. The player wanted to buy the Darth Vader hero which was 60,000 credits at the time. An EA Representative replied to the players post on Reddit stating: "The intent is to provide players with a sense of pride and accomplishment for unlocking different heroes”. The comment received overwhelming backlash from the gaming community and received 672,000 downvotes, making it the most disliked comment in the whole of the website’s history. (Gamespot, 2017; Reddit, 2017).

As a result of the controversy surrounding Star Wars Battlefront 2’s launch. Kim (2017) writes that on November 28 Electronic Arts stock dropped by 8.5 percent causing them to lose $3.1 billion dollars in stock value. This was due to the gaming community and political backlash Electronic Arts received due to their microtransaction model in Star Wars Battlefront 2. Furthermore, in the U.K. Star Wars Battlefront 2 physical game sales declined by 61% compared with its predecessor Star Wars Battlefront which released in 2015.

Due to the overwhelming backlash from the video game community prior to Star Wars Battlefront 2’s launch, Electronic Arts microtransaction model was noticed by Disney executives who were alarmed by it. Disney’s head of consumer products expressed unhappiness with how the controversy was reflecting on the Star Wars brand. Soon afterwards, Electronic Arts temporarily suspended all microtransactions in Battlefront 2. Additionally, the developers also reduced the prices of all hero characters by 75 percent. Moreover, EA released a statement from expressing the concerns that players had regarding the microtransaction model in the game, as well as other players having unfair advantages through loot crates, and promised to spend the time adjusting the microtransaction model in the game. It is widely believed that Electronic Arts were fully aware of what they were attempting to achieve with microtransactions within Star Wars Battlefront 2, and were attempting to damage control the situation at this point. (Gamespot, 2017; Sinclair, 2017; Taylor, 2017).

Furthermore, in 2013 Laurijsen, reported on three studies which looked at player satisfaction and the use of microtransactions. They found that there was no link between feeling satisfied with the outcome of a game and having to use microtransactions. This is in contrast to players’ reaction to Star Wars Battlefront 2 in 2017. When the game was released players quickly became angry about how the game was built around the microtransaction model. The game is designed around microtransactions in a way that players were required to either complete 4528 hours of gameplay to unlock everything, or to buy in-game currency from $5 to $100 to buy loot boxes with a random probability chance of getting virtual cosmetic items, or power items that can dramatically alter the chances of winning a game. Players were frustrated due to the fact that the loot box in Star Wars Battlefront 2 gave an in-game advantage over others, despite selling the game for a retail price of $60. This was the first time microtransactions were used to this extent. (Gamespot, 2017; Louvigny, 2017)

The Legal and Political Changes to Microtransactions

Shortly after these events, politicians from around the world involved themselves, and heavily criticise Star Wars Battlefront 2’s microtransaction system as well as microtransactions in general. Hawaiian state representatives expressed concerns on Battlefront 2’s microtransactions. Moreover, how children are being exploited to gamble money for a chance to win game upgrades, eventually resulting in getting caught up in an addictive cycle. The Hawaiian State representatives concluded that loot boxes were a form of ‘predatory gaming’ and as a form of gambling, they have vowed to take action to protect children from in-game monetization, and are in the process of working on legislation to ban children for buying them. (Cross, 2017; Kim, 2017; Lee, 2017) Furthermore, countries in the European Union such as Belgium launched an investigation into microtransactions within games although they came to the conclusion that it would be difficult to regulate microtransactions using current laws. (Chalk, 2017; Knaus, 2017). It is also worth noting that the United Kingdom have voiced their concerns on microtransactions. The U.K. Gambling Commission determined in early 2016 that microtransactions such as loot boxes were a potential risk to children and younger people. However, due to the U.K. Parliament being responsible for defining what is legally classed as gambling all the Gambling Commission can do is enforce the laws that are laid down by Parliament. (Gambling Commission. 2017; Hood. 2017)

Furthermore, the Victorian Commission for Gambling and Liquor Regulation (VCGLR) in Australia have also considered whether loot boxes in video games constitute gambling. A student from Australia reached out to the VCGLR and simply asked: ‘do loot boxes constitute gambling?’ The student received a reply from the Strategic Analyst from the Compliance division at the VCGLR saying that loot boxes do in fact constitute gambling by the definition of Victorian Legislation, however current legislation has not moved as fast of technology preventing anything from being done at this moment in time, additionally the video game companies responsible are overseas. (Walker, 2017)

In May 2017 the Chinese Ministry of Culture passed a regulation that required online game operators in China to disclose loot box item odds such as the probability of all virtual items from loot boxes. This led to Activision Blizzard revealing the odds of receiving virtual items in loot boxes in their game, Overwatch, which has 35 million players as of October 2017. (Ahmad, 2016; Frank, 2017; Statista, 2018). It was also noted that all items are cosmetic only to the characters within Overwatch and do not provide extra benefits in the game. (Frank, 2017; Overwatch, 2017). Furthermore, players can alternately earn loot boxes for free in various ways such as levelling up, taking part in seasonal events or winning games in the arcade. This is a step in the right direction for China, as game consumers know the odds of receiving items before spending money.

In December of 2017, Apple attempted to tackle microtransactions such as loot boxes on the App Store by adding a guideline to their App Store Review Guidelines in which: “Apps offering “loot boxes” or other mechanisms that provide randomised virtual items for purchase must disclose the odds of receiving each type of item to customers prior to purchase.” (Apple 2018). This change to policy implies that all companies and developers who wish to add an App to the App Store containing microtransactions must disclose the random probabilities of receiving certain items. This is a positive change for the industry and consumers.

More Ethical Approaches to Microtransactions.

Other video games developers such as Epic Games have strived for a more ethical approach Microtransaction model. In Epic Games free-to-play ‘Fortnite Battle Royal’ multiplayer game, players can spend money on the in-game currency known as ‘V-bucks’. With this currency, players can buy cosmetic items for their player avatars. Epic Games have noted that the cosmetic items do not grant any competitive advantage in their game. Despite this, in the campaign of Fortnite Save the World players can purchase with V-bucks ‘loot piƱatas’ which contain a random probability of receiving items, this is restricted to the campaign. However, Epic Games have offered alternative options to earn V-bucks for free in Fortnite such as; giving players V-bucks based logging in daily, daily campaign quests, Storm Shield Defence Missions and Seasonal Events as well as enabling players to earn V-bucks by levelling up a ‘Battle Pass’ through the multiplayer Battle Royal. (Gameskinny 2017) This is a more ethical approach to microtransactions than Electronic Arts because players know exactly what they are buying within the multiplayer or Fortnite, additionally, no items hold any competitive advantage in-game and cosmetic only. With that being said the presence of loot boxes and gambling are present in Fortnites campaign, however as mentioned previously there are many ways to earn V-bucks for free within Fortnite.

Conclusion

In conclusion, the use of microtransactions in video games does not seem to be stopping anytime soon and will continue to be used in purchased video games as a source of revenue due to the fact that companies gain far too much profit. Activision Blizzard reported in their fourth quarter of their financial year of 2016 that they had reached record revenues from in-game content making up $3.6 billion, more than double their profit of $1.6 billion in 2015. (Activision Blizzard, Inc. 2016) Additionally, Electronic Arts reported in their earnings from April 2016 to March 2017 and had generated $1.68 billion through in game-content being microtransactions. (Electronic Arts Inc. 2017)

The effect that Star Wars Battlefront 2 created around microtransactions might have a profound effect on the future of microtransactions and how they are implemented into games. If game companies continue to be unethical in their microtransaction models, the consumer reaction will continue to be angry and negative, this could potentially lead to a boycott of certain video games, which in turn could hurt more game companies stock values. Ultimately, this may lead game companies to reflect on the ethics of how they implant microtransactions into their games. Furthermore, there is a chance that politics will eventually become heavily involved with microtransaction ethics and how it is a form of gambling and might dictate the future of where microtransactions end up. Thus, microtransactions could be eventually restricted or banned if they continue to be used unethically. Although change is happening slowly, video game companies need to be more careful than ever with how they present microtransactions within their game over the course of the next few years the decisions made by game companies on how to handle microtransactions within their game will shape the consumer reaction and political changes to come.
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