Op-Ed: Australia's gambling crackdown signals choppy waters for loot boxes

"The outrage swelling up in Australia about slot machines is...a flashing warning sign for anyone who wants to promote anything that even smacks of gambling," writes contributor Katherine Cross.

A tentative step forward has been taken on the roiling video game controversy of the season: the ESRB will now label all video games with in-game purchases.

The label will be applied to every game with real-currency purchases, “including but not limited to bonus levels, skins, surprise items (such as item packs, loot boxes, mystery awards), music, virtual coins and other forms of in-game currency, subscriptions, season passes and upgrades (e.g., to disable ads).”

It’s a small step, and a welcome one so long as the industry doesn’t drop the Mission Accomplished banner. The reason this issue got so huge is because it imbricates with a whole range of revenue-generating practices that raise unanswered ethical questions. Those questions won’t go away, and recent events in Australia help illustrate why.

First and foremost Australia’s eSafety Commissioner has issued new guidance on “online gambling” that fully encompasses video gaming. For example:

“Some online games include activities and features that are normally associated with gambling—like ‘loot’ boxes, ‘bundles’, ‘crates’ and ‘cases’ that provide a random chance to win virtual items, which can include an in-game currency.”

The page goes on to give parents advice for dealing with the matter, like securing their credit cards, using parental controls, calling support lines and the like. It’s all guidance, but it’s noteworthy that this office (which was only created in 2015) has now polevaulted to the front of the videogame gambling debate. The definitions it offers to concerned parents are a clear statement of belief: lootboxes and the like are gambling. “Games that simulate a gambling activity are easily accessible through mobile apps and social media sites and can expose your child to a realistic gambling experience at a very young age,” the eSafety Commissioner’s site notes.

But is this by itself a “crackdown”? No. My headline comes from other events in Australia having to do with more traditional forms of gambling. As you’ll see, the discourse on old school gambling is rapidly changing Down Under, in ways that game developers will have to pay attention to.


Down in Tasmania, a charismatic progressive politician is staking everything on gambling. In a forthcoming state election, leader of the opposition Labor Party Rebecca White is proposing a ban on “pokies” (slot machines essentially), which are available in a number of easily accessible bars in the state. Under White’s proposal, the machines would be removed from every establishment, save Tasmania’s two casinos. In so doing, she took on the powerful Farrell family, which holds a monopoly on every pokie machine in the state--a particularly dramatic turn of events considering she used to be a waitress at their Wrest Point Casino.

Speaking to The Sydney Morning Herald’s Nick O’Malley, White explained “I saw people who were so exhausted from sitting at the machine for so long...that they fell off their chair and had to be taken to hospital. I saw people wet themselves at the machines...I saw people who peed in the coin cups because they did not want to leave. I saw how addictive the machines are.”

White ensured the proposed pokie ban was a critical issue in Tasmania’s election; her Labor party didn’t win outright, but increased its share of the vote and put the matter on the nation’s agenda. Her bold stance made national, even international news.

What’s more compelling is her argument about the terrible effects of gambling addiction, mirroring many similar arguments made about video game players--especially children--who spend hundreds or even thousands of dollars on in-game transactions. Such arguments will gain traction, and if they’re gaining ground against once-invincible traditional gambling establishments, video gaming is in for a much rougher ride.


The second bit of news also comes from The Sydney Morning Herald, which this past week reported on a different problem with pokies. Australian supermarket giant Woolworths has a majority stake in the Australian Leisure and Hospitality (ALH) group, which administers more than 12,000 pokies across the country. According to whistleblowers, ALH staff secretly compiled personal data from individual gamblers to find ways to keep them at the machines longer. According to the Herald, “a database shared across 400 pubs contain[ed] details about their regular poker machine users’ gambling and drinking habits, and the football teams they followed.”

Liquor & Gaming New South Wales, the local regulator, is investigating since the allegations point to activity that is illegal under Australian law. Regulators in Queensland and Victoria are also looking into this. After less than 24 hours worth of pressure, the supermarket giant was distancing itself from pokies.

For game devs what should stand out here is the similarity to an increasingly widespread practice in the gaming industry, where third party firms--Scientific Revenue being but one example--collect a range of metrics about a game’s players to develop targeted adverts and pricing schedules that “provides personalized, profit-maximizing prices for all of [a game’s] users.” In the case of SciRev, players technically consent to having this data collected when they grant a gaming app its permissions upon download.

But it remains an opaque, even invisible process from the player’s perspective; they certainly can’t tell that a given game is running SciRev’s tools. There’s little clarity about what data is being collected and how it’s being used.

But the overriding purpose is, in Scientific Revenue’s phrase, “turning players into payers.”


In an unsigned editorial, the Herald’s editorial board writes, “no one should be surprised that the professionalism and efficiency of [Woolworths’] retail marketing operation have been transferred across to the management of its gambling businesses.”

But the Woolworth/ALH operation was actually quite primitive compared to what we see in videogames, comprised of on the ground scratchpad notes and barking local managers, essentially, feeding qualitative observations into a word processor. It still served the same purpose: keeping people in one spot, feeding coins into the machine. “DO WHATEVER YOU HAVE TO DO TO KEEP PEOPLE IN THE ROOM,” screamed the advice from the top of a document passed around to staff at one pub.

“It’s the predatory tactics that's being deployed,” one whistleblower told the independent MP Andrew Wilkie. “It’s unethical and essentially you are looking over people’s shoulders, and documenting what people are doing and they don’t know that you are doing that. They think you are having a general chit-chat with them, but you are actually profiling it.”

In their editorial, the Herald notes that “alarm at the grip gambling holds over Australian society and politics has reached a high point,” while praising the Woolworths whistleblowers as people who felt “uneasy about subjecting their fellow human beings to what amounts to exploitation.”

If this is the emerging climate around old school gambling, which is both culturally normalized and well-connected to the political elite of this country, what chance do videogames have using the same well-worn tactics?

The problem is that the relative sophistication of video gaming’s “predatory tactics” are hardly a defense. Thanks to app permissions, the data gathered is quite streamlined, more quantitative than qualitative, and paints a fairly useful picture of users en masse. And how to sell to them. One wonders what the “alarm” might look like if these practices became even more widespread and endemic to games played by children. At that point, the ESRB’s small compromise certainly wouldn’t cut it.

To look at the outrage swelling up in Australia about slot machines is to see a flashing warning sign for anyone who wants to promote anything that even smacks of gambling. And it’s already clear, from the eSafety Commissioner’s statements that a consensus view that holds lootbox based games to be gambling is emerging. Today pokies, tomorrow MTX?

Serious ethical questions need to be asked within our industry, before executives have to answer them in front of a Congressional committee or Parliamentary inquiry.

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