MMO Money: 16 Countries to Investigate Lootboxes and More China Trouble

There are really only two big news stories from the last week in gaming business. The biggest story is the ongoing lootbox controversy and the fact that 16 countries have now signed a declaration to investigate lootboxes and skin gambling, and news on the Chinese regulation of new games entering the market is grim as it looks like it could continue for some time to come. Plus, there’s a surprise in this week’s UK gaming charts as an MMORPG that is several years old enters the top 10. Find all of that below in this week’s MMO Money.

 

China’s Freeze on New Games May Continue Another 4-6 Months

There’s more bad news this week for Tencent and in fact, any game company hoping to break into the Chinese games market from outside of China. It looks as though the government mandated freeze on new games may continue another 4-6 months. It began in March as the government announced they would be implementing new procedures and systems for games entering their market but these things take time to create. In the meantime, there has been a massive reduction in the number of new foreign made games released in China. Part of the reason they’ve cited for not approving new games has been a recommendation from the Ministry of Education who suggest that limiting games and the amount of time young people can play them may reduce child myopia. This, despite there being no scientific proof that looking at a screen all day causes myopia.

So far this hasn’t had a massive impact on larger publishers like Tencent and Netease. Yes, Tencent lost billions in its market value, but it still only amounted to a small percentage of their worth. Larger companies like this will have had permission for games well in advance of their release and they’re still banking on those, but the longer this hold continues the fewer games they will have left to release in China. That lack of growth will end up impacting the bottom line of these companies in a big way. The Chinese market is already starting to feel the effects too, as market growth is down to just 5% from 30% at the same time last year.

Source: GamesIndustry.biz

 

UK Charts

The Elder Scrolls Online

This week The Elder Scrolls Online was the big surprise on the charts. It entered the charts at number 8 ahead of the release of their latest DLC Murkmire. At the same time, GTA V has dropped down a few places to number 6. PUBG was also pushed down to 11 from 9. Ultimately, Spider-Man managed to keep the number one spot for another week, which isn’t surprising at all given how universally loved it is. Check out the full top 10 below.

This Week Game Last Week
1 Spider-Man 1
2 Shadow of the Tomb Raider New Entry
3 NBA 2K19 New Entry
4 Crash Bandicoot: N.Sane Trilogy 5
5 Mario Kart 8: Deluxe 7
6 Grand Theft Auto V 3
7 F1 2018 4
8 The Elder Scrolls Online New Entry
9 LEGO The Incredibles 10
10 Super Mario Odyssey 15

 

Lootboxes

Just when it seemed like we might be able to stop talking about lootboxes because news was slowing to a complete standstill on that front, it jumps back up to be the center of attention again. Since the last MMO Money was released, we’ve had three different stories coming from Europe about lootboxes.

The first one is actually a continuation from last week. Belgium has officially started criminal investigations into EA’s noncompliance with the country’s gambling laws. EA has continued to maintain that lootboxes aren’t gambling, which seems like a pretty massive gamble on EA’s part. We’ll just have to wait and see how things turn out in Belgium.

Just a couple of days later researchers in the UK identified a link between lootboxes and gambling. They surveyed adults playing 10 major games with lootboxes and found there is an important relationship between problem gambling and the use of lootboxes. The more severe a participant’s gambling problem, the more money they spent on lootboxes. They also go on to say the following:

“However, regardless of the direction of causality, the games industry faces a crisis of conscience. Industry bodies such as the ESRB can no longer claim that there is little evidence of a link between problem gambling and loot box use. We call on individual companies within the games industry to remove loot boxes from their products. When companies include loot boxes in their games, our results suggest that they are either profiting from problem gambling or causing problem gambling. Loot boxes have no place in video gaming culture. We also follow Drummond and Sauer in recommending that ratings agencies incorporate additional parental advisories into games that feature loot boxes. We recommend that games with loot boxes are restricted to players of legal gambling age. Given the severity of the link seen here we also strongly recommend that relevant authorities restrict access to loot boxes as if they were a form of gambling.”

Your move EA.

Finally, 15 member nations of the 2018 Gambling Regulators European Forum signed a declaration in which they expressed concern over third-party game related betting and skin-gambling sites, as well as the potential for lootbox models to bleed over into legitimate gambling. This is mostly a declaration stating that they intend to begin investigating lootbox regulation. The declaration was signed by the 15 nations that take part in the forum, which are Austria, Czech Republic, France, Gibraltar, Ireland, Isle of Man, Jersey, Latvia, Malta, The Netherlands, Norway, Poland, Portugal, Spain, Washington State, and the UK. Finland also joined in the signing of this declaration, though they aren’t involved in the forum. This could represent a major shift in lootbox regulation just as it seemed like the whole issue was dying out. It’s going to be interesting watching this story develop over the coming months, and could finally mean the big change so many consumers have been hoping for. Everyone cross your fingers!

And no, I don’t know why the United States has a representative on the Gambling Regulators European Forum, I’m still trying to work that out myself.

Source: Nieuwsblad.be, Loot Box Spending in Video Games is Linked to Problem Gambling Severity by David Zendle and Paul Cairns, UK Gambling Commission

 

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Global Gambling Regulators Join Forces to Fight Loot Boxes

15 European gambling regulation bodies and one from Washington state in the US are joining forces to attack the more predatory aspects of loot boxes head-on. This new gambling regulation group will try to combat both third-party gambling operations tied to games as well as loot box monetization practices.

gambling regulation group

According to statements made during the 2018 Gambling Regulators European Forum, this new group’s mission is twofold, with plans to address “unlicensed third-party websites offering illegal gambling linked to popular video games” and ensuring that gaming loot boxes themselves “do not constitute gambling under national laws.”

Based on statements made by UK Gambling Commission chief executive Neil McArthur, the motivating force behind these new measures is the protection of children. “We encourage video games companies to work with their gambling regulators and take action now to address those concerns to make sure that consumers, and particularly children, are protected,” said McArthur.

It does bear noting that the joint effort does not expressly outline what sorts of measures will be taken against these loot box-related practices. That said, the international effort is a significant one considering countries and states in the US have been acting independently up to this point.

Our Thoughts

While words are indeed vapor, the fact that several countries are attempting to put together at least a unified front against loot boxes definitely is heartening. It’s also interesting to note that countries that seemed previously dismissive of the issue appear to be doing an about face. Still, it will likely be some time before we see any tangible results from this new move.

Source: Eurogamer

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MMO Money: Mobile Revenue is Breaking Records

Quarterly report season, it’s exciting and a little bit brain melting. In between it all we’ve got other business news to talk about too including esports betting and more lootbox drama. We also get a real-world example of what can happen to a company’s stock when an embargo is broken and false information is released. There’s one theme that runs throughout this article, mobile revenue is breaking records all over the place. There’s a lot of information to digest in this week’s MMO Money so grab a drink, maybe a snack too and sit back for a wild ride. It all ends with more lootbox talk from Begium, Guild Wars 2’s game director, and everyone’s favorite…EA.

 

PUBG Mobile Revenue Only 1/3 Fornite iOS Revenue

Mobile Revenue is Breaking Records

While PUBG mobile and Fortnite iOS came onto the scene at roughly the same time back in March, PUBG has only started to monetize in the last week. The revenue for that first week isn’t amazing. In fact, it’s one third the revenue Fortnite got in its first week being on iOS only. For those who don’t know, PUBG is available on both Android and iOS. Fortnite generated 3.7 million dollars its first week on mobile compared to PUBG which comes in around $1 million.

The report from Sensor Tower also states that Fortnite beat out PUBG with fewer players, 3.7 million downloads vs 22 million. But it doesn’t show how many of those 22 million downloads since launch are still active PUBG players, so this isn’t really a fair comparison to make. The 3.7 million Fortnite players would have all been active at some point in that week simply because it was the very first week, and not a couple of months later. Randy Nelson, Head of Mobile Insights at Sensor Tower attributes the differences to the means of monetization. “There’s also the possibility that the way Epic Games has structured its purchases may be giving Fortnite a leg up on its biggest competitor,” he said. “It offers limited-time costumes and set daily items that players can purchase outright, as opposed PUBG Mobile’s primary use of loot boxes that produce random (and often duplicate) items when opened by players.”

 

Activision-Blizzard Q1

They’re winning all of the money. End of story.

Overwatch Retribution Event - McCree and Reaper

Kidding…well sort of. They really are winning all the money. Activision-Blizzard had a net revenue of $1.97 billion for Q1, that’s up from $1.73 billion for Q1 2017. Net revenue from digital channels were at an all-time quarterly record of $1.46 billion. In Q1, Activision Blizzard had 374 million monthly active users, 38 million of those coming from Blizzard games. Preorders for WoW’s Battle for Azeroth expansion are ahead of where they had originally forecast.

The Overwatch League has strong viewership globally, reaching millions of people every week. As a result of the league and the upcoming playoffs, this summer there is increased engagement with the franchise. This means more people are playing and watching for longer than previously.

On the mobile side of things, King has had its highest quarterly net bookings in history. That’s money made from merchandising, products sold, licensing fees, and so on. This quarter King also had 2 of the top 10 highest-grossing titles in US mobile app stores for the 18th quarter in a row.

Generally speaking, things are great for Activision-Blizzard, so much so that they’re raising their outlook for the full year.

 

German Mobile Game Revenue Seeing Explosive Growth

Thanks to the many articles we’ve done covering the 2017 games business scene we know that mobile is still growing in a massive way and is already really dominating the gaming industry. But there’s one market in particular that is seeing massive, unexpected growth: Germany.

The German Games Industry Association reported on data from market research company GfK that in 2017, mobile gaming revenue grew faster than all of the German gaming market. Mobile gaming sales rose 21% versus the overall market which saw only 15%. Most of the revenue came from in-app purchases which totaled €481 million ($569 million). Just to put all of this in perspective, in-app purchases have more than doubled since 2014. It also doesn’t look like things are going to slow down any time soon. What this does show is that Germans are a fantastic audience for mobile games, unlike most of Europe who seem to prefer to keep a tight hold on their wallets.

 

Want to learn more about the games industry in 2017 check out these articles:

2017 Online Games Financial Review
2017 Games Industry by the Numbers
2017 Games Industry Revenue

EA Celebrating Record Year

It’s good news for EA, despite all the very public lockbox drama they had throughout the last year. Game sales are actually down, but live services are picking up the slack and now make up 40% of the publisher’s income. For the full year, EA’s net revenue was up 6.2% to $5.15 billion. But the news that most people were really hoping to hear was about Anthem and EA did not disappoint, saying that Anthem is set to ship in the last month of the last quarter of the year, that gives it a launch date in March 2019. During the call, they also talked a bit about lockboxes, but we’ll go into more detail on that in the section dedicated to all things lootbox.

 

Dow Jones Reporting Problem

Dow Jones News Service broke embargo and false information was released ahead of Activision-Blizzard’s quarterly report call. This information caused Activision-Blizzard’s stock to tumble, as well as stock for EA and Take-Two. Activision-Blizzard suffered a 6.3% drop, but within a couple of hours the correct information was published and in the end, Activision-Blizzard closed down 2.3%. Afterward, Dow Jones issued a statement saying, “We regret our error as well as inadvertently breaking the embargo. We have issued a correction and are reviewing our processes.”

 

Tencent Q1

Have you had enough with all the good news yet? Well here’s some more for you. Tencent is reporting a 48% increase in revenue year on year. Most of this has been driven by mobile games and social platforms. Total revenue for the quarter was $11.69 billion with operating profit at $4.88 billion. Smartphone game revenue increased 68%. This includes both mobile games and social games on their social media platforms like QQ, which has 805.5 million active users. Facebook is at 2.2 billion, just in case you’re wondering.

On the PC gaming front, revenue remained fairly flat year on year. But with new titles expected in the coming months, Tencent has said this will change. The company also attributes the lack of significant revenue increase on more and more people making the transition to mobile gaming. Tencent is going to be responsible for releasing PUBG and Fortnite to China, assuming they get government approval. They’re also going to publish Ubisoft mobile and PC games in China. So, the future is looking bright for this monster of a company.

 

Boss Key Saga

By now you’ve almost certainly heard about the saga of Boss Key. The company shut down this week just a month after putting a new game up on Steam Early Access. If you haven’t heard all of the drama, or you haven’t seen the concept art from the games they never got to make there’s an entire article on the Boss Key saga.

 

Pearl Abyss Q1

Pearl Abyss had a record first quarter thanks to mobile games. Are you starting to see the same pattern we are? Net profits are up a massive 82.9% compared with the same period last year. Much of their success is thanks to releasing Black Desert Mobile in Korea. North America and Europe account for 56% of Black Desert Online’s game sales. Coming up, the company is working on MMOFPS Project K, casual mobile MMO Project V, and Black Desert Mobile is going to expand to more regions of the world. You can expect it to reach the West sometime next year.

 

Kakao IPO

Black Desert Online

Speaking of Black Desert Online’s performance, we need to talk about Kakao Games, the publisher of BDO in the west. They’re preparing an IPO on the KOSDAQ in Korea. If it passes the screening required, it will most likely go public by the end of this year. According to Samsung Securities, Kakao is worth an estimated $1.4 billion. In addition to BDO, they’re also responsible for publishing PUBG in Korea and developing mobile games.

 

NCSoft Q1

All of NCSoft’s games are down this quarter with the exception of Aion. Guild Wars 2, the company’s most popular game in the west saw a massive, though entirely expected drop. Q4 2017 is where all the revenue for the game’s last expansion Path of Fire was at, so while there was a 32% drop quarter on quarter, year on year there was actually a 66% increase.

During the investor call, NCSoft admitted that Blade & Soul II for mobile has been delayed until 2019 because it didn’t meet expectations. It has a new team and a redesign which is the same thing they did for Lineage Eternal.

 

Nexon Q1

Finally, we’re at the last quarterly report that has been released as of this moment, Nexon. Much like many of the companies already mentioned in this article, Nexon has a strong showing this quarter with $827 million in revenue. That’s up 21% year on year. One thing that really makes them stand out from other companies is that most of its business, 84% of it in fact, was on PC. The vast majority of Nexon’s earnings came from China (67%) and Korea (22%) while North America accounted for just 4%. Later on this year in the west we can expect to see Durango, Maplestory 2, Maplestory M, and Final Fantasy XI mobile.

 

Esports

You can expect to see esports betting blossom thanks to a ruling by the US Supreme Court. They effectively overturned the 1992 Professional and Amateur Sports Protection Act which banned sports betting in all but a few states. The Supreme Court ruled that PAPSA violated the Tenth Amendment. What does this mean for esports betting? It means we’re going to see it a whole lot more. DraftKings have already got plans to move into betting for sports and esports.

In other esports news Quarterback Inc. has raised 2.5 million dollars in its initial seed funding round. The funding will go towards continued development and growth of Quarterback’s esports gaming platform. The seed round was back by Bitkraft Esports, Crest Capital Ventures, Deep Space Ventures, and UpWest Labs.

 

Lootboxes

Finally, we end this article as we always do with a look at what has been going on around the lootbox controversy in the last two weeks. The biggest news has been that the Belgian Gaming Commission released their full report on the controversy. The report itself is 25 pages long and in English, if you want to give it a read, but the most important thing to take from it is that they recommend criminal prosecution being initiated. Another recommendation that they give is age verification and banning the sale of games featuring loot boxes to minors. Wow.

Gamasutra posted an interview with Guild Wars 2 game director Crystin Cox from GDC that touched on the lootbox controversy that is well worth a read as she had a lot to say. She had a hard time defining what an ethical, non-painful lootbox experience might be like and she also said she hopes the government doesn’t get involved in regulation. Guild Wars 2 was specifically mentioned in a recent article here on MMOGames talking about a site that explains microtransactions for games. Guild Wars 2 has frequently been called out by players for their lootbox practices.

Lastly, as promised there is EA news to talk about. EA is adamant that lootboxes aren’t gambling at all. Why? Well, according to EA CEO Andrew Wilson, it’s because players always get a specified number of items and there’s no way to cash the items out or sell them for currency, real or virtual. This argument is a bit like Santa promising you’ll get 5 things for Christmas and on Christmas morning finding out that 3 of them are lumps of coal, one is a gum wrapper, and the other is reindeer droppings. You still got something though!

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Dutch Gaming Authority Determines Loot Boxes are Gambling

Countries in Europe continue to make connections to loot box monetization schemes and gambling, with the Netherlands making a pretty decisive ruling on the matter. After an investigation of ten different games that feature loot boxes, the Dutch gaming authority not only found what it called “addictive elements”, it even found some games circumvented the country’s gambling laws.

loot box monetization

According to a report translated by Eurogamer, the country’s gaming authority found that, of the ten titles the authority looked at, “all of the loot boxes that were studied could be addictive” and even declared four games violated the Dutch Betting and Gaming Act. The names of those four games were not part of the report, though the assumed offending titles are FIFA 18, Dota 2, PlayerUnknown’s Battlegrounds and Rocket League.

“Loot boxes are similar to gambling games such as slot machines and roulette in terms of design and mechanisms,” stated the authority. “Offering this type of game of chance to Dutch players without a license is prohibited.”

As a result of the group’s findings, demands are being brought to developers and publishers to make changes to in-game loot boxes, including changing visual effects that indicate a sense of “almost winning” and extending the time between opening consecutive boxes. They also want companies to include measures to keep vulnerable groups away from loot boxes or otherwise demonstrate that loot boxes are harmless.

Failure to comply with these demands by June 20th could incur “enforcement action” such as fines or an outright ban.

Our Thoughts

Pretty cut-and-dry sounding to us: either adjust the way loot boxes are presented, or face the consequences. This is definitely a landmark moment in the ongoing gaming loot box saga, and it certainly could pave the way for similar actions by other countries around the world.

Source: De Kansspelautoriteit via Eurogamer

Articles Related to This Story

Germany and Sweden Begin to Investigate Loot Boxes
ESRB Reveals Plans to Include a Loot Box Label for Games
Loot Boxes Return to Star Wars Battlefront II

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Germany and Sweden Begin to Investigate Loot Boxes

Perhaps the initial firestorm has died down, but the heat is most assuredly still there on gaming loot box practices. In addition to moves being made by Hawaii and Belgium, it looks like we can now add Germany and Sweden to the list of governments pushing for legislative regulation of the practice.

gaming loot box practices

In Germany, a study by the University of Hamburg has found that certain gaming business models and industry sales were driven by a small portion of players – or in other words, they earned money via “a typical feature of gambling markets”.

As a result of these findings, it is “conceivable” that loot box practices violate existing regulations meant to protect children and adolescents according to Youth Protection Commissioner Wolfgang Kreißig. In response, publishers could face a blanket ban on releasing games that feature loot boxes. A decision on such a ban is expected to come this March.

Meanwhile in Sweden, Swedish Minister of Civil Affairs Ardalan Shekarabi will be asking authorities to investigate loot box practices to determine if there are enough similarities to constitute gambling.

“We are working to regain control of the gaming market as soon as possible and ensure that Swedish consumer protection rules apply to all actors involved in gaming,” said Shekarabi, who is hoping to have some form of legislation prepared for January 2019.

In spite of this, EA has confirmed during an investor’s call that loot boxes will return to Star Wars Battlefront II – the game that was the catalyst for the loot box conversation – in the coming months. “Digital economies have a place, and we will continue to drive and focus on that,” said EA CEO Andrew Wilson during the call. “The teams are working on how that context will apply to the Battlefront universe, but more on that in the months to come.”

Wilson also refuted reports that loot boxes were yanked from the game at the instruction of Disney, telling investors that the company has “a tremendous relationship with Disney” and that “you shouldn’t believe everything you read in the press.”

Our Thoughts

Don’t stop the pressure, folks! Loot boxes can see sweet, sweet death if we want it!

Sources: Welt via GamesIndustry, P3 News via VG247, VG247

Articles Related to This Story

Hawaii’s Chris Lee Shares a New Video on Loot Box Legislation
Play of the Fortnight: Overwatch Loot Boxes – Are They Bad?
Governments Strike Back Against Battlefront 2 Loot Boxes

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Belgium is Investigating Loot Crate Gambling

The loot crate gambling conversation is not going away, much to the possible chagrin of certain publishers. Belgium’s gaming commission is now targeting the practice as a possible gambling measure according to VTM News.

loot crate gambling

The report states that loot boxes in both Star Wars Battlefront 2 and Overwatch are being investigated by the Belgian gaming commission as a form of gambling due to the fact that players have to purchase a crate in order to see what is inside. According to commission chairman Peter Naessens, loot boxes could be a game of chance and, if they provide any form of advantage, must fall under the classification of gambling and thus have a permit from the Gaming Commission.

EA issued a statement to GameSpot about the matter, saying that the Battlefront 2 loot crates do not confer any advantages. “A player’s ability to succeed in the game is not dependent on purchasing crates. Players can also earn crates through playing the game and not spending any money at all,” reads their statement.

Blizzard’s Mike Morhaime has said in an interview earlier this month that Overwatch’s loot crates avoid the “pay for power” trap and so should be out of the conversation. “I think another element, in terms of the gambling question…there’s an element of converting back [loot crate items] into real-world value. I think that’s a critical element, and that element does not exist in Overwatch loot crates.”

In related loot crate gambling news, an online petition is asking the ESRB to consider loot crate mechanics as a form of gambling. “Just because you get a small compensation, in the end, it doesn’t mean that this is not real gambling,” reads the petition. “The solution to this problem would be, that ESRB declares their respective ‘Adults only’ rating for video games in which you can gamble.”

The petition currently has over 34,000 signatures as of this writing.

Our Thoughts

There is still a lot to mull over still with the matter of loot crates. We’ve already approached this question in Overwatch, but there’s certainly something to be said for loot crate practices in other games like Star Wars Battlefront 2. Where do you stand on the matter? Does getting anything from a loot crate absolve it from the definition of gambling, or is any randomized item earned with real money fall under the definition for you?

Sources: VTM News via Engadget, PCGamesN, Change.org, Game Informer

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Play of the Fortnight: Overwatch Loot Boxes – Are They Bad?
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The ESRB Says Loot Boxes Are Not Gambling

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Loot Box Petition Forces UK Government Response

An online loot box petition asking that gambling laws adapt to include in-game lockboxes as gambling is expected to receive an official UK government response. The petition filed to the UK Parliament website has achieved the minimum 10k signatures required to receive an official response from Parliament.

loot box petition

The petition argues that loot boxes in games “are essentially gambling of which are targeted at children and vulnerable adults” and that they “copy many traits to make them as addictive” as what is considered “real” gambling.

In addition to the petition, Labour MP Daniel Zeichner has filed two questions to Karen Bradley, Secretary of State for Digital, Culture, Media and Sport. The questions ask what steps are being planned to protect “vulnerable adults and children from illegal gambling, in-game gambling and loot boxes within computer games”, along with an assessment on the effectiveness of regulations by the Isle of Man against the practice and whether those same protections have been discussed for use in the UK proper.

Currently, the Gambling Commission does not believe that loot boxes fall under the definition of gambling due to the items earned holding no real-world value. The response echoes a statement from the ESRB regarding the practice, which equates the opening of in-game loot boxes to opening a pack of cards for a CCG.

According to the petition website, the UK government has three days to issue a response. If the petition achieves 100k signatures, the matter could be brought up for debate in Parliament. As of this writing, the petition has just over 11k signatures and has a deadline of April 4th, 2018.

Our Thoughts

It would appear that loot box practices are finally getting on the nerves of enough people to demand some level of pushback, at least in the UK. It’s easy to assume that the official response will come off as dismissive, but if nothing else this appears to have raised the volume of discussion about the matter across the gaming world. Ideally, this will lead to changes in loot box practices, but only time will tell.

Source: Eurogamer

Articles Related to This Story

The ESRB Says Loot Boxes Are Not Gambling
Destiny 2 Loot Boxes Include Powerful Items
Overwatch Makes Changes to Loot Boxes in PTR Update

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