The Macro Problem of Microtransactions: The Self-Regulatory Challenges of Video Game Loot Boxes

Business Horizons, Forthcoming

28 Pages Posted: 14 Jan 2019

See all articles by Matthew McCaffrey

Matthew McCaffrey

University of Manchester - Manchester Business School

Date Written: 2019

Abstract

The video game industry has ignited a global controversy surrounding microtransactions in gaming, especially the use of “loot boxes” — randomized rewards with potential real-world value. Consumers and legislators are calling for the regulation of these revenue models on the grounds that they are unfair, predatory, or types of gambling. This paper examines the controversy from a management perspective. It first considers current regulatory responses to the controversy and what they mean for business practice. It then explains ongoing industry-level and firm-level attempts to self-regulate to placate consumers and governments. These tactics highlight a wide range of broader strategies that game developers and other stakeholders can pursue to improve customer relations and more publicly signal their commitment to self-regulation and to avoiding consumer harm. Yet they can also apply more broadly than video games, especially to firms that offer controversial products or services that do not yet fit within current regulatory frameworks.

Keywords: Video Games, Microtransactions, Loot Boxes, Government Regulation, Self-Regulation, Electronic Arts

JEL Classification: I18, K20, L38, L82, M38, Z11, Z18

Suggested Citation

McCaffrey, Matthew, The Macro Problem of Microtransactions: The Self-Regulatory Challenges of Video Game Loot Boxes (2019). Business Horizons, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3309612

Matthew McCaffrey (Contact Author)

University of Manchester - Manchester Business School ( email )

United Kingdom

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