“Well, we’ll just do this for the rest of the world.”
The European Commission has published its proposed Digital Fairness Act, which has the potential to change how video games are monetised – worldwide – forever. A draft of the Act was leaked yesterday and what’s been published today appears to be, to my eye, the same, though there’s now also a mini-site accompanying it that explores the Act in more detail and uses more understandable language.
And note that while the Digital Fairness Act isn’t about video games exclusively – it’s much broader than that – it does mention video games specifically, highlighting both their increased importance to society now, and that policy-shaping bodies like the European Commission are prepared to take them seriously.
The Digital Fairness Act is set to become European law, probably sometime between 2028 and 2029, once everyone’s discussed it and made whatever amendments they’re going to make to it. And at that point, breaching the regulations will come with potentially steep fines (up to six percent of a company’s worldwide annual turnover, or up to €2m where an annual turnover isn’t available).
The biggest things in the Digital Fairness Act relating to video games are regulations around loot boxes (sometimes referred to as “variable reward systems” or systems with “uncertainty-based rewards”) and virtual currencies, particularly with regard to “minors” – anyone under 18 years old.
The Act stipulates paid-for virtual currencies must be disabled in a game by default for minors, then activated by parental and guardian approval, and that paid loot boxes “shall not” be offered to minors at all. Moreover, games must provide a way for everyone to disable paid loot boxes completely, and clearly show the probability of receiving items from them.
It’s these changes that have the potential to overhaul how loot boxes work everywhere going forwards, and whether companies use them at all. To understand why, I talked to games business expert George Osborn, who runs the excellent Video Games Industry Memo newsletter, and who’s been following the Act closely.
“EA might be looking at it and going, ‘This isn’t great news for [EA Sports FC] Ultimate Team because people can switch it off'” -George Osborn
Osborn sees this as a “really big” regulatory change and believes that companies like EA, Xbox, Activision Blizzard, PlayStation, and other big gaming companies, both in console gaming and mobile gaming, will be “really concerned” by this. That’s partly because a lot of these things being outlined are not necessarily easy to implement.
For starters, a company now needs a way to work out who’s a minor playing its game and who isn’t, and it needs to provide “a master switch”, as Osborn calls it, for people to switch paid loot boxes off with. These things require not just design changes but perhaps entire alterations to a game’s approach; it means theoretically being able to turn paid card packs off in EA Sports FC Ultimate Team, example, and their not being able to be sold to minors at all.
“EA might be looking at it and going, ‘This isn’t great news for [EA Sports FC] Ultimate Team because people can switch it off,'” Osborn added, “but Ultimate Team is at least hived off in a box.” EA could potentially age-gate Ultimate team as a mode and deal with it that way. But what if you’re a card game where random paid rewards are central to your premise? “What that now means is you’re possibly going to have to find a way to just completely turn that off for users, and it is very difficult to do that when they’re embedded into the design of the game.”
The virtual currency issue is potentially easier to tackle because existing parental controls can control spending, so those tools could expand to cover it. But another proposal brought forward in the Digital Fairness Act states that a game must clearly show, in a region’s local currency, how much an item costs when bought with virtual currency, which adds another layer of complication when considering different currencies and people moving between countries with their devices.
“There’s going to be a strong likelihood that some of the design features will remain within the games because it’s easiest to work off a single universal version” -George Osborn
These changes require investment and thought, and they sit alongside broader changes that affect things like subscription services, such as Xbox Live and PlayStation Plus and Nintendo Online, to make them easier to cancel and less able to obfuscate prices and hidden extras. There’s even a stipulation that people be able to talk to a human in customer service rather than a chat bot. There are more technicalities for game-making companies to consider.
But why should people outside of the European Union care? These rules are only enforceable there. Because: if a company is selling a game into the European Union, which I expect every game company will want to do – “you don’t just want to rule out a market of a few hundred million consumers; it’s not a light thing to cut that out”, Osborn says – then it will have to comply by these rules. And if it does, how many different versions of a game will it be prepared to make?
Think about the recent global move towards all devices using USB-C chargers: that was a movement started by a European Commission ruling. Think of the new Switch 2s with removable battery packs: that was another change instigated by the European Commission. “Because that market is big enough, you design for it,” Obsorn says, “and then your logic becomes, ‘Well, we’ll just do this for the rest of the world.’ You’re not going to produce one with the battery sealed in and the battery without. You’re just going to find one way to produce things.
“That’s likely to be the biggest impact in the UK and the rest of the world,” he adds, “as people adjust the designs of their games to follow these rules. There’s going to be a strong likelihood that some of the design features will remain within the games because it’s easiest to work off a single universal version.”
The other thing, which Osborn thinks is more important, is that policy makers around the world are “desperate” for solutions to problems and don’t know where to look for them. “So if someone comes up with an answer to a question that’s been annoying everybody, like ‘what do we do about loot boxes?’,” he says, “and it provides a particularly strong – or perceived to be effective – solution, it’ll be copied. And it’ll be copied because a big regulatory bloc like the European Union, which is known for protecting consumers particularly well, has decided this is a good thing. People trust it.”
“And more broadly what this marks is a much wider crackdown on the way that video games monetise their players” -George Osborn
Then, because companies have already developed a way to comply with those rules, it becomes difficult for them to argue that they can’t do it elsewhere. “Because those regulators go, ‘Well why not?'” Osborn says. “Because if you build the solution in one place, you can build it elsewhere.”
Whether or not this will be the end of loot boxes as we know them, Osborn isn’t sure. “My guess would be this will continue to push loot boxes into the fringes of video game monetisation. It was already starting to happen,” he says. “I know some really high-profile games have them very prominently, which makes people feel like is there really any change here? But I know a lot of companies behind the scenes started to quietly move away from them in the last few years when they were a reputational problem. If you move to a world in which you’re meant to have a massive off-switch in your game for them, that’s a world in which fewer companies will go in that direction.”
Some will stick with it. “If you’re an EA, it’s going to be very difficult to move away from the model that has supported your business for years,” Osborn says. And card-based deck-building games will struggle to avoid it. “But overall, we’re going to see a shift away from it,” he adds. “And more broadly what this marks is a much wider crackdown on the way that video games monetise their players. As you start to see that crackdown come into force, game developers are going to have to think much more carefully about how the design decisions they make don’t just interact with ethical practices, but actually with legal practices too.”
