Previously on Game Theory: “Get all the satisfaction of putting together mind-blowing theories of your own with — Theory Crates. An exciting new feature that lets all you loyal theorists feel the pride and accomplishment of concocting a new theory out of literally nothing! [echoes] I’ve made a severe and continuous lapse in my judgment. I’m simply here to apologize. I’ve heard your concerns about Theory Crates potentially offering theorists an unfair advantage when crafting fun, mind-blowing videos for YouTube, [inhales] so I have decided to Logan Paul: put the cameras down Matpat: –be purchased anymore. I’d like to apologize to the– L & M: — Internet. M: I’d like to apologize to anyone who’s — L: — seen the video. M: I’d like to apologize to anyone — L: — who has been affected or touched by — M: — loot crates, or loot boxes, or any loot containing vesels of any kind. I’m disappointed in myself. L: And I promise to be better — I will be better. M: At least until you guys are less mad at me, at which point I will sneak Theory Crates back into circulation just to show you how much I respect you as consumers. Both: Thank you. [intro music] Hello Internet! Welcome to Game Theory, where earlier this week, We started a deep exploration into the science of loot boxes. With all the drama they caused late in 2017, it seems important to get our facts straight: Are loot boxes truly evil, or are they just an obnoxious business practice? [Annoying Orange’s laughter] Are game makers actually manipulating us into gambling our money away? So far, we’ve looked at some general tricks both casinos and loot boxes used to hack our brains into spending more money. But today, I’m gonna take it one step further. Because these game makers, casinos, *and* game developers alike are targeting not just you as a human, but you as an individual. Watching when you — you — specifically play and *how* you specifically play to capture you when you’re most susceptible. Sound a bit too Orwellian? Like a Big Brother is watching? Hah, well, as you’ll see it’s not that far off. Are these practices wrong? Are they illegal? I’ll leave that for you to judge. But what’s happening is very, *very* real and targeted directly at *you*. So it’s essential that you, and all the rest of gamers, be made aware of it. So let’s step up to the table, roll the dice, and hope we don’t crap out. When it comes to tracking individual player habits, the casino business has been doing it for *decades*. The Caesars Entertainment Corporation, formerly Harrah’s Entertainment, introduced their Total Rewards card back in 1997. A membership card that allowed casino guests to earn extra perks by gambling. The program provides a nice incentive to keep players coming back for more. The more you spend, the more rewards you get for food, shopping, and alcohol at the casino. On the surface, it doesn’t seem like that big of a deal, but that one card turned Harrah’s into one of the most profitable casino chains in the world. Allowing them to buy out the Las Vegas strip’s iconic Caesar’s Palace in 2005. Because here’s the thing — Giving *you* as a player extra benefits wasn’t the goal of the card. Spoiler alert for life, guys. It’s *never* the goal to give you extra benefits. No, the real secret behind the Total Rewards card was that it allowed the casino to track each player’s behaviour every time they visited. Because it required players to swipe into each machine they went to, swipe out when they were ready to leave, and swipe into whatever machine they headed to next, the casino was able to start tracking individual players movements and habits. With enough time, they were able to figure out what a person’s favorite games were right down to whether they prefer playing slots with The Wizard of Oz, Britney Spears, or Big Bang Theory. Even the exact amount of money they’re willing to lose before they decide to call it quits. Knowing this, Caesars’ casinos were able to not only structure their casino layout to optimize for the games that tended to be played together, making sure that players were always within arm’s length of their favorite slots, But more importantly, they were able to pinpoint exactly when a gambler was about to reach their breaking point, and then send over a lady in a sparkly bikini to offer him a free meal, a free drink, tickets to a show… By doing this, they made their guests play longer and leave feeling more positive about the time they spent at the casino. Even if they lost hundreds of dollars. Which means that they were much more likely to return, and more importantly, spend more money. Also the loyalty program added to the sense of sunk costs that we talked about last time. “Well, I’ve dedicated all my time to this one casino. “To start somewhere else would be to lose all those reward points I’ve accumulated . “Might as well stay here.” Because loot box systems aren’t considered gambling, they can do this exact same thing, just even more directly. It’s illegal for a casino to adjust the odds of a slot machine in order to help a losing player, But a video game can change the odds of getting a good drop any moment that they want to. Fire Emblem Heroes gradually increases the odds of getting a five-star hero every time you roll a three- or four-star in its Gacha system. So players are essentially guaranteed to get a good drop, even if it’s not what they specifically wanted, after a string of bad ones. That way they’re still getting rewarded and have a renewed sense of hope right at the point when they might have started to get fed up with the system. It also encourages them to keep spending after a bunch of failed attempts because of those sunk costs. “If I stop now I’ll lose all that progress I’ve made to that good 5-star roll, so I might as well keep spending until I get to that level.” But that’s not all. Game companies can dive even deeper into the specific data that makes you “you” in an attempt to make you more likely to open up your wallets. A mobile development consulting company called Scientific Revenue provides game developers with analytical software that tracks player behavior and then dynamically adjusts the pricing of microtransactions to best match what *you specifically* are willing to spend. On their website, they directly say, quote, “Different people respond to different prices at different times. “So why offer the same prices to everyone? “To maximize revenues, you need sophisticated user profiling “and prices that are tailored to specific users.” End quote. Their sole goal is — “turning players into payers,” M: Or more specifically, as their site says, “Turning free users into paid ones, and keeping more whales.” I didn’t realize that giant sea mammals can manipulate game devices with their fins, but hey, game on, my belugas. Game on. Well it’s certainly scary to see how the company’s whole premise is using data to read our minds in an attempt to get us to spend money, You have to admit — the idea certainly makes sense in theory. Of course people are willing to pay different amounts for something. And when the thing being sold is a digital item that costs the company practically nothing to make, you can choose whatever price people will pay. Never mind the ethics of people paying different amounts for the same exact item. Anyway the long and short of it is that it works. Scientific Revenue boasts a twenty to forty percent boost in in-app purchases for games that use its software. While researching for this episode, I stumbled across a fascinating video by Jim Sterling who did an incredible exposé on the company, so if you want to learn more I’ve linked to it in the [ i ] cards at the top. Check it out. Jim is *excellent* at doing these sorts of things, so I highly recommend watching that. And Scientific Revenue is far from the only one in this business. Kotaku discovered a patent, owned by Activision, that uses player info to push gamers into buying microtransactions and loot boxes. Basically what this tool is able to do is identify items that might interest you as a player, and then match you against other players with more skill who own and use that item. That way, you’re in a match, you see the item, you see how good the other players are with it, And you want to get it for yourself so you too can be as good as those other guys. In short, as games track more and more of your data, and as technology continues to understand gamer behavior better, games are being tuned more and more precisely to get you to spend money. And with a combination of player metrics and psychological sciences working against you, it’s a lot to resist. Even if you’re not typically someone who spends money on games. So, all things told across these two episodes, this is a partial list of everything that is stacked against you. Skinner Box reward models, free trials that get you over your loss aversion and into a state of sunk costs, illusion of control, dynamic odds precisely tuned to *your* play habits, flexible pricing to hit you where you’re willing to pay, and even matchmaking services to get you excited about new items. Oh boy, that’s a lot. But, we have to go back to the underlying question here. Is it gambling? Is it dangerous? As much as it might seem that this is a clear-cut case of companies squeezing us for every last dollar by exploiting our desire to get a rare item out of a random box, there is another side to this story. Like every issue, there’s a lot of nuance to this subject. But as I think we all know, in a world where your thoughts need to be condensed to 280 characters, nuance is a hard sell. It doesn’t get the retweets, but when you actually stop and look at loot crates, they’ve been around for over a hundred years.
[old movie audio] That’s right, meet the original loot boxes: Baseball cards. [normal] Before there were Hearthstone cards, or Magic cards, or practically even Hallmark cards, there were baseball cards. Just like the loot boxes of today, cards started coming in packs shortly after World War II, offering a selection of all your favorite b-ball characters to collect and trade, and it was all Yankee Doodle Dandy and apple pie. But card makers quickly realized that they could get kids — and their parents — to buy more packs of cards if they set up special rewards or incentives in the packs. One of the most famous examples was the Gold Rush of 1992. The Gold *Foil* Rush of 1992. The way it worked was for the manufacturer, Topps, to insert special gold cards into select packs of baseball cards. They were exactly the same as regular cards, but the lettering was gold. Ho ho boy, calm down. It became such a massive craze that the company had to update their packaging to make it tamper resistant. *And* add features to cards to prevent counterfeiting. Realizing what a big hit these rare premium cards were, Topps then came out with a *super* premium set and an *ultra* premium set to keep collectors collecting. Other competitor companies started creating similar gimmicks to get kids to buy more card packs and collect more and more cards with the same players over and over again. Same player, same player, same player– just a special font, a heavier card stock, a shiny gold label. So even if you’ve never touched a video game, if you, or your parents, or your parents’ parents have ever opened a set of baseball cards, They’ve participated in the same psychological phenomena that I’ve been talking about this whole time. From the dopamine anticipation pathways, to the sporadic rewards, to the loss aversion principles. So if this practice has been going on in safe, kid-friendly hobbies for literally a century, can it actually be harmful? Well interestingly enough, shortly after the 1992 Gold Foil craze, the exact same discussions happening now around loot boxes, started happening around baseball cards. The Wall Street Journal came down hard on the principles of card collecting as gambling and lamented its “loss of innocence” back in 1996. In 1999, The New York Times brought the same issue up again, but instead of baseball cards, it was Pokémon cards. claiming that the Pokémon card lottery system was a form of gambling for children. You know the phrase “those who don’t read history are doomed to repeat it”? Well here we are. The argument is cyclical, with a ton of the major toy crazes from the past few decades being ultimately based on some kind of random prize system, or, to some people, gambling. So, how did all these issues shake out in the past? Why is this still an issue nearly thirty years after the first gold foil baseballer hit store shelves? Well, one of the biggest arguments that have kept these issues from moving forward in the past is that there are some genuinely big differences between what we classify as gambling, and what happens with card packs and loot boxes. In a casino, you’re betting money that you’ll win. But if you don’t, you leave the casino with nothing. Your money literally disappears into the casino vault and you get nothing in exchange. Systems like loot boxes though, or Magic cards, or Pokémon cards, or Baseball cards before them, or even those eBay mystery boxes that vloggers have been spending egregious amounts of money on lately — those don’t work like this. In the case of loot boxes, you’re always buying *something*. You never hand your money to Blizzard for a loot box and find that that loot box is empty. That would be what a casino is like: maybe you get something, maybe you don’t. But in this case, you *always* get something. You just don’t know whether it’s the something that you wanted. And where *you* might not want the skins or sprays in the box, for someone else, it might be exactly what they were looking for. There’s no gaming company that’s actually participating in a system where you give something and get nothing. So here’s the deal. Would you rather have loot boxes that give you nothing, and then have the government classify them as gambling and regulate them, Or would you rather just keep them the way they are — unregulated. That seems to be the option that we’re faced with here. *Or* if you do want to call loot boxes as they are today gambling, and then regulate them, where does it stop? You’ll also need to regulate Magic cards, and baseball cards, and by logical extension, bags of Skittles. And if you think that sounds stupid, why? Consider this. I buy a bag of Skittles and expect a certain number of red and purple ones because they’re obviously the best flavors. But instead I always end up with like 70% yellow and orange. I lost the gamble. My loot bag of Skittles gave me a bunch of crap flavors and I am outraged. While that seems like an extreme example, it’s a slippery slope towards any product that involves a random chance. And the lines only get blurrier the further you go. So there you have it. The scientific arguments against loot boxes, and the philosophical rationale for them. Like I said, it’s not an easy debate, but what’s most important is that we *as players* stay aware of the psychology that goes into every game that we download or pick up off the shelf. Let 2018 be the year where we get smarter as players, and educate other gamers on the tactics being used to separate us from our money Knowing and understanding the systems in place to take advantage of our basic psychology helps you to avoid them, and ensures that your in-game decisions are being made by *you*, not by a company manipulating you. But hey, that’s just a theory, a GAME THEORY! Let 2018 begin.