BY OLIVER TASLIC AND ROBERT CYRAN

The $130 billion video game industry looks set to be a major battleground in 2020. Microsoft and Sony will release their first new consoles in years. Alphabet’s Google has just released Stadia, its cloud-based platform – and along with Apple wants to be the Netflix of online play. Meanwhile developers like Activision Blizzard have a strong hand. But the way the industry is growing will attract increasing regulatory scrutiny.

Amazon and other behemoths have either launched or are planning subscription packages offering monthly access to a slew of games, in the hope that a mix of exclusive content and a wide selection persuades players to pay up. People tend to play a few games a lot, though, rather than a wide range of games a few times. Popular ones like Fortnite have become places to hang out online with friends. The gaming comes second. This acts as a coalescing force around a few titles and gives the developers of popular games, like China’s Tencent, Activision and privately held Epic Games, a strong hand.

While these players duke it out for market share, though, their strongest opponent is limbering up. An important source of developers’ revenue are so-called loot boxes – digital packages of random items that can be purchased using real money. They give players the chance to win desirable digital items, and gaming companies a stream of high-margin income. In Electronic Arts’ Ultimate Team mode, for example, gamers open randomised “packs” in the hope of acquiring rare sports players. It accounted for 28% of the company’s net revenue in the most recent financial year.

But success brings scrutiny. Critics argue there’s a correlation between loot-box use and gambling addiction. Worse, children can easily access games featuring loot boxes, since many of them are approved for youngsters and age verification is typically weak.

Microsoft, Sony and Nintendo, which dominate the console market, will from 2020 make it mandatory for developers to show the probability of winning certain types of items from loot boxes. Apple introduced that two years ago, yet loot boxes remain in many high-grossing games in its App Store. Developers will be hoping that self-regulation is enough. But the bigger gaming gets, the sharper the scrutiny will become.

First published Dec. 23, 2019

IMAGE: REUTERS/Wolfgang Rattay