The New Trends Shaping the Loot Box Landscape

March 2021

Telecoms & Connectivity

James Moar

Research Analyst

Loot boxes originated from loot systems in MMORPG (massively multiplayer online role-playing games) in the Asian market, and from the monetisation of F2P mobile gaming. As players in Asian countries often did not have the funds to purchase full-cost titles, developers began to introduce loot boxes as a method to guarantee monetisation from a game that would otherwise not generate revenue from significant base sales.

Due to fears of loot boxes links to gambling addiction, and children being exposed to these issues and spending significant sums on loot boxes, national governments have begun moves to scrutinise loot boxes and, in some cases, moved to regulate them. Belgium, the Netherlands, and China either classified them as gambling or have legislated to restrict them. In the UK and the US, bills and legislation have been debated, but without currently being passed into law. In response to criticism and governmental pressure, many publishers and developers have moved to ‘self-regulate’ their practices, with titles such as Call of Duty removing loot boxes from the latest versions of their games and Heroes of the Storm no longer offering the option to buy loot boxes with real money.

By 2017, loot box usage was commonplace in most high-profile video games, but the backlash over its usage in games like Star Wars: Battlefront II and increased governmental scrutiny have seen the use of loot boxes change in recent years. Whilst still used extensively in mobile games and in many high-profile titles such as Overwatch, Apex Legends, Call of Duty, FIFA, and Destiny 2, the implementation of loot boxes in new games has slowed and evolved. The recent changes in the usage of loot boxes can be categorised into three main trends.

The first has been a move to cosmetic-only microtransactions. Indeed, to both counter criticism of loot boxes being used as ‘pay-to-win’ mechanisms and as an answer to the increased governmental scrutiny of their usage, there has been a growing move in recent years away from loot box usage, to a focus on purely cosmetic microtransactions. This trend has been enjoying growing popularity and has even been seen in the release of new titles, such as Riot Games’ Valorant.
 
Another important trend has been the industry’s greater focus on transparency. As national governments have focused on the link between loot boxes and gambling and their impact on children, the games industry has shifted to provide more transparency to the player regarding the contents of loot boxes.  The shift toward greater transparency has also been evident in the use of different loot box mechanics. In Fortnite Save the World, Epic Games shifted to transparent loot boxes that removed the element of randomness and showed players every item they would receive in a paid loot box before opening it.

And, finally, another important trend that has been registered recently is the adoption of battle pass monetisation and removal of loot boxes from some games. While many games still use loot box mechanics, new approaches to monetisation have been developed, particularly the use of challenge-based battle passes popularised by Fortnite Battle Royale in 2018 and adopted in other popular games. Battle passes provide a tiered approach to providing in-game customisation options that are all visible at the start, to avoid the chance element of the loot box approach, and require the player to complete various challenges to unlock these tiers to gain the rewards.

Even so, we expect the revenue from loot boxes used in video games will exceed $20 billion by 2025, up from an estimated $15 billion in 2020. However, it must be noted that this growth is slower than the sector has previously experienced, because we expect both consumer fatigue with loot boxes and legislative constraints to limit the market in the coming years.