Video game maker Electronic Arts is facing a rising tide of regulatory action from countries around the world, the end result of which could end a practice that nets EA billions of dollars annually.
The issue at hand revolves around “loot boxes”: in-game products that gamers purchase with the chance of receiving game elements that will give them a better chance at winning. In the past few months, the US, Canada, the UK, India, and many other governments have all launched probes into this practice, struggling to come up with a framework to understand and regulate it. The growing international consensus is that loot boxes purchased with in-game currency should be understood as gambling, and controlled as such.
It seems a logical comparison. In FIFA 21, gamers can buy ‘Packs’ of players’ cards in order to gain use of those players in competitive online matches. The chances of ‘packing’ a great player — like, say, Cristiano Ronaldo — are very slim, so players are incentivized to buy plenty and buy often so their chances of getting a Ronaldo card increase. They do this with an in-game currency called FIFA Points, which is purchased with real money.
Gamers can, and have, put thousands of dollars into this system without winning cards of any real value relative to the money they're spending. The results for EA’s bottom line are ridiculous, with the amount spent on in-game purchases tripling the amount spent on the video game itself. In May, Bleacher Report released a story that looked into FIFA Ultimate Team buying habits. They found that in a recent tournament, gamers were using teams with a real-world value of approximately $27,000.
EA Net Revenue from Ultimate Team— Daniel Ahmad (@ZhugeEX) May 20, 2020
FY 2020: $1.49bn
FY 2019: $1.37bn
FY 2018: $1.18bn
FY 2017: $775m
FY 2016: $660m
FY 2015: $587m
Examples of the deleterious effect of this business model abound. Every few months, the press unearths another story of a child who got hold of a parent’s credit card only to spend thousands buying loot boxes. More recently, a 32-year-old FIFA player, making use of a UK data collection law, was able to take a look at data EA had collected about his gaming sessions. He was shocked to find he spent more than $10,000 on FIFA Points in a few years. In the final tally, the man said the points “weren’t worth it.”
How we got here
In the past year, Belgium and The Netherlands have taken more drastic steps than anyone against EA, paving the way for other nations to follow suit. In January 2019, Belgium forced EA to stop the sale of FIFA Points in their country altogether, while the Dutch government in October 2020 announced its intent to fine EA €250,000 a week as long as the packs are available in the game. Since then, EA has already amassed €5 million in fines in The Netherlands, which the company is in the process of appealing.
The problem doesn’t stop with FIFA. Many of EA’s franchises are based on almost an entirely loot box-based post-launch monetization system. The “Ultimate Teams” game mode exists across all of EA’s sports franchises, and other marquee EA games like the Star Wars Battlefront series have relied on loot boxes to boost profit margins.
While EA hopes that the problem will confine itself to the Dutch and Belgian governments, other countries seem ready to fall, even in EA’s biggest markets. A Greenstone poll on December 10 showed that one-third of UK MPs want greater games regulations, and two-thirds are concerned about loot boxes. In the Northern District of California, EA is facing a class-action lawsuit alleging that EA “relies on creating addictive behaviors in consumers to generate huge revenues” and that EA’s Ultimate Team Packs “are predatory and designed to entice gamers to gamble.” A situation where either of these nations strengthens their regulations would be a huge hit to EA’s $38 billion market cap.
The necessary addition to any story about the business of gaming is how things are going in the community. In FIFAWORLD — the community of gamers and content creators that make FIFA into more than just a hobby — people seem generally excited by the prospect of regulation. As FIFA Points have become more and more integral to FIFA with each title release, the system has become more unpopular with gamers, especially those looking for a more casual experience. Claims that one can “Pay to Win” are louder and ever more frequent.
The same claim is made about a good deal of EA titles, which may be part of the reason the company is bleeding its support on social media. According to Thinknum data, EA’s “Like” count is way down from its 2017 high of 4.66 million, now hovering around 4.53 million.
This downward trend means not only that social media users aren’t engaging with the brand the way they used to — it means they're making the active decision to hit the ‘unfollow’ button. For a gaming company, this doesn’t bode well. The gaming community ?— with its discerning fans, brand-loyal customers, and ever-increasing cultural relevance — is a dangerous one to disappoint. So, whether regulation comes or not, EA might consider a business model that doesn’t dry up gamer enthusiasm quite as much.
About the Data:
Thinknum tracks companies using the information they post online, jobs, social and web traffic, product sales, and app ratings, and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.