UK Government issues report on loot boxes and "immersive and addictive technologies"

The COVID-19 pandemic has led to significant lifestyle shifts for consumers around the world, many of whom have turned to gaming for much-needed distraction and social connections.

According to a new report released earlier this month by Unity Technologies, there has been an increase of 46% in daily active users of desktop games and 17% increase in mobile gaming this year, probably due to COVID-19 and 'stay at home' requirements. The report focuses on COVID-19’s impact on consumer gaming from January 1, 2020 to mid-May 2020 as compared to the same period in 2019. The report pulls data from  mobile games using Unity’s monetization platform as well as games made with Unity for PC, macOS, Android, and iOS, as well as aggregated data from Unity’s deltaDNA platform. The same report found that:

• Microtransactions have grown, with In-App Purchase (IAP) Revenue growth for mobile games increasing by 24% since the pandemic was declared;
• Mobile gaming ad impressions increased by 57% and ad revenues increased by 59% for the weeks following March 8, 2020 as compared to the timeframe in 2019; and
• Mobile gamers are installing more apps than ever, with the number of installs increasing by 84%

In this context, the UK Government's formal response (the "Response") to the Department for Digital, Culture, Media and Sport (DCMS) Select Committee’s report on Immersive and Addictive Technologies is extremely timely.

Loot boxes and gambling

According to the Report, "the government believes the approach to protecting young people and vulnerable people - and any relevant regulation - should be based on evidence. To guide this approach, it will be important to understand fully the existing research around loot boxes, and how current protections and legislation work in a fast-moving environment. That is why the government announced in the Queen’s Speech in December 2019 our intention to carry out a review of the Gambling Act 2005, with a particular focus on tackling issues around loot boxes".

Accordingly, the UK Government will launch a call for evidence in relation to the impact of 'loot boxes' later this year. This will examine, for example, the size and variation of the market, the design of mechanisms, the context in terms of other types of in-game spending, the impact on consumers and particularly young people including links to problem gambling, and the effectiveness of the current statutory and voluntary regulation. The Report also states that a series of roundtables will take place, discussing for example effective approaches to protect users from any harms identified.

The Report also notes that the industry is already progressing some important initiatives including the following:

1. PEGI’s new “paid random items” rating (see our note on this here);
2. New rules from Sony Interactive Entertainment, Microsoft and Nintendo requiring future console games to disclose the relative probability of receiving randomized virtual items in loot boxes;
3. Commitments made by major games publishers to disclose the relative rarity or probability of obtaining in-game virtual items from purchased loot boxes
4. industry’s participation in ongoing research projects to create virtual worlds that are safer for young people; and
5. Information campaign to help parents take advantage of tools already available on devices to disable and set spend limits on in-game purchasing.

In this respect, we note that class action complaints have recently been filed with the U.S. District Court for the Northern District of California this month (June 2020) against Apple and Google for allowing developers to market apps and games with loot boxes on the App Store. What is interesting about these two cases is that they do not target the game's developer or publisher, but rather the owner of a platform where games and apps can be downloaded, arguing that the platform benefits from in-game purchases made.
 
UK's Government responses to other areas of concern

Other topics discussed in the Research include the following:

• Video Games Research: The UK Government will lead a series of workshops this year with experts from relevant research councils, academia and industry to research both the positive and negative impacts of video games. The research program will be carried out independently in order to ensure its credibility and wide acceptance. Contrary to the recommendations of the DCMS Report, the Government does not intend to impose a levy on the games industry to pay for new research since the Government believes that it would be "likely to disproportionately impact the SMEs and microbusinesses that comprise the vast majority of games businesses in the UK".  
• Online age ratings. The UK Government wants to see the age ratings from physical game copies applied to all online video games. In 2019, the UK Government called on the industry to adopt Pan European Game Information (PEGI) age ratings for every game available online. The UK Government plans to assess voluntary compliance shortly, aiming to drive adoption on every major platform. If progress is not forthcoming, the Response states that the UK Government will amend or create legislation to ensure consumer protection from potentially harmful material online.
• Future online harms regulator. The Response expressly refers to the ICO’s Age Appropriate Design Code (see our note on the ICO’s Age Appropriate Design Code here), which complements the Government's work to protect children. The Response further refers to the UK Government's Online Harms White Paper, which proposes enacting a law imposing a new ‘duty of care’ towards users, which will be overseen by an independent regulator. Under the proposed regime, companies will be accountable for tackling online harms, ranging from illegal activity and content to behaviors that are harmful but not necessarily illegal. The UK Government is considering appointing Ofcom as the new online harms regulator. In addition, recognizing that further research and evidence is required in relation to concerns about “excessive screen time” and “designed addiction", the regulator will continue to support research in this area to inform future action and companies are expected to be transparent about design practices which encourage extended engagement.  
• Esports. To help this burgeoning industry deliver on its potential, the UK Government plans to continue its relationship with the sector, including hosting a roundtable with esports stakeholders examining the ways in which esports can further drive innovation and public engagement. It will also involve addressing key concerns around issues that include talent working and competing in the UK, access to venues, and ensuring that esports are conducted in a safe and fair manner for competitors and audiences.  
• Diversity. The Government cites its support for programs addressing the gender imbalance and improving the representation of women and girls, both in the industry and within content itself and the impact that this has, including on societal norms and attitudes.  

If you would like to learn more about how EU Digital legislation affects the Gaming Industry, join us for our upcoming Gaming Industry Virtual Roundtable on Wednesday 8th July 2020. In addition to privacy laws (the GDPR remains a priority), we will discuss the new "Platform-to-Business" (P2B) Regulation (effective 12 July 2020), the EU Copyright Directive (effective from 7 June 2021), the Digital Services Act (currently under consultation) as well as the tightening of social media regulation. This session will be conducted as a roundtable, where we invite you to share your questions and experience rather than a formal lecture. Click here to register (registration is free).