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Time To Hit Pause And Change Rules For Online Gaming – Analysis

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By Shashidhar K.J.

Beijing has enacted new laws to curb video game addiction amongst minors in China and now gamers under the age of 18 will be banned from playing games from 10 p.m. to 8 a.m. Gamers will also be restricted to only 90 minutes on weekdays and three hours on weekends and holidays. The Chinese government also enacted rules to limit spending to 200 yuan a month. Similar laws have been enacted to protect minors in countries like South Korea and Japan, where users are logged out of online games at particular hours or given warnings.

Video games, as a medium, have always been under the scrutiny of governments and politicians for the perceived ills that they encourage. In 2018, the World Health Organisation (WHO) classified gaming addiction as a mental health disorder with an emphasis on what exposure to video games might do to young minds. First person shooter (FPS) and shooter games have been made scapegoats following school shootouts for allegedly corrupting and desensitising children to virtual acts of graphic violence in the US—rather than enacting gun law reforms. Video games were hauled up during their infancy in the early 1990s, when US senators Joe Lieberman and Herb Kohl pulled up the industry in congressional hearings for “realistic depictions of graphic violence” and exposing youngsters to them.

Politicians often raise concerns on the corrupting influence of video games. But in India, following the Galwan attack, outrage against gaming took a nationalistic flavour with the Indian government banning PlayerUnknown’s Battlegrounds Mobile (PUBG) along with several other Chinese apps as they posed a threat to national security—it is a wholly another matter that PUBG is developed by a South Korean video game company, Bluehole, and is only distributed by Chinese game publisher Tencent in India.

Nonetheless, the COVID-19 pandemic has forced children indoors and to spend more screen time with video games. Worried parents wish something could be done about the excessive screen time and violent video games. Regulators and politicians may be tempted to follow in China’s footsteps and enact similar bans, but, perhaps, it is wiser to hit pause and understand what is truly ailing the video game industry and gamers.

Do the children require protection?

To be fair, there are several issues that are plaguing the video games industry that need to be regulated, but moralistic narratives for protecting children from harmful content aren’t necessarily the best lens to frame rules. Video games as a medium have been elevated to art forms, dealing with complex concepts and emotions, perhaps, better than other mediums like video, audio, or text. However, to the charge that video games are designed to be addictive so that users will spend an extraordinary time to the detriment of others duties, game companies must walk a fine balance between making sure that their game is engaging or have users abandon the game as they aren’t entertaining enough.

Holding and capturing the user’s attention isn’t a problem exclusive to video games. Social media, movies, television, radio programmes, podcasts, and even the print medium deal with the same. What is concerning is the tactics companies use to capture attention. For example, social media companies tweak their algorithms to resurface old posts to drive engagement again, but the unintended consequence has been that outdated information has been repurposed to obfuscate the context and drive more misinformation.

With video games, the monetisation options increase exponentially as game developers control the virtual environment that players enter. It isn’t news that the video game industry’s revenue far eclipses other forms of media like movies, television, music, and print. The video game industry’s revenues are now driven mostly through microtransactions and developers have an arsenal of tactics to implement them—character customisation with skins or alternative outfits; steep difficulty curve after a particular level, which forces users to buy in-game purchases to overcome them as seen in games like Candy Crush; implementing turn-based mechanics, where users are forbidden to play for some time, which can be bypassed by in-game purchases as seen in Clash of Kings; introduction of in-game resources to progress in the game which can be purchased; purchase of ‘loot boxes,’ where players get a range of randomised in-game items to be used for multiplayer games, etc. In some sense, game progression itself is being monetised, where the skill of the player doesn’t matter as much.

Broadly, in the video games community, there is a tussle on the direction the industry should be going in. Developers and publishers view games as a service, where they constantly need to introduce novelties and have users pay for them, and, therefore, extend the life of the intellectual property of the game. Video game players, on the other hand, prefer to view games as a singular product and ownership of the game belongs to the user and can be preserved like any other form of media like movies on DVD, novels, music albums on CDs and vinyls. Each model has ramifications on how the industry will progress, but with the rise of online marketplaces for games and the disappearance of storage media, the games-as-a-service model is here to stay. There is backlash from players about the excessive monetisation of games with microtransactions, which does have real-world implications for minors.

A 2019 report by the Children’s Commissioner of the UK highlights this, where children aged 10-16 were interviewed regarding the monetisation options in video games. The respondents revealed very complex social behaviour while playing video games. The respondents replied that video games are an important social activity that help them make friends and develop friendships beyond their age group. However, the downside is that players face enormous peer pressure to purchase in-game items to fit in the social circle. Further, video game streamers add to the pressure for buying new items during their gameplays. The report also highlighted the problems of the ‘loot box’ mechanism and termed it as gambling as the items the players receive are randomised and they are encouraged to ‘try again’ with another purchase. In response to this, countries like Japan and Belgium have outlawed these in-game purchases. China requires more transparency on loot boxes, requiring companies to disclose all possible rewards that users could get along with the probability of getting them. The Netherlands requires game companies to obtain a licence to introduce loot box mechanics in games. Meanwhile, the UK is debating a law regulating microtransactions in video games, and US senator Josh Hawley has introduced a bill in the United States to ban pay-to-win and loot box transactions.

If it walks like a duck, if it talks like a duck…

However, the Indian startup ecosystem has decided to drop all pretenses of building a video game with some gambling elements and just focus on gambling instead using regulatory arbitrage from a particular court case judgements. Gambling is outlawed in India on the federal level, but individual states can allow some forms of gambling. But broadly, court cases have ruled games such as poker, teen patti, and fantasy sports as “games of skill” rather than “games of chance” like roulette, slot machines, raffles, etc. Following the COVID-19 lockdown in March 2020, venture capitalists poured millions into the “gaming” sector, however, the term that the Indian startup ecosystem uses is “real-world gaming” and this encompasses fantasy sports like ‘Dream11’ and ‘Mobile Premier League’ where users create virtual teams and earn points based on the real-world performance of the players and the latter may redeem these prizes. Online poker also uses this regulatory arbitrage. These companies operate in a regulatory gray space and their applications are not allowed in app marketplaces like Google Play Store and the iOS app store, due to their rules on disallowing gambling applications. These apps, however, can be downloaded on to phones directly bypassing app store rules and policies.

Nonetheless, the fervour of “real-world gaming” has caught the attention of investors as they are able to deliver much faster revenue and profits with these ventures than other bets. Dream11 clocked in a profit of INR 180 crore for FY2020. Nazara Games recently listed on the stock markets last year to much fanfare boasting of India’s potential in the gaming sector. There is paucity of imagination to use gaming as a medium to tell vibrant stories in the Indian ecosystem. Nazara Games does not own any original intellectual property (IP) to tell the kind of grand stories in franchises like ‘Grand Theft Auto’, ‘The Elder Scrolls, BioShock’, ‘Doom’, ‘Call of Duty’, ‘Assassin’s Creed’, etc. but relies on making clone “freemium games”. Its revenue primarily comes from hosting sponsored esports events, freemium games, and “real-world gaming”. Thus, the Indian startup ecosystem is looking to blur the lines of gambling and develop properties to only maximise revenue.

The debate of whether “real-world gaming” apps are games of skill or games of chance is splitting hairs. Gambling represents significant harm to the social fabric of a country, no matter the name it decides to adopt. Fantasy sports are ultimately dependent on the chance of a player’s performance in real life no matter the picks made by the player. Poker has been counted as a game of skill since it requires skill from players to bluff or call a bluff during the game, but would this point matter in an online game when players don’t get to read cues like in the offline counterpart? Courts and regulators need new lenses to regulate the sector. Perhaps, a guiding principle could be to see if “the house always wins” to determine if games can be classified as gambling.

States like Andhra Pradesh, Kerala, Karnataka, and Tamil Nadu have banned these games and online gambling in some forms and more states like Uttar Pradesh and Rajasthan are debating new laws to regulate the sector. However, Andhra Pradesh’s list includes websites of video game publisher Electronic Arts (EA). This demonstrates that state governments aren’t making sufficient distinction between online games, which employ some mechanics bordering gambling and the world of “real-world gaming”, and online gambling apps and websites. There is a need to understand these new complex methods of capturing user attention and monetising it with various in-game currencies and resources and the risks they would pose to users. There is a need to understand the relationship between these monetisation systems on younger players and draw a line with better age verification. Finally, there needs to be a better nomenclature for “real-world gaming”. It’s time to call a spade a spade, and not use contrived definitions to pass off online gambling as gaming.

Game development is an intense sector drawing from multiple disciplines to immerse players in a narrative. In many ways, video games have contributed to the advancement of computing and though many studios have risen and fallen, they were never shy in pushing the envelope on what could be done and had several backers. Therefore, it is ironic that venture capitalists in India who have poured millions of dollars in “real-world gaming” to have users test their luck but are unwilling to bet on Indian game studios to rival the likes of Bioware, id Software, Valve, amongst other gaming studios.

The views expressed above belong to the author(s).

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ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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