A UK-based video gaming trade association has published a new set of 11 principles designed to improve player protections around loot boxes.

UK Interactive Entertainment (Ukie) – which represents 700 members across the video gaming and interactive entertainment industries – has published the new guidance as recommended by the Department for Culture, Media and Sport’s (DCMS) Technical Working Group.

Loot boxes are featured in video games. They allow players to purchase randomly selected virtual items with real money.

Given their random nature and potential for harm, they have often been compared to online gambling, with many calling for regulation to be introduced around loot boxes in order to protect children and young people.

The principles

The 11 new industry principles are intended to do just that, as they set out guidance for game publishers to reduce the potential harm of loot boxes. The full list of principles follows below.

1. Make available technical controls to restrict under-18s from acquiring loot boxes without the consent or knowledge of a guardian.

2. Drive awareness and uptake of technological controls with all players and guardians through regular communications. This principal will be followed up with a £1m targeted public information campaign starring broadcaster Judi Love, beginning in July.

3. Form an expert panel on age assurance in the games industry. This group will meet regularly to develop and share best practices, stay up-to-date with technological developments and explore opportunities to develop improved systems.

4. Disclose the presence of loot boxes in games prior to purchase and download.

5. Give clear probability disclosures to ensure players can easily access clear information on the chance of receiving a given virtual item before purchasing a loot box.

6. Design and present loot boxes in a way that is easily understandable and which promotes fair and responsible play.

7. Support the implementation of a Video Games Research Framework, facilitating the creation of better quality research into video gaming.

8. Continue to tackle the unauthorised external sale of items acquired from loot boxes for real money.

9. Commit to lenient refund policies on loot boxes where spending has occurred without a parent or guardian’s consent or knowledge.

10. Advance protections for all players by engaging with third-party organisations, players, parents and academia.

11. Work with the UK government and other relevant stakeholders to measure the effectiveness of the above principles over an implementation period of 12 months.

Ukie and government commentary

“We’ve been clear the video games industry needs to do more to protect children and adults from the harms associated with loot boxes, said UK Minister for the Creative Industries John Whittingdale.

“These new principles are a big step forward to make sure players can enjoy video games responsibly and safely. I look forward to seeing games companies put the plans into action and will be watching their progress closely.” 

Ukie co-CEO Daniel Wood added: “Publishing these shared principles for how the industry approaches loot boxes is a UK first and provides us with a clear direction moving forwards. 

“The principles will improve protections for all players and underlines the industry’s commitment to safe and responsible play. We look forward to working collaboratively across industry and with others to implement them over the coming months.”  

Impact of loot boxes

A BBC News article has set out the damaging impact loot boxes can have on their users.

It told the story of Dave Sproson, a man who ended up in financial difficulty after developing an addiction to buying loot boxes.

“I started to realise that it was getting out of control when I could no longer sustain buying loot boxes with my income,” Sporson said.

“I had to resort to using credit cards, which I’d never had before. I used payday loans. Over a period of 12 months, I had 28 from various different lenders.”

Stories such as these have helped to inspire regulatory action on loot boxes across several key European jurisdictions including Belgium, where loot boxes were declared illegal in 2018, and the Netherlands, where the government continues to look into regulation of the game mechanic.

Esports data supplier Bayes Esports has secured a new investment from Australian esports-focused fund PAC Capital.

The investment, part of a series of A4 financing led by PAC, brought the total capital raised by Bayes in 2022 to €9m.

PAC Capital is a global fund manager with more than $500m under management. It is primarily focused on the esports, gaming and technology industries.

The fund is led by chief investment officer Clayton Larcombe, who is “one of Australia’s most influential esports businessmen” according to Bayes. Larcombe is now set to replace the Bayes founder Jens Hilger as chairman of the firm’s board.

Larcombe said: “The future of sports is esports. Esports is growing at such an incredibly fast pace that businesses active in esports need to be fast, agile, and, most importantly, innovative. That is what I see in Bayes Esports. 

PAC Capital chief investment officer Clayton Larcombe: “Bayes is a significant investment in the fund and shows the commitment and belief of PAC to the esports/gaming sector.”

“A truly innovative business with the power and the potential to lift the industry to new heights. Bayes is a significant investment in the fund and shows the commitment and belief of PAC to the esports/gaming sector.”

Bayes said it will use the investment to fund recent content partnership acquisitions and partnership extensions, while expanding its team and management by bringing in more high-profile experts and talent from various industries.

The firm recently announced a two-year exclusive live match data partnership with Counter Strike event organiser BLAST, as well as the appointment of former EMEA business lead for customer programmes at Google, York Scheunemann, as COO.

“We are delighted to have found a strategic investor and true visionary in the field of esports in Mr. Larcombe, who shares our vision and will work with us to drive the esports industry forward,” commented Bayes CCO and managing director Amir Mirzaee.

“Being able to secure this investment during a time where investors have grown more and more hesitant is a clear indication to us that we are on the right track and that our message of an ecosystem built around official data is resonating with the industry’s decision makers. 

“We have started out strong in 2023, but there are a lot more announcements yet to come. We will continue to expand our lead as the premier source for esports in-game data and bring truly gamechanging innovations to the industry.”

Australian NFT gaming platform Balthazar DAO has secured a further $2m in a Private Round Token Sale, bringing its fully diluted valuation to $60m.

The funds will be used to recruit product experts and engineers to build its software development kit, Babylon, which includes a proprietary noncustodial wallet system.

The start-up has now raised a total of $5.6m over the past year, following both pre-seed and seed-round Token Sales.

Tim Heath’s Yolo Investments were included in the Private Round Taken Sale, along with private equity institutions such as IDG Capital, Tezos Foundation and Kucoin Labs.

“The NFT gaming niche will ripple through the video games industry at large and the future may belong to NFT gaming entirely,” said Heath.

Additional investors included Hive Empire Capital, led by Finder’s Fred Schebesta, as well as Digital Asset Capital Management (DACM), Gandel Invest, Fantom Foundation, Red Building Capital, Vendetta and Pluto Digital, among others.

NFT-led horse racing project ZED Run invested in Balthazar during a previous round, as did Zip co-founder Larry Diamond.

Despite a turbulent end to the year for crypto assets and NFTs, Balthazar CEO John Stefanidis insisted that digital ownership, and its application through Web3, was the future of the gaming industry, which is expected to reach $294bn by 2024.

Yolo Investments general partner Tim Heath: “The NFT gaming niche will ripple through the video games industry at large and the future may belong to NFT gaming entirely.”

“We’re building technology that’s applicable to not only the gaming space, but the entire crypto industry,” said Stefanidis in a press release.

“We’re starting with gaming, to solve the problems of easy onboarding, opening accounts, in-game marketplace, peer-to-peer transactions, Web3 inventory management systems and on-chain in-game transactions in real time.

“We will expand into solving problems around password and credential recovery, which will unlock categories such as DeFi, and other products that are really good but hard to access for Web2 users.

“We’re very clear in our mission to allow people to own their assets. That’s the underlying value that we’re adding,” he added.

According to the PwC H1 2022 Global Cryptocurrency Mergers and Acquisitions Fundraising Report, crypto fundraising in 2022 looks set to outperform last year’s total of $36.6bn.

Total funds raised in the crypto market reached $24.2bn in H1 2022 according to the October report, which is 20% higher than H1 2021.

The report states that NFT and metaverse projects received one-third of all deals in H1 2022 (34%), compared with just 4% during the same period of last year.

Even in this market, NFT gaming is growing quickly in terms of the number of games that are entering the space and the number of gaming funds and funds being raised,” added Stefanidis.

Balthazar is now focused on building a noncustodial credential recovery system that will allow people to hold on to their own assets but remove the risk of losing passwords.

On its official website, Balthazar is described as an NFT gaming platform for the metaverse designed to make NFTs, cryptocurrency and gaming more accessible for people.

The Affiliate Football League

The Guardian has urged football clubs in the Premier League to reveal whether they have affiliate deals with bookmakers, after discovering that some of the clubs in the English Football League (EFL) had acted as affiliate partners for Flutter Entertainment-owned SkyBet.

The EFL said that some clubs are expected to continue to receive revenue from those deals, and by default losing gamblers, until the end of the 2023-24 season – although the arrangement lasted for a total of six years before being scrapped at the start of the 2019-20 season.

The story certainly struck a chord with British commentators and politicians, many of whom have campaigned aggressively for gambling reform.

Labour MP Carolyn Harris, who co-chairs a cross-party parliamentary group on gambling-related harm, said: “This appears to be proof that football clubs are exploiting their own fans, some of whom will be gambling addicts, by taking a cut of every penny they lose to greedy bookmakers. The government must now step in to loosen the hold that the gambling industry has on the national game.”

The Guardian said it understands that one League Two club made £5,000 from the contract in a year, while the team involved in the deal whose details were first discovered by the paper – Accrington Stanley – “made no revenue from acting as a betting affiliate during the fourth quarter of the 2021-22 financial year.”

There are concerns, however, that if the more popular clubs in the Premier League have similar deals, there could be a great deal more money than that changing hands between bookies and pro teams.

Evidence of affiliate deals in football was “a gamechanger in the fight to end gambling sponsorship in football,” said James Grimes, who campaigns for an end to gambling sponsorship in football via his group The Big Step. 

“No one should accept that this is normal or safe,” he concluded.

Retention time for bookies in the US

The Washington Post took a deep dive into US gambling advertising spend this week, examining the “considered gamble” taken by operators which have so far invested “astronomical” sums on marketing their wares to the American public.

Perhaps unsurprisingly, household names in the US like Caesars and BetMGM were singled out for their unusual stunts, including Caesars transforming a fleet of Ubers in Arizona to look like chariots, and BetMGM claiming to have “received the first bet from space.”

It pointed out that in spite of the firms’ commitment to spending whatever it takes to acquire customers in the US, Flutter-owned FanDuel is the only publicly traded US operator to have turned to profit in the market so far.

With market share of around 47%, FanDuel eclipses its competition in the US, while DraftKings and BetMGM take up a further 35% of the market between them, the Post said.

As a result, the other 60 or so US operators hoping to carve out their slice of the remaining market are now increasingly under pressure to become more cost-conscious.

Punters in the US are therefore likely to see “skimpier” promotions and fewer sportsbooks advertising on national TV this autumn, it added.

“You’ve seen the industry pull back and say, ‘Wow, fighting for market share got pretty ugly in terms of losses’,” said David VanEgmond, a former executive at FanDuel and Barstool Sportsbook who now leads investment group Bettor Capital.

Still, the investments could yet pay off for US bookies who were brave with their advertising spend in the first few years of the market opening up.

According to McKinsey partner Dan Singer: “When a market opens up, you’ve got to get out there and start acquiring, because being the first book that someone downloads gives you roughly twice as much action as being the second or the third.”

And, with the average customer expected to be worth thousands of dollars to a bookie over their lifetime, those operators will now look to retain the customers they’ve already got hold of.

Rather that, VanEgmond suggested, than going the same way as Caesars, who had “a bunch of people come in, then losing them to other places and now having nothing really to show for it.”

The ‘Netflix of Gaming’

Netflix is setting up its own video game development studio in Helsinki, according to a report released this week by BBC News.

According to the piece, the streaming giant has long had an interest in the gaming world – having acquired small developers including Oxenfree creator Night School Studio – and now wants to increase its capabilities in the sector by establishing its own Helsinki-based development studio.

The studio will be run by former Zynga and Electronic Arts executive Marko Lastikka, who is an established figure in gaming as one of Farmville developer Zynga’s co-founders.

Apparently, Lastikka will help Netflix attempt to improve its retention rate by offering a more engaging product to customers, after the service announced its first quarterly reduction in subscriber count in April this year.

The firm went on to lose another million subs between April in July, the biggest drop in its history. It still has more than 220 million subscribers worldwide, however.

According to the article, Netflix is also working to identify areas where TV, film and video gaming cross over. The firm has already released several series based on games, including Arcane based on League of Legends and Cyberpunk: Edgerunners.

Netflix is also working closely with Ubisoft, the BBC said, which will see both a live-action Assassin’s Creed television series developed, and a Netflix-exclusive mobile game.

Independent industry analyst Eric Seufert told the BBC that he thought Netflix was making substantial investments into gaming.

“If they want to utilise a lot of the IP that they have, they probably have to build a lot of those games themselves,” he said. “Because working with external publishers on IP licensing deals becomes very tedious and complex.

“They have so much data on customer preferences on the video-streaming content side, my sense is they can probably bring some of that to bear.”

So it looks like anyone promising to create “the Netflix of gaming” has some bad news awaiting them… they’ve already beaten you to it.