The video game industry has ignited a global controversy surrounding microtransactions in gaming, especially the use of loot boxes: randomized rewards with potential real-world value. Consumers and legislators are calling for the regulation of these revenue models on the grounds that they are unfair, predatory, or could be considered gambling. This article examines the controversy from a management perspective. First, I outline current regulatory responses to the controversy and what they mean for business practices. Then, I explain ongoing industrylevel and firm-level attempts to self-regulate as a way to placate consumers and governments. These tactics highlight a wide range of broader strategies that game developers and other stakeholders can pursue in order to improve customer relations and, more publicly, signal their commitment to self-regulation and avoiding consumer harm. These practices can be applied more broadly to firms that offer controversial products or services that do not yet fit within current regulatory frameworks.

Loot boxes: From concept to controversy

In just a few decades, video gaming has grown from a niche pastime into a cultural and economic phenomenon and in the process created an industry with an estimated global market value of $115 billion in 2018 (Statista, n.d.). But this success has not come easily. Competition has been fierce for many years (Schilling, 2003) and growth has frequently been accompanied by criticism and calls for regulation. Currently, consumers and regulators are voicing concerns about the sale of digital content in games (microtransactions), especially the purchase of randomized content (loot boxes). Game developers and publishers are being criticized for increasingly relying on these transactions to generate revenue, a practice that some view as illegal or exploitative. The controversy over loot boxes originated with consumers, who used social media and online forums to express frustration with the choices of major developers and publishers. The loot box debate has been the worst for leading publisher Electronic Arts (EA), which heavily relied on microtransaction models in its most recent games. EA’s problems came to a head in November 2017 with the beta test of Star Wars: Battlefront II, which initially placed a major emphasis on loot boxes. The firm ended up scrapping the microtransaction system just before final release due to consumer outrage during the testing period, but not before it caused a storm of controversy among gamers and policymakers (Kain, 2017).