Could Neverwinter’s Monetization Strategy Spell Trouble?
If you’re talking free-2-play games you can’t dodge the topic of lockboxes. Hated by players the developers often refer to them as necessary evil. Neverwinter of course also uses a monetization strategy that highly depends on them. The devs typically say the loot is not mandatory for anything in the game. The amount of progression you get from lockboxes however is so big that you can hardly work around them. And because a limited amount of lockbox keys are included in the VIP package, it essentially makes a subscription mandatory for ambitious players.
But this is not a discussion about whether Neverwinter is truly free-2-play. Instead I want to talk about why lockboxes as focal point of a monetization strategy might become risky going forward. As more and more major titles like Elder Scrolls Online or Star Wars are switching to them, the opposition is growing. China already forces publishers to reveal drop rates and yesterday Massively Overpowered’s Andrew Ross published an insanely interesting article on possible legal issues the system might run into. Could companies be sued over their use of lockboxes and illegal gambling?
Lockboxes and Illegal Gambling
By all means, go read the entire article, it’s worth it. Especially since there’s not really a good summary, other than “it’s complicated”. Nonetheless I’m going to try to figure out how this all relates to Neverwinter’s lockbox system.
[su_quote]”An illegal lottery in the US consists of three elements – 1) some kind of consideration (money or something of value) for entry, 2) random chance, and 3) a prize with some value. Usually, companies change out one of these in order to avoid illegality. For instance, if you remove the consideration for entry by allowing free entries, you have a sweepstakes. If you remove the chance element, you have a contest. If you remove the prize, then there isn’t much of anything at all.”[/su_quote]
Based on the above definition, I think in terms of Neverwinter it’s safe that we have to focus on 1) and 3). Lockboxes are absolutely random and there is no skill involved at all. For 1) just being able to farm Astral Diamonds by playing the game and trade them for ZEN doesn’t help. If the community opens lockboxes, somebody has to pay for the keys. So every opened one brings revenue, they are not obtainable for free. Cryptic and PWE could probably challenge that they offer limited ZEN through the quests in the ARC client, but that’s only true for PC and not a direct gameplay activity. So it seems the entry fee is given as well. That leaves only one question to answer: Do the items that drop have value?
Apparently it’s not enough for a company to cover the “value part” in their ToS or EULA. Only because they state that virtual items do not belong to the player, have no value and cannot be sold, doesn’t mean that’s legally true. If there’s a secondary market and players can sell or trade items, it implies value. What seems to be working in favor of the game however is the fact that there is no cash-out feature. Nonetheless you can’t reliably rule out that Neverwinter’s lockboxes might violate laws. It’s for sure one of the titles that more aggressively tries to use gambling-like mechanics to bait players into spending cash.
Is Neverwinter in Trouble?
The article mentions two Blizzard games that feature lockboxes, yet “should be immune” to being sued. Hearthstone and Overwatch both have the ability to earn the boxes via ingame activity and the contents cannot be traded. As I’ve lined out, this does not apply to Neverwinter. It still doesn’t mean Cryptic and PWE are in trouble as the article doesn’t create the impression that something is really imminent. The sheer possibility however that something could happen should already be alarming enough to developers and publishers. Legally it’s a twilight zone that’s largely untested.
So at some point lockboxes might not only be unpopular, but actually illegal. And a game that so heavily depends on lockboxes might not want to get caught by surprise by an unfavorable court ruling.
Do think courts have to deal with lockboxes and gaming in the future? Share your thoughts in the comments below or visit the corresponding thread on our message board!
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2 thoughts on “Could Neverwinter’s Monetization Strategy Spell Trouble?”
Yes, as we have already seen in China, lockboxes have been dealt with under legislation. Whether companies there comply with it or not will determine if the courts have to deal with it. This has created a legal, albeit international, precedent dealing with gaming and gambling.
As your post mentions an EULA does not indemnify a company completely, especially if it breaches the law in which the company is based. It will require a court to determine if lockbox items have value, despite the company claiming otherwise.
Interestingly, there is no minimum age requirement for playing Neverwinter Online in the Neverwinter Online EULA. Although this may change as PWE reserves the right to modify the EULA at any time. Furthermore, section 9.1.iv. prohibits use of the game in any way which is harmful for children. While the premise of this article is that lockboxes may be considered as gambling, this is still a grey area in US/Caliornian legislation in which this game operates. If it is determined to be gambling, and in my opinion, the psychological effects are similar to gambling, exposing children to this aspect of the game may be harmful to their behavioural development. With players inviting this game into their household, with the potential of children being exposed to it, it is like bringing a casino into one’s home, which again in my opinion, is harmful.
Online technology is therefore an area in which legislation can be made, as the area is new and largely untested.
I think it is in broad stroke that simply by taking the language of the statute and then by pointing out how the facts overlap in theory that it is an arguable violation of the statute. Sure, when you compare the language of the statute to the action in game to the naked eye it would arise a question that there may be a violation. Unfortunately, the application of law is not that simple, and in order to confirm whether or not the violation may have occurred you still have to consider all facts and then whether there is authoritative or persuasive case law applying those facts to the elements of the statute. Case law narrows and or interprets the definitions of words used in the statute. In the present case, that would apply to the question of “value”. Precedent, if not legislation, will set forth what constitutes “something of value” when there is a question of whether there is “value”. You already pin pointed the hitch in the equation, the content one gains through opening lockboxes is intangible. The intangible item has value in the game and with respect to the in game currency, but that value does not necessarily constitute or translate to real world value simply because one may sell that item to another in theory and therefore constitute a prima facie case for violation of the lottery statute. You brought up the EULA, but I feel like you also dismissed it’s terms same. However, you have to consider whether or not the terms of the EULA prohibiting the sale of the items and defining those items held by accounts, and the accounts themselves, as owned by Cryptic with respect to this Federal Law question. Moreover, the EULA defines the items from lockboxes, the accounts, and all items thereof as the intellectual property owned by Cryptic. Meaning, arguably, the person who participates in the lockbox lottery, so to speak, receives an item that they don’t own, as the item, including the account for which receives that item are all owned by the developer and essentially licensed for use by the player.
I think that there would be more of a question or potential risk of violation of that statute if Cryptic EULA maintained different terms. Terms that permitted the sale of in game items for real money, or terms that provides for the player as the owner of the account and the intangible content collected thereof without restriction or encumbrance to marketability through sale, assignment or transfer of ownership. However, that is not the case, and you cannot simply ignore that fact as all facts play a role in determining the application of law. The real world sale of these intangible items both violates the EULA for sale of the intangible goods, but also the terms for protection of their intellectual property. That makes these items and the accounts they are attached to the intellectual property of Cryptic not the property of the player; and, therefore, the more realistic argument is that these items cannot have a value because the use of these items outside the license granted by the EULA violates both contractual and intellectual property rights of the developer and or publisher. Accordingly, if the item is not marketable and transferable then it cannot have any real world value by limitation of the contractual terms for its use. If the item cannot be sold or transferred without violating the rights of another, it cannot have value to the player who receives the item or the party who buys the item from the player for real world money. Therefore, I feel that in legal theory, the statute fails on its face.
The below link from an article published on Forbes already eludes to the fact that the law has not yet caught up with intangible game items and their purported value; see link to Forbes “What is the Legal Status of Virtual Goods?” by Oliver Herzfeld, Dec 4. 2012. Also, see link, paybefore.com wherein, the Courts of the US clarify that Mini-Games played through Social Network websites where pay for chance to gain in game virtual goods were deemed legal because they only provided virtual goods usable in game; see link to paybefore.com “Make Sure Your Virtual Currency Doesn’t Enter Illegal Gambling Territory”. Therefore, it is unlikely that there been a precedent set in that intangible game items maintain real world value. The point is that it appears this matter would constitute a case of first impression if it were ever filed in the Courts. However, who’s going to pop the cap on this bottle with respect to its challenge in Court? Surely, the US Attorney’s Office has bigger fish to fry, and without precedent, is it truly worth it for the US Attorney’s Office to spend tax payer money all the way through Supreme Court potentially for the precedent to be established? Perhaps the question of value over these intangible items will be born through civil litigation, or class action litigation? Whoever takes it upon themselves to file this issue with the Courts, or even the question of whether these intangible items have real world value must be prepared for a huge investment to be the first to break through the wall of silence on the issue and establish a precedent. This would clearly have to take place on the federal level, because I could reasonable anticipate that if such a question were to be brought up in State Court over a dispute between two players disputing over the sale of an item, I could see the Court dismissing the case for lack of standing due to the terms of the EULA if the Defendant were to introduce that evidence in his/her defense. Therefore, until such time that there is more precedent on these types of transactions in the Court system, you can expect the lockboxes to continue their sales.
Your post caught my eye and I love the oddball unique one off legal situations such as what you have presented in your post. I only spent a short period of time researching what I thought may be the answer after review. Therefore, the foregoing analysis and conclusion was based on a quick and dirty review. What is the takeaway? Although you can apply the situation with the lockboxes to the elements of the statute for an illegal lottery, it does not make the circumstance of that violation exist. Law may be logical, but it is complicated by the minutia of fact and relies upon precedent.
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