Nintendo, Microsoft, and Sony are taking a stand on 'loot boxes' by forcing new games to disclose their odds

Loot boxes are digital merchandise that offer a mix of randomized video game rewards at a fixed price.

Video game companies have defended the use of “surprise mechanics” like loot boxes, and these sorts of microtransactions have generated millions in revenue for popular games like “Overwatch” and “NBA 2K.”

However, lawmakers and critics have expressed concerns that loot boxes represent a gambling model in video game form.

As the Federal Trade Commission considers the impact of loot boxes on the gaming industry, Sony, Nintendo, and Microsoft have all agreed to new standards that will require new games to disclose the odds of receiving specific items when purchasing loot boxes or similar products.

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During a hearing with the Federal Trade Commission Wednesday, America's largest video game lobby addressed concerns with loot boxes, the randomized digital purchases that have becoming a growing trend in the video game industry.

Loot boxes, also referred to as surprise mechanics, offer a selection of in-game rewards or items for a set price. Critics of the loot-box business model compare these microtransactions to gambling because the odds of obtaining specific rewards are often unknown to the buyer, and because the desire to find the rarest items can lead some players to continue spending money on a game with little return on investment.

Concerns that loot boxes were exposing children and gamers at large to an addictive form of gambling has led lawmakers to consider regulations on the practice, and the FTC's August 7 hearing examined these concerns more closely with industry experts.

Read more: A US senator is pushing a bill to stop 'Fortnite' and other games from selling 'loot boxes' to kids. Here's why loot boxes are causing so much panic.

During the course of the FTC hearing, the Electronic Software Association announced that Sony, Nintendo, and Microsoft, the companies behind the three largest video game platforms, had all agreed to change their approach to loot boxes and other surprise mechanics.

All three companies would require video game publishers to disclose the odds of receiving specific items when selling loot boxes. Google recently updated its policy for games in the Google Play Store with a similar standard, and Apple introduced a disclosure policy for surprise mechanics in December 2017.

According to a statement from the ESA, Sony, Microsoft, and Nintendo intend to implement this disclosure policy by 2020, and several major video game publishers including Activision Blizzard, Ubisoft, and Electronic Arts have agreed to disclose their odds for loot boxes by the end of 2020.

“As an industry, we take our role in this conversation seriously,” a statement from the ESA said. We plan to underscore to the FTC our industry's deep connection to our community and shared desire to work with policymakers, parents, and players to provide the information they need for a positive game experience.

Last year, the Entertainment Software Rating Board also introduced a new label to denote games that have in-game purchases.

New Hampshire Sen. Maggie Hassan, who requested that the FTC host the loot box hearing back in November 2018, approved of the gaming industry's move to self-regulate.

“I am encouraged that the video game industry has taken this important step forward to improve loot box transparency,” Hassan said in a statement. “I'll keep working to ensure that children are protected from the predatory and addictive effects of loot boxes in video games.”

While these companies ultimately decided to disclose the odds for loot boxes sold in America, several countries in Europe had passed their own regulations requiring video game publishers to share the odds for loot boxes sold there. Belgium and the Netherlands have already banned the sale of digital loot boxes entirely due to gambling concerns.