The Toxic Economy of Gaming

The video game industry makes more money than movies and music combined - and it got there by deploying the greatest hits of dark consumer psychology. Gambling, paywalls, and slowly but surely chiselling ownership out of the hands of their customers. It’s doing so well, in fact, that it’ll start growing outwards. This episode explores the origin of modern gaming and the moments that ensured it ended up being a sinkhole for money and frustration. Hosted on Acast. See acast.com/privacy for more information.

• 0:00Speaker 00

  The video game industry makes significantly more money than the movie and music industries combined. In fact, it's actually more than double their combined annual income, which comes as a surprise to lots of people, but it won't come as a surprise to the ones actually playing the games. How can these games make so much money? Well, imagine that you wanted to hear a song by the Beatles, say, but you had to buy a small virtual packet of Beatles songs and the song that you want to listen to might or might not be in that packet. And if it's not there, then you just buy another virtual

• 0:40Speaker 00

  packet of Beatles songs. It'd be madness. Or maybe you prefer Taylor Swift, but instead of packets of random songs, it's that she releases an album with nine songs on it, but if you pay more, then you get 14 songs. That's the sort of thing that you find at every level of the gaming industry. And this stuff should be a bigger deal. But the problem with gaming is that the people who aren't interested really aren't interested like at all. But we should be looking more closely because what you see is what can happen to an industry when there's no real concern for the customers over a long period

• 1:23Speaker 00

  of time. And now we have two big things taking it all much further. First, Sony is getting rid of physical discs. So everything will be downloaded from here on out. That signals the end, really, of ownership as we knew it. And second, a game called Grand Theft Auto VI is coming out in 2026, and it's probably going to be the most lucrative game in history. It's been 12 years in the making. Neither of those things could have happened without the backstory that we're going to get into today. This episode of How We Got Here is about video games. And I want to make something

• 2:07Speaker 00

  clear, though. You don't need to be a gamer for this to be fascinating because the story is amazing. The economy of it is just huge and it's growing outwards all the time into new places. The legislation's a mess and it's all alive right now. We've got historic things happening this year. So let's get into it. I'm joined as always by our excellent producer, Rob. Rob, hello.

• 2:33Speaker 01

  Sorry, I'm just levelling up my crafting right now. How are you going?

• 2:37Speaker 00

  I'm good. Yeah, I had a feeling you'd be levelling up in some way because you know about gaming. You've done this stuff.

• 2:42Speaker 01

  Yeah, I'm a big gamer. I've been playing video games all the way back since I got a Nintendo 64 for Christmas when I was eight years old and I've never looked back.

• 2:51Speaker 00

  Nintendo 64 is my zone too. How are you going to find this to talk about? Is it going to hit you in annoying ways that it's not going to hit me?

• 2:58Speaker 01

  I think so. I think so. It'll remind me of mistakes that I've made along the journey and lessons that I've learned. And also just me being upset about the direction of where the industry is heading.

• 3:09Speaker 00

  It is upsetting. I mean, it's fun and funny, but it's also kind of upsetting for people who are invested, I guess. Yeah. Well, I'm excited to get into it with you because you're going to help me kind of angle this in ways that is important. But before we do all that, let's get into two truths and a lie. This is the segment where I lay out three potential facts. Two are true, one is not true. You decide which one you think is fake now, and then you see if you change your mind during the story. And at the end, I'll tell you which is which, obviously. Number one, a game called Diablo Immortal is free to play, but you can spend up to $100,000 on improvements for a single character.

• 3:50Speaker 00

  That's number one. Number two, Belgium was the first country to classify the practice of paid randomized prizes, AKA loot boxes, which we'll get into, as gambling. And they did it all the way back in 2005. Number three, in 2017, game maker EA posted on Reddit that locking some characters behind a pay to play, behind a pay and play wall was intended to create, quote, "sense of pride and accomplishment for unlocking different heroes." And it became the most downvoted post in the history of Reddit. Rob, which of those three feels fake to you?

• 4:30Speaker 01

  Yeah, I mean, I didn't really play Diablo at all. So not entirely sure about that one. Belgium seems like a reasonably well governed country. That seems pretty possible. It also seems very possible that EA made that mistake because I can tell you as a gamer, they might be one of the most hated companies in the gaming industry. And Reddit is a space where a lot of gamers thrive. So the idea of them downvoting them to oblivion seems very plausible to me. So I'm going to say number one because I'm not entirely sure about Diablo.

• 5:01Speaker 00

  Okay, okay. But so we're talking about the plausibility of spending $100,000 on a character in a game.

• 5:07Speaker 01

  Very plausible.

• 5:08Speaker 00

  Plausible, okay. Number two is that Belgium outlawed effectively loot boxes. And then the third one is that Reddit doesn't suffer fools and everyone, ah, it's EA. So I think they all sound all right.

• 5:19Speaker 01

  Look, all three of these are really plausible. That's the way the gaming industry is. So this is a hard pick.

• 5:25Speaker 00

  I'm feeling really good about the two truths and a lie this time around because that's what you want. You want it to be a hard pick. People are going to figure it out as we go, I suspect, and I'll unveil which one is fake at the end. And we're going to get into the backstory in just a moment. But before we do, let's hear it from our very excellent partners.

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• 7:16Speaker 00

  Might as well go all the way back to the start. And for gaming, that is in 1958. I mean, video gaming. I mean, people have been playing games for a long time, obviously. We're talking about video games.

• 7:26Speaker 01

  Correct.

• 7:27Speaker 00

  But 1958, that's when American physicist William Higginbotham made something he called Tennis for Two, which is basically an experiment to see if he could simulate trajectories on a virtual ball. And he made the game so that two people using a basic controller could hit this ball back and forth over this kind of circular screen. And there's videos of it, and I think Rob will probably bring them up. Thank you, mate. Now, it was displayed at a science fair and people, particularly kids, they really liked it. No big surprise there in hindsight. But Higginbotham, he's a scientist, not a businessman. So he really didn't make any money out of this thing. It was kind of just a demonstration and that's

• 8:07Speaker 00

  how it stayed for a long time. During the 1960s, a couple of other scientists and academics at different universities made similar types of things, but the real breakthrough came in 1972, when a company called Atari decided that this was enough fun for people to pay money for. So I brought out the game Pong.

• 8:29Speaker 01

  We all know Pong.

• 8:30Speaker 00

  And you know Pong, right?

• 8:31Speaker 01

  We all know Pong.

• 8:31Speaker 00

  Have you played much Pong?

• 8:32Speaker 01

  I've played a little bit of Pong. It is fun for about three minutes and then you're like, this is pretty dull.

• 8:37Speaker 00

  I wanted to get into the spirit, so I looked it up on the internet and you can play it for free. And I was the exact same. I was like, this is cool. This is cool. This is boring now.

• 8:43Speaker 01

  Yeah. Yeah. Games have come a long way since Pong.

• 8:47Speaker 00

  Yeah. I mean, little did I know, though, the nostalgia factor here is huge because if you wanted to buy a, you know, restored original Pong machine, it's going to cost you like four or 5,000 bucks.

• 8:57Speaker 01

  Yeah. Nostalgia is a massive industry in gaming these days. Like, I'll have moments where suddenly I have an urge to play a game that I played when I was a kid and my partner will be sitting there being like, this looks terrible. And I'm like, you just don't get it.

• 9:11Speaker 00

  You don't get it.

• 9:11Speaker 01

  You don't get it. You don't get it.

• 9:13Speaker 00

  How far back are we talking? Like Nintendo 64, cartridges stuff?

• 9:16Speaker 01

  Yeah, 64. So like, I played Super Nintendo because my cousins had it. I'll tell you a story. So my cousins had Doom on their Macintosh back in the day.

• 9:27Speaker 00

  I remember Doom.

• 9:28Speaker 01

  And I remember it as being probably about five years old. I would go to my cousin's house and I'd sit there and play Doom. And I would play Doom for so long that I'd piss my pants. And this happened quite a few times. And looking, looking back at it, I'm like, where was my parents? I'm five years old. I'm playing Doom, which is a first person shooter, and I'm so addicted to it, I'm pissing myself.

• 9:51Speaker 01

  Red flag mum, red flag.

• 9:53Speaker 00

  I, I, I'm never gonna let you forget about this.

• 9:58Speaker 00

  I can't, I'm so happy to know that.

• 10:00Speaker 01

  Yeah.

• 10:00Speaker 00

  I, I remember playing Doom at my, this is one of those things, isn't it? Like, I remember playing Doom at my grandparents' next door neighbour's house when I was a kid. Didn't piss my pants, but I remember it being.

• 10:10Speaker 01

  You clearly weren't as locked in as I was.

• 10:12Speaker 00

  I wasn't, that's so good.

• 10:16Speaker 00

  There's Doom. Anyway, I'm talking about Pong because other games sort of saw the success that Pong was getting at the time. This is the early 1970s and the whole idea of arcade gaming kinda went global fairly quickly. In fact, by 1975, just a couple of years after it was invented, Atari sold 150,000 Pong units. So it really didn't take long at all, considering that people had basically no prior understanding at all of video games. But the whole system is pretty simple. Video game companies manufacture these games. It was the size of a small vending machine and people put coins in to turn it on and play.

• 10:58Speaker 00

  Now, the people buying these video games, really anyone who had a business where people needed to stand around and wait for a little while. So pizza parlors, convenience stores, bars, they all loved them. Because not only did you give people something to do, but they were also making about $40 US a day out of these machines, which is pretty solid money back in the 1970s. So by the late 1970s through to the 80s, dedicated video game arcades started popping up because more and more games were being released and the business case was developing. They were often racing coins for games.

• 11:34Speaker 01

  There's a venue near my house, not to completely dox myself, but there is, they have an old school arcade there. It's a lot of fun. Yeah, it's heaps of fun. They've got all the classics.

• 11:44Speaker 00

  Would you take, here's a question. Gaming's kind of fraught for kids. Would you take your kids to an arcade?

• 11:50Speaker 01

  I think I would, yeah. Like, my son's not at that age yet.

• 11:55Speaker 01

  But there's a lot of good stuff there. I mean, you obviously wanna keep them away probably from like the shooting and fighting games when they're young. But there's so many good games and that's kind of also entwined with, you know, the game, we gotta throw the basketball in the hoop and like air hockey and those sort of things. So they're all there in one place and, you know, the, the driving ones, you get to sit in the car or sit on the motorbike.

• 12:12Speaker 00

  Totally. And from a parenting perspective, it's kinda nice to be like, we're going to the game, play the game, then we leave and the game stays there.

• 12:18Speaker 01

  Yeah, correct.

• 12:18Speaker 00

  That's kinda nice.

• 12:19Speaker 01

  Yeah.

• 12:19Speaker 00

  It's a good thing. But then, everything changes in 1985 because Nintendo brings out Super Mario for their home console. This was the first mass uptake of home gaming. Players could buy the game once, play it as many times as they wanted, no coins needed. It's still a pretty big purchase though, worth about $40 US for the game and about 200 US for the console. But families were going for it. And I mean, if you adjust that for inflation, it's 620 US dollars for the console. Rob, how much does the console cost now?

• 12:53Speaker 01

  Yeah, if you're looking for, say, an Xbox, probably with less amount of storage, you're looking like $500, $600 Australian. If you're going for a PS5, like looking online now, probably a bit closer to a thousand. The big thing now with gaming consoles is the fact that it's storage. Whereas we know storage costs a lot of money. So that's really the big determining factor now.

• 13:11Speaker 00

  I suppose the point then becomes that it was expensive.

• 13:15Speaker 01

  Yeah.

• 13:16Speaker 00

  At the time, it's more expensive now, but not by the kind of, the factors that you might expect.

• 13:20Speaker 01

  Yeah.

• 13:21Speaker 00

  Perhaps.

• 13:22Speaker 01

  Yeah.

• 13:22Speaker 00

  It's an interesting point. Growth continued in this space, obviously, for years, and that is the crux of what we're talking about. We're not talking about arcades, we're talking about home video gaming. And when I was a kid, as discussed, it was Nintendo 64. You kinda knew what you were getting. Wasn't particularly cheap, but you got the cartridges. You kind of, you might save up, you might ask your parents. It was kind of pretty sort of linear in how that all worked. It was no downloading. It was very much a hard copy type of world, wasn't it?

• 13:51Speaker 01

  Yeah, exactly. Like, I, I remember conversations with mum being at some sort of toy store and being like, I want this game. And she's like, give it five weeks and you can have that game. I wanted Mario Kart. We ended up with Diddy Kong Racing because it was, it was, it was cheaper. And as we've spoken about on a previous episode of this show, this was also a time that the video store could rent you these cartridges as well. So it was a big rental market too.

• 14:13Speaker 00

  I had a friend who, whose parents would buy them the game they wanted, put it on top of the fridge in sight and be like, you will work towards this.

• 14:22Speaker 01

  Wow.

• 14:23Speaker 00

  Which is kinda brutal, but now that I'm a parent, I'm like, that's, that's genius. That's like a masterclass in delayed gratification and, and working towards a goal.

• 14:31Speaker 01

  Or you're just teaching your child deception because in the middle of the night, they're getting the ladder out, they're taking it down, they're playing it for a few hours and then they go put it back before they go to bed.

• 14:40Speaker 00

  Again, I'm learning more about you. I didn't even think about that.

• 14:42Speaker 01

  Yeah.

• 14:42Speaker 00

  But you could have totally done that and then just put it back.

• 14:45Speaker 01

  That's what I would have done.

• 14:48Speaker 00

  You were a naughty kid, I'm learning this about you. Then, as always happens, the internet ruined everything. The next chapter of gaming is kind of the one that we're still in. The games are now completely online and that has made it possible for them to become marketplaces, able to accept payments. And what that means is the games stopped increasing in price. In some cases, they actually become cheaper or even free to get started. But the games start earning much, much more money from the people playing them. Now you have games like Roblox and Fortnite, which are free to download and start playing,

• 15:27Speaker 00

  but they have commercial systems in them that are widely regarded to be quite predatory and target kids sort of alone without their parents. That fridge system, it really doesn't work anymore. There is no barrier to entry and parents have to be incredibly vigilant and aware in a way that they really didn't have to before. And the path the industry took here is fascinating and it's kinda good for parents to know about. We're gonna arrive at this destination today of what has happened, but we really do still have some backstory to get through so that we can kinda get there. Because the truth of it is, the video game companies didn't just clock on to this sort of stuff in the internet era. There have been hints that this was always the goal.

• 16:10Speaker 00

  I'm gonna give you a couple of decades here quite quickly because I do want us to get up to present day. First example of pay to win, really, was a game in 1983. Game was called Lost Tomb, standard arcade game where you go through pyramids and you fight off baddies with, with whips. But between levels, Lost Tomb offered extra whips to players who would put extra coins in. You didn't need to wait until your character died to start again. You would just dump money in and then you would be more likely to succeed. So that's the first case of paying to win. The industry probably had this in mind all along, they just needed a better model and that was provided by the internet.

• 16:52Speaker 00

  Over time, paid shortcuts started showing up more and more. You could spend dozens of hours playing a game to unlock tools and characters, or you could just pay to get them right away. And around that time, when the internet started coming in and the model improved, players could start paying for personalization. The business of buying virtual things so your character looks unique and reflects you as a person. Lots of that was obviously about status. The first time that really happened on any large scale was 2003, when a developer called NEXON launched MapleStory, which is free to play online, massive multiplayer game. And it had something called Cash Shop, which is not the most creative name ever.

• 17:35Speaker 01

  Nush. It's simple. I know what it is.

• 17:38Speaker 00

  It's a cash shop.

• 17:39Speaker 01

  Yeah.

• 17:41Speaker 00

  You could use real money to buy your character's things like clothes and furniture, stuff like that. But Cash Shop also had something called a gachapon ticket, and I hope I'm saying that right because it's a Japanese word.

• 17:51Speaker 01

  Yeah.

• 17:52Speaker 00

  You put money in and you get a random item. Sometimes it's something that you want, sometimes it's boring and lame and a bit of a dud. And these are the first examples of something that we now know as loot boxes. So Rob, these are kind of the genesis moments. You know, you got pay to win, pay for customization and then pay for chance at something that you want. And they're arguably, correct me if I'm wrong, three of the most important pillars of the gaming industry economy.

• 18:22Speaker 01

  Yeah, there's another one as well, which is essentially just paying for more content, like we spoke about at the top of the show. Here's half an album, pay, forget more. Generally, a, a big game, a triple A game, as they're called, you kind of expect that if I buy this game, I'm gonna have about 40 hours of gameplay before I've kinda done most of it. There was, there's a period where a lot of games coming out were like 20 hours, 30 hours. And they go, hey, we've got an expansion, pay an extra amount and you get more. But it's kind of just the rest of the game that they've put behind a paywall. So that's something as well that's been the case. What if I told you about a black market in games?

• 18:58Speaker 00

  Okay.

• 18:59Speaker 01

  So World of Warcraft, at the time, probably the biggest game in the world in the mid to late noughties. They have a function called the auction house. Now, I'll put it on the screen so you can have a quick look at what we're talking about here. But essentially, a player can go in and they can sell something. They can sell a helmet that they found or an axe or a piece of iron ore, whatever it may be. Now, what happened in this game was that it was so big and there was so much going on that people within the game were going around saying, hey, if you want gold for the game, come to my dodgy website and I'll sell it to you. And this was rampant and rampant for a decade or so, until Blizzard eventually went, hey, hold on, wait, we can, we can do this. And now officially, you can buy gold from the company who makes the game.

• 19:39Speaker 01

  But this black market economy still exists today for this 20, 25 year old game, where people are spending hours and hours. Today, they've got like bots and things that do it, but there was a period where there were people just playing this game all day long, probably in poorer countries, making gold in the game and then selling it for real money. And there was a whole black market running it.

• 19:59Speaker 00

  Would people be spending solid amounts of money or is this really tiny but a lot of times?

• 20:03Speaker 01

  I, I think people would be spending hundreds of dollars at a time, you know. There probably was a time where it might have cost more, but as, you know, bots and AI are more common, it's probably cheaper to get the gold in the game. And as the game's been older, it's probably easier to find where it is. But if you're a hardcore player of this game and, you know, you don't wanna spend the hours it takes to get all the items to craft the sword you want, well, I'm just gonna go pay 500 bucks online and I get it now. And the game that I'm playing every day, well, I've taken the shortcut.

• 20:31Speaker 00

  Yeah, well, I suppose that, that would be important learning moment for the game. I mean, if there's supply and, and demand happening outside your platform, well, you just wanna bring it in, don't you?

• 20:40Speaker 01

  Correct, correct.

• 20:40Speaker 00

  Yeah, it makes sense.

• 20:41Speaker 01

  Yeah, and I think is that game in particular, because it's an old game, there is a genre of dad gamers. And the dad gamers, well, they've probably got a bit of cash, they probably haven't got much time. And I don't really wanna spend the time to get the sword, I'm just gonna buy the sword now.

• 20:55Speaker 00

  That's a very interesting, you talk about dad gamers, because we're gonna get to that in a second. But what I think I'm, I'm learning as we're talking about this as well, is that pay to win is annoying, but it's pretty linear. I mean, you wanna do better, you pay the money. Paying for aesthetic changes to characters is also pretty straightforward. It's not great. It's not a particularly smart way to spend money, but that's your choice. But the one that stinks the whole joint up, I reckon, is this loot boxes thing. The gaming industry has always had a view of the randomized loot box system as kind of so what? How is this any different to buying a packet of football or baseball cards? I mean, you might get something you want, you might not. The problem is that academics and policy experts have long held that this sort of thing

• 21:37Speaker 00

  does groom young people for gambling. And it makes money by pressing the same psychological buttons, just in a digital way, not analog like football cards, digital like poker machines. And back in 2020, the New South Wales government in Australia said loot boxes are, quote, "a growing concern because the risk and reward elements are the same as gambling, and there are really no age limits." It also said that the median monthly spend for kids aged between 12 and 17 was $50 a month. Then, in 2024, the law changed in Australia. Games with loot boxes had to be classified as M, not recommended for kids under 15.

• 22:21Speaker 00

  Rob, do you reckon that was a game changer?

• 22:25Speaker 01

  I'm going to say no. Knowing what some of these laws in Australia have done to things, particularly social media, it doesn't seem like much changed.

• 22:32Speaker 00

  Not much changed.

• 22:33Speaker 01

  Yeah, and I feel like if the kid's like, hey, I want this game or my friends have got it, the parents are like, well, if your friends have all got it, you can have it too. I don't want you to be left out.

• 22:41Speaker 00

  Wasn't the silver bullet.

• 22:42Speaker 01

  No.

• 22:43Speaker 00

  As is so often the case, it just made things more complicated. And the legislation sounds fine, but it's incredibly weak and just doesn't work. A study by Sydney Uni a year later, in 2025, showed that one in five games in the top 100 on the App Store are mislabeled when it comes to age classification. And 58% of the top grossing games carried four age ratings at the same time. And the maximum penalty for getting the age rating wrong is $6,000, which obviously is nothing to a gaming company. This pretty useless legislation took four years to happen after the government identified that loot boxes are a, quote, "growing concern."

• 23:25Speaker 00

  And not only does the legislation take ages, but it varies all over the world. And online games are inherently borderless. And businesses are really good at defending their practices and adapting quickly if needed. Now, a place that does stand out here is Belgium. In 2018, it officially classed loot boxes as gambling. EA Sports argued it isn't because participants always get something, so it's not gambling, it's a purchase. And that didn't really work. And eventually EA pulled its FIFA points from the Belgium market. And we'll talk about FIFA points in a minute because it's quite interesting.

• 24:07Speaker 00

  But in most countries, loot boxes, whatever they might be called in that particular game being played, they're allowed to exist. But I'm getting ahead of myself again because we're going to talk about all those messed up destinations that we found ourselves in. But there is more important backstory to be had right after this.

• 24:25Speaker 00

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• 25:59Speaker 00

  Rob, I like your hat. It's a nice hat.

• 26:02Speaker 01

  Thanks, thanks. This is the hat that you get when you do 1,000 hours of podcasting. So it's a new achievement for me. I'm very proud of that.

• 26:08Speaker 00

  Good on you. Mate, I just bought mine for five bucks.

• 26:12Speaker 01

  Oh, okay.

• 26:17Speaker 00

  You see what I mean?

• 26:22Speaker 00

  Oh, yes. Welcome back.

• 26:27Speaker 00

  Electronic Arts, EA, is one of the biggest game publishers in the world. They also won worst company in America in 2012 and 2013, Rob.

• 26:38Speaker 01

  Who gets to vote for this?

• 26:39Speaker 00

  Two years in a row.

• 26:40Speaker 01

  Two years in a row.

• 26:41Speaker 00

  I don't actually know. Worst company in America. Look, I don't know who votes for that.

• 26:47Speaker 01

  Yeah.

• 26:47Speaker 00

  But it sounds pretty rough.

• 26:50Speaker 01

  Yeah.

• 26:50Speaker 00

  You wouldn't want to have to wear that in the boardroom.

• 26:53Speaker 01

  Yeah, I feel like I'm trying to think of companies who would be repeat offenders. I reckon airlines would be in there a lot. I reckon like power companies would be in there a lot. Telcos, they'd probably cop it a bit.

• 27:01Speaker 00

  Yes, to all of that, I suspect. But yeah, EA, frequent flyer.

• 27:08Speaker 01

  Yeah, frequent flyer.

• 27:10Speaker 00

  In 2009, a couple of years before all this, EA made loot boxes a core part of their business, particularly for its sports games like FIFA, incredibly popular soccer and flash football game. I mean, we say soccer.

• 27:24Speaker 01

  Yes.

• 27:25Speaker 00

  But I don't want people to get mad at me because I'm doing that.

• 27:27Speaker 01

  Yes, it's okay. I've played a lot of FIFA, so I'm an expert on this.

• 27:30Speaker 00

  Okay, good. I'm gonna, I'm gonna use you on that then. So it called them FIFA Ultimate Team Packs.

• 27:36Speaker 01

  Foot packs, Rob? Yeah, foot packs. So basically, everyone, if you've ever played any sort of fantasy sports, that's what it essentially is. But instead of you playing with the team, here's Arsenal, here's the team, here's Real Madrid is the team, you can create a fantasy team. And you create it through playing more and getting points.

• 27:54Speaker 00

  Right, so you can use those points and trade them for like a Messi or a Ronaldo, whoever you want, except, you know, you can't just pick them.

• 28:01Speaker 01

  No.

• 28:02Speaker 00

  You have to gamble using that in-game points currency. And the more expensive the pack, the better your odds. So you could spend a dollar, you could spend $25, but still no guarantees on what you're going to get in that pack, Rob?

• 28:13Speaker 01

  Yeah, they had, from my memory, they had like a bronze, silver and gold pack. And essentially that if you had a gold pack, it guaranteed you one gold player of some level who was going to be in your team. And that they had a big dramatic visual when you found out who your player was. And there's a lot of really funny videos of people going, oh my God, it's this club, this nation, it's gonna be Ronaldo. Ah, and it's just another Portuguese guy. So very interesting to watch.

• 28:41Speaker 00

  Just another Portuguese guy.

• 28:43Speaker 01

  Sorry, sorry to all the amazing Portuguese footballers out there.

• 28:46Speaker 00

  I'm sure there are great ones. I don't know who they are. I only know one. So that just sort of illustrates the point, I guess.

• 28:51Speaker 01

  Yeah.

• 28:52Speaker 00

  And here are the psychological layers that legislators identified years later, but really have never done that much about. The first is that the money is clouded. You don't spend dollars or euros. You spend FC points that you buy with those real currencies. That helps detach the purchase from reality in our minds. Second layer here is that the purchases are randomized. So this is a slot machine and it provides a very similar adrenaline spike and makes you want to do it again and again and again. Third one, a lot of the best items have time limits, only available short window. I mean, this is artificial scarcity, of course, because there is absolutely no real

• 29:36Speaker 00

  limit on a virtual item. All of this stuff just feeds into a dark psychological system. Fourth, it leverages FOMO because everyone else at school has a better team than you do. It's a shortcut to status and success inside the game that costs money to people who perhaps are not ready to deal with money in that way. So there's all these layers to it and they're all really ugly when you look at them.

• 30:04Speaker 01

  Yeah, and you, particularly in this game, there's a lot of influencers online, YouTubers who play this game and that's what their whole channel is. And they've probably got a little bit of money behind them. So you see the videos of them getting Messi and Haaland and Mbappe, but you're down the other end of it and you're like, oh wow, they got this player. And you don't realise that either they've been paid to do this or they've spent lots of money themselves to make sure that they get the best player and they make their video.

• 30:29Speaker 00

  Yeah, right.

• 30:31Speaker 00

  I really don't like, you know, that's extremely uncontroversial. Nobody likes this, but a lot of people participate in it. And to illustrate that, get this, in 2017, EA released this Star Wars game, Battlefront 2, but the main characters like Darth Vader, they were locked behind this in-game currency system. You needed 60,000 credits to unlock Vader, which worked out to be about 40 hours of game time minimum, or cash. And people were upset about this. EA responded to the backlash on Reddit with the following statement, and I quote,

• 31:12Speaker 00

  "The intent is to provide players with a sense of pride and accomplishment unlocking different heroes." Robbed 600,000 downvotes. It became the most downvoted comment in history of Reddit by a very wide margin.

• 31:29Speaker 01

  Yes, yes. Gamers don't like this sort of stuff.

• 31:33Speaker 00

  Can you imagine the person who was like going into the meeting being like, "Hey, we're getting a bit of flack online about this decision for the Star Wars game." And then someone's going, "Oh, just clear it up real fast. Let me just, let me just tell them why it's good."

• 31:46Speaker 01

  Yeah, exactly. No, you need to spend more money, everyone.

• 31:49Speaker 00

  And then like solemnly, a couple of days later, they're like, "How did that post go? That was not good."

• 31:53Speaker 01

  I'm resigning.

• 31:54Speaker 00

  Not well received.

• 31:55Speaker 01

  Yeah.

• 31:57Speaker 00

  EA actually ended up backing down on that one. They removed the microtransactions from the game before full release. But if we're keeping score, in the year to March 2024, EA made more than two and a half times more money selling things inside the games as from selling the games themselves. The scandals really don't change anything.

• 32:23Speaker 00

  But there is a small fact that kind of helps me feel slightly better about all this. Because you might be thinking, "Yeah, but who's actually spending this money? Is it everyone?" And the short answer is no. In fact, it's not many people. In GTA Online, which is this hugely popular game, the one where there's a new version coming out this year that's been, you know, 12 years in the making, absolutely enormous. In the last version of that, only 4% of active players spend any money at all beyond buying the base game. But those 4%, they spend a lot. And the industry calls these people whales,

• 33:02Speaker 00

  which is the exact same term and the exact same vibe as high rollers at blackjack tables. A small number of people spending a lot of money, and it's across the board. Same number when it comes to Candy Crush, which is the hugely popular mobile game. Only 4% of people spend money in that, but it earns about a billion dollars in revenue a year. And Rob, this kind of changes how I think about this whole system. And it makes it feel even more like a casino to me.

• 33:35Speaker 01

  Yeah, it is, it is very casino-y. And I think for those people playing it, it's like, well, if, if I'm spending 10, 15 hours on this game per week, well, this is my hobby. Why wouldn't I spend money on it? But then it's just that constant draw of you might win this, you might get this. And then you get it, and then you don't really get much gratification from it.

• 33:56Speaker 00

  And it's probably, that's right. And it's probably people who maybe have a bit of a problem with this sort of thing.

• 34:02Speaker 01

  Yep.

• 34:03Speaker 00

  Targets them in similar sorts of ways, I suspect. I mean, if you or I spend a little bit of money in the game, then sure, I mean, that's fine. But the whole system, what we're learning is that it works best when it finds a small number of people with compulsive tendencies. Maybe they're going through something and maybe they're young, or maybe they're a bit older and they have the money to spend and they're making some objectively bad choices.

• 34:25Speaker 01

  Yep.

• 34:26Speaker 00

  I think it's safe to say.

• 34:27Speaker 01

  Yep.

• 34:29Speaker 00

  And there's really no risk that they'll win anything of actual value like they could at a casino. The amounts of money can be huge. Now Diablo Immortal, released in 2022, charges $4.50 every time you want to run through a dungeon with a chance at rare loot for the game. A free player could do this about three times a month. But one analysis found that in order to max out a character, you would need to spend about $100,000, which you could do. And that's a free game, Rob, which is baffling. And it just shows that there's very few upper limits on this sort of stuff.

• 35:12Speaker 00

  And that if you end up in a sort of a spiral where you're just spending and spending and spending, there's no safety net at all.

• 35:19Speaker 01

  Nope.

• 35:20Speaker 00

  Dangerous.

• 35:21Speaker 01

  Nothing to stop you.

• 35:22Speaker 00

  Dark.

• 35:24Speaker 01

  Very.

• 35:24Speaker 00

  All of this that we've been talking about so far basically amounts to the gaming industry walking. Now they're starting to run. And I mentioned the Sony bombshell earlier. From January 2028, no new PlayStation games will ship on a disc. So it'll be digital only. We've been talking about spending money inside games, but this, I think, is connected. The company behind GTA 6 is Rockstar. It's the biggest game release maybe of all time, and there won't be a physical copy of it. That means there's no shops, there's no secondary market, and it means changes to the game can be made whenever they want. Heaps of backlash on this, as you'd expect.

• 36:08Speaker 00

  I mean, their own blog posts had thousands of angry comments within hours, days of them announcing this news. Now, there's a change.org petition sitting near 180,000 signatures as I record this, asking Sony to reverse this decision.

• 36:26Speaker 00

  PlayStation's social accounts have basically gone quiet because every post gets buried in outrage. But as I mentioned, people complain and then they spend. And GTA 6 is unlikely to suffer that much from the backlash. The reason this is going so nuts is that it touches on a core fear for modern consumers, that you really don't own the thing that you're buying anymore. You're kind of more like renting it. And that rental can be changed or revoked without your permission. That's the concern. The system is graduating. You don't get much inside the game.

• 37:10Speaker 00

  Things are randomized and cost money. And now you don't get that much in the macro sense either. You don't really even own the game that you paid for. For those that don't play the game,

• 37:26Speaker 00

  don't ignore this. It is going to grow outwards. What else can be slowly and elaborately changed from something that you buy once and own and do whatever you want with to something that you gamble for and rent? I mean, I think this is quite scary. A lot of people talk about this online. I don't think it's a conspiracy. I do think there should be outrage because, Rob, this does suck.

• 37:49Speaker 01

  It does suck. It's interesting that PlayStation are making this decision because gamers will know that maybe it was five to 10 years ago, the PlayStation actively mocked Xbox, which is Microsoft, for saying that they were going to do this. And they were like, "We'll never do this. We understand gamers. The times have changed and now they want to make this decision and they're rightfully getting the hate." As you mentioned, shops get affected. Like I remember going to buy games at a store, you might, you might as well. For us here in Australia, it's eBay Games. Go walk into a game store today and you'll see that it's mainly board games and merchandise and dolls and things like that because the video games are disappearing because predominantly they can only be bought online.

• 38:29Speaker 00

  Yeah, it's, it's difficult to have any local, anything attached to this, including the legislation, as we've sort of talked about earlier. A lot of this stuff now just exists in the ether.

• 38:39Speaker 01

  Yeah, because there was, there was a time when internet gaming was taking off that the concern was that it was actually killing the shared console. So you'd come around to my house, we'd sit there, we'd play Mario Kart. Online gaming meant, no, no, you can't play with someone else in the room. They have to be on their own device somewhere else and you play with them. So that was the first step. And now it's taking away, like you said, selling it secondhand, which for some people, they might not be able to afford new games. And if games are popular, they'll stay at their full price for a long time. Whereas, you know, your stores, someone can go and say, "Hey, I've played GTA now. I don't need it." Sell it on to the next person.

• 39:15Speaker 00

  Yeah, it's an incredible rate of change, which is happening right now. And I think the point is, look backwards and you see the GTA V made $5 billion over 13 years, online only. And only 4% of the players were spending the money. That information, by the way, is according to a breach of Rockstar's own data. The task of GTA 6 will unquestionably be to improve all of those numbers. It'll want more people spending, it'll want them spending more money, and it'll be wanting them to spend the money in the game for longer than 13 years. It's the sort of thing where you wanna say, be careful.

• 39:59Speaker 00

  And Rob, I really haven't said that very much in this series, but this episode freaks me out.

• 40:05Speaker 01

  Yeah, yeah, it is concerning. And as I said off the top of the show, for parents out there who have kids that may be coming into gaming age, this is something to be aware of because gaming only gets more popular every year. The younger generations are the ones who are going to be playing it the most. You need to understand what they're playing and how the games work.

• 40:22Speaker 00

  I think an important distinction to make here is that I'm not even talking about games that are, you know, quote unquote, damaging for young kids to play. I'm talking about participating in this really toxic economy.

• 40:33Speaker 01

  Yeah.

• 40:33Speaker 00

  This really messed up system of earning money from attention inside a fun to play game.

• 40:41Speaker 01

  Yeah.

• 40:41Speaker 00

  Whatever the game may be. I say this too, there are some businesses that are not doing this. And it's important to say, in 2023, Baldur's Gate 3, is that Baldur's Gate?

• 40:51Speaker 01

  Baldur's Gate. It's a really good game. It's a really good game.

• 40:56Speaker 00

  Am I, am I doing an okay job of covering up the fact that I don't play that many games?

• 41:00Speaker 01

  I think you're doing okay.

• 41:01Speaker 00

  Am I doing medium?

• 41:02Speaker 01

  I'm here to support.

• 41:03Speaker 00

  Thank you, because I suspect that there's gonna be a few people in the comments being like, oh, Jesus.

• 41:07Speaker 01

  Yeah, Baldur's Gate 3, really good game.

• 41:10Speaker 00

  Okay.

• 41:10Speaker 01

  Loved it. I played it a lot. It was awesome.

• 41:13Speaker 00

  So the reason I like that game without having actually played it is that it had near-perfect review scores, I have read online. One of the things critics and players praised consistently alongside everything else was the fact that it had no microtransactions, no loot boxes. You buy the game, you play the game, and that's it. And this particular game sold over 20 million copies. So maybe there is a bit of a pendulum here. Swings hard one way and then collective willpower and some brave business people swing it the other way, and that's what you hope. I don't know, though.

• 41:46Speaker 01

  Yeah, it's hard. I'll give you another example of a positive story, at least I've viewers as positive. So there's a game called Dota 2, which has been around for a long time. Now Dota 2 is a free-to-play game. Like a lot of these games, it has little microtransactions. So you can buy your little funny hat for your character and whatever you want. They every year would put out something called a compendium, which was all these little games within the game where you could get your funny hats for your characters or your fancy sword. Wouldn't make your character any better or worse, it just looked different. That was massive. And what they did was they took that money and they pushed it into an esports scene, a pro scene. Now, they had a big tournament called the International.

• 42:28Speaker 01

  How much do you think the biggest prize was when that was at their absolute peak?

• 42:32Speaker 00

  I couldn't even ballpark that.

• 42:34Speaker 01

  So it was a $41 million prize.

• 42:36Speaker 00

  Oh, jeez.

• 42:36Speaker 01

  Between, I think, 16 teams and the first team probably took a raise 17 or 18 million. So all this money was essentially crowdfunded. People who love the game, love watching people play it, love the community that it fostered. And they would put the money in, it would go to the pro scene and people would get to watch these grand tournaments in stadiums and people would win money and it was great. It was really good. The game's declined since then and it's not as big, bigger money. But I'd like to think that that's a good story of this, where it fostered something new. It created more stuff, but much like Baldur's Gate 3, these things aren't that common.

• 43:09Speaker 00

  For people who are not active gamers and need a little bit of handholding through this sort of stuff. I mean, I'm absolutely on your team here. And it's important to say that there is a huge esports world of people watching people play these games.

• 43:21Speaker 01

  Yeah.

• 43:21Speaker 00

  When I was a kid, it was like you watched your older brother and his mates play the game and that was kind of, you'd be up for that, it was kind of fun. But now there's this enormous world of that.

• 43:29Speaker 01

  Yeah, exactly. You've got streamers who will just play generally, they'll play any game and you just watch one person play. But then there's also the competitive scene. So FIFA or esports, as we were speaking about, huge competitive scene. Shooting games, you Counter-Strike, you Call of Duty is a competitive scene. Going back to games like Starcraft, which is a very old game, had a massive competitive scene. And again, people like watching the best people of these games, much like watching actual athletes play and get around this. And for some games, it's like, how can we put, get money into these scenes? Because they exist and it can't all be through sponsorships. So often crowdfunding is the way to go.

• 44:07Speaker 00

  Well, that's, there's some nice examples. It's not all bad, I suppose. But here's where I land on this episode. Hopeful, but freaked out. The more I research this world, the more worried I get. And I say to parents, if you aren't already, check on your kids. Make sure you know the business models of the games that they're playing. There's a lot of attention on the types of games, but make sure you know how this game is earning money out of your kid. If you're a player, remember the game is built to get you to spend money without thinking as fast as possible. And it is, for a lot of games, increasingly like a casino.

• 44:50Speaker 00

  And if you're a regulator, Belgium figured this out in 2018. That was a while ago now, though. And a lot of countries haven't done much that works.

• 45:04Speaker 00

  And now I'm all bummed out.

• 45:05Speaker 01

  Yeah.

• 45:06Speaker 00

  Should we play some like Mario Kart or something?

• 45:07Speaker 01

  I'd love to. I'd love to.

• 45:11Speaker 00

  But before we do that, let's do the two truths and a lie reveal, Rob.

• 45:16Speaker 01

  Yep.

• 45:17Speaker 00

  Number one was a game called Diablo Immortal is free to play, but you can spend up to $100,000 on improvements for a single character. True.

• 45:26Speaker 01

  Yep.

• 45:27Speaker 00

  Wild.

• 45:27Speaker 01

  New hat. They get, they get a new hat.

• 45:30Speaker 00

  They get, but you get the hat.

• 45:31Speaker 01

  Yeah.

• 45:31Speaker 00

  My goodness, it is a theoretical one. I'm not sure anyone's actually spent $100,000, but it's true in theory. Now, number two, Belgium was the first to classify the practice of paid randomized prizes, aka loot boxes, as gambling and they did it all the way back in 2005. That's the lie, Rob. They did do it, but they did it way later in 2018. Still, well done, Belgium.

• 45:52Speaker 01

  Well done, Belgium.

• 45:53Speaker 00

  I say.

• 45:54Speaker 01

  Yep.

• 45:54Speaker 00

  Number three, in 2017, Game Maker EA posted on Reddit that locking some characters behind a pay and play wall was intended to, quote, "give a sense of pride and accomplishment for unlocking the different heroes." And it became the most down-voted post in the history of Reddit. Hilarious, true.

• 46:10Speaker 01

  So funny.

• 46:11Speaker 00

  So funny.

• 46:12Speaker 01

  So funny.

• 46:12Speaker 00

  God.

• 46:15Speaker 00

  Rob, you know this world. I've been waiting for this through the chat. Final thoughts?

• 46:21Speaker 01

  Finals thoughts, it is a very dangerous landscape at the moment and there are a lot of very predatory game companies. But that being said, there is also a big movement and has existed for a long time of indie games, which are small companies, small developers, sometimes even just one person building games. Those games are still out there. They don't have these sort of systems in them. People are just happy for the game to be bought and played and they're out there. So it doesn't mean that you have to stop gaming altogether, but look into what you're playing. Is this a game that is just trying to suck money out of you? Or is it just someone who loves games, has built a cool game that you can go play and it might cost you $10 or $20 and you can still have a good experience out of there? Because when we say gaming these days, we do think of our big titles.

• 47:05Speaker 01

  We think of Grand Theft Auto, we think of Mario. But for every one of those, there are hundreds of little small games, whether it be mobile, computer, that are out there. Go put money to those people.

• 47:15Speaker 00

  Yeah. Just a final question, final thought. Do you think that I'm right in my concern that these types of predatory practices will grow outwards and into other areas, particularly of entertainment, but possibly into other areas of the economy for non-gamers to have to deal with?

• 47:33Speaker 01

  Yeah, like I wouldn't be surprised if there are people sitting in boardrooms looking at the gaming industry and going, how can we do that where we are?

• 47:39Speaker 00

  Sure. It's a bit of a bummer, really. I mean, that is how we got here, gaming. Leaves me feeling a bit angry and a bit sad. Back to the fun ones.

• 47:50Speaker 01

  Woo-hoo.

• 47:51Speaker 00

  Next time, because we're talking about housing with my dad, Rob, who knows quite a bit about it. We're not just getting my dad in because he's my dad and I just thought it'd be fun. He's written books on this.

• 48:01Speaker 01

  Okay, is housing fun?

• 48:04Speaker 00

  No, it's not. Oh, my God. We're not gonna make this a bummer of a podcast, though. Thank you very much for listening, Rob. Thank you, as always, for your insights and your help.

• 48:13Speaker 01

  No worries.

• 48:14Speaker 00

  Production qualities as well.

• 48:16Speaker 01

  Yep.

• 48:18Speaker 00

  Thank you and see you soon.

• 48:21Speaker 00

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