China’s New “Loot Box” Regulation–Not All Fun and Games

If you follow me on twitter (@hsdecktech), you might have seen that my buddy (@GreenRanger_HS) recently brought an interesting development in Chinese law to my attention. He linked me to a discussion of the regulation (here) that states it will go into effect May 2017.

A little background: China has long had weird gaming-related issues that I’m not qualified or learned enough to thoroughly recount here, but two stand-out issue has always been those of gambling and addiction. Urban legends and reputable sources alike recount stories of Chinese gamers dying at the keyboard, blowing their entire savings, or being checked into crazy and dangerous “rehab” centers to combat their addictions. When I researched my law paper quoted heavily in my post about Hearthstone’s Heroic Tavern Brawl, I stumbled upon a story about one Chinese game specifically designed to maximize addiction and poor purchase decisions by offering not just chests filled with random items, but also a prize based on who opened the most chests in a 24-hour period (which, of course, resulted in a group of whales all spending thousands of dollars a day to try to get the #1 prize).

Now, in what appears to be an attempt to protect their population, China recently passed a law targeting what people are referring to as “loot box” game monetization. Redditor czhihong has provided the following unofficial translation of the relevant portions (each emphasis his/her own):

2.6. Online game publishers (who provide virtual goods or services with any form of random mechanisms) shall not directly request gamers to to indulge in such activities through a direct injection of cash or virtual credits.

They shall promptly and publicly announce information about the name, property, content, quantity, and draw/forge probability of all virtual items and services that can be drawn/forged on the official website or a dedicated draw-probability web page of the game. The information on draw probability shall be true and effective.

2.7. Online game publishers shall publicly announce the random draw results by customers on the official website or in a prominent spot in-game, and keep records for government inquiry. The records must be kept for at least 90 days. When publishing the random draw results, appropriate measures should be taken to protect user privacy.

2.8. When online publishers are providing virtual goods and services with any form of random draw properties, they shall provide players with an avenue to trade for other virtual goods, either using virtual cash or any other ways to obtain similar virtual goods and services.

Per usual when I do law posts, a few DISCLAIMERS first: This post is not intended to provide legal advise to any reader, and is not intended to create an attorney-client relationship. If you are interested in how these issues might affect your game business, please contact a lawyer for a consultation. Also, I don’t speak/read/write any Chinese language, so I cannot verify the accuracy of the sections. Finally, I don’t practice in China and am not familiar with its laws generally; often laws are best interpreted within an entire legal scheme, so additional information may be helpful for a more accurate or nuanced evaluation.

I. Interpretation of the Law
This section is oddly written and should be split into multiple subsections, but let’s try:
1) Applicability: the section is clearly written in very general terms and appears to encompass Hearthstone under any fair interpretation. It also likely affects almost every other online game you play which, increasingly, is becoming just about every video game. The section is it is written in crazy-broad terms on its face, so I would like to see an official translation and how this, if accurate, ends up actually being interpreted.
2) Direct injection of “cash or vitual credits” prohibited: this is interesting for us in light of Hearthstone’s practice of doing special one-time-only quests for certain milestones like finishing the tutorial, beating the inkeeper, and new set releases, but this does not appear to prohibit credits “earned,” even if only minimally, and cards and packs should not count as “cash or virtual credits” because packs do not fall within the normal meaning of those terms and because the currency and the product cannot, logically, be the same thing (don’t tell coin collectors :P). In sum, I don’t think this will affect Hearthstone.
3) Publish “draw” probability: this is the MEAT of the regulation, as far as we are concerned, and is what I will discuss below. It appears to mean that things like pack and arena draft option probabilities must be published.

2.7: Does not really affect players more than 2.6 already does–it’s more about record-keeping in the event of lawsuits or government audits.

2.8: This section requires that goods can be exchanged for other virtual goods. That just seems like good game design, both in player satisfaction and encouraging repeat purchases, so I don’t know why a game would not already have this. Of course, Hearthstone, being a very well-designed game, already has this through the craft/disenchant system, so this does not appear to affect us either.

II. Publishing Probabilities

I discuss important legal issues using the “No Regrats” guy as my avatar.

From what I have seen, players all over Reddit, Hearthpwn, and Twitter are pretty excited about this requirement. GreenRanger, who plays WAY more and better Arena than I do, pointed out that this type of information could be particularly helpful to Arena players  who are having their own little spat with Blizzard over stats on the probability of getting Jade Golem cards (which is, of course, relevant in determining whether it is worth it to try to draft the cards at all). A similar issue was previously avoided by removing all “C’Thun” cards from the Old Gods drafts, but that fix could not work this time because Jade Golem cards are only in three classes instead of all 9, so removing them would likely screw up offerings even more. He tells me that the top two Arena websites have conflicting information on the draw probabilities and that Blizzard has not plainly, officially stated the correct (non-bugged, if perhaps that was an issue) stats.

Hearthpwn pointed out that this could also finally confirm or disprove the “pity timer” when opening packs.

That all sounds good, right? How can transparency hurt if the game is not trying to take advantage of the player? People are generally receptive to it, some even calling for the regulation to be implemented in every country. I, for one, fully understand the Arena players’ complaint: a major portion of the value of 1/3 of the classes currently, apparently, hangs in the air.

III. Why I’m Concerned
Games are a business and every game is about making money. There are clearly slimier ways of doing so, but even the publishers that do it for the love of the game and gamer (I think Blizzard falls in this category) need to be profitable, at the very least so that they can continue to make great games for us. While I agree it is good to protect people from abusive tactics, I think this regulation appears to go too far.

Hearthstone is a global game. Although China is a little weird and separated from the rest of us, they play the same Hearthstone we do. That is to say, whatever happens in China will happen to the rest of Hearthstone (and, of course, your other games that affect China and your region). Even if there is no official English implementation of the Chinese rules, the stats will be translated and published just as quickly as this regulation was. Therefore, the Chinese rules will effectively apply to the other regions, whether Blizzard wants them to or not. *The masses rejoice*

However, a quietly important Texas case from earlier this year–DaVinci Editrice S.R.L. vs. Ziko Games, LLC–reaffirmed US copyright protections or, more accurately, the lack thereof, regarding basic game mechanics. (Gamasutra article link here, and decision linked here). The decision highlighted a basic dichotomy underlying American copyright law between the “idea” and the “expression.” Generally speaking, “ideas” are not protected whereas “expression” is. That’s why we see the same three basic movies over and over again and why, until this China regulation, digital games were more protected than IRL games. You see, American courts have routinely found that the way a mechanic is coded is part of its “expression” (think of it like the order of words in a novel).

In the case of Hearthstone, the “idea” of a pack is something like: buy a pack of five cards, the cards can have different rarities, at least one of the cards is “rare” or above. That part is not protected. What is protected (unless they have made it public, or got it from the public domain, or some other weird situation I’m not aware of), is exactly how they made the magic interubes convert your credit card number into 40 dust.

Now, I know far less about coding than I should, but here’s where I think the problem lies: if all of a sudden Blizzard needs to dump “effective” information about the probabilities behind packs, how long would it take somebody who is devoted to making a Hearthstone clone to make a perfect replica of Hearthstone pack generation? All the cards are already fair game under the same idea/expression dichotomy, and, if we’re releasing Arena probabilities, then we have essentially given cloners a key to: 1) all the cards, 2) both major game modes (assuming the cloners have figured out how to replicate game play which, if they haven’t, they would not start this process anyway), and 3) the main monetization method.

I don’t think this regulation is enough to kill the game, but I am concerned about the negative implications of it. Clones damage brand integrity, hurt sales, and force unnecessary legal action. I’m not convinced that Blizzard needs to be exposed to those harms just because some developers exploit, and some gamers have issues with, gambling/addiction.

TL;DR: This regulation makes cloning easier. Clones are bad.

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