Outside a suburban Tokyo supermarket, a small girl nags her mother for three Y100 coins.
Choosing one of the dozen machines in front of her, she feeds in the money and an opaque plastic sphere rolls out. She opens it and is crestfallen to discover inside a pirate rabbit in a purple frock coat. She wanted the blue one.
What does this episode represent? A harmless twinge of childhood disappointment or the source code of an intensely partisan “loot box” debate that threatens to bring the $135bn global video games industry into conflict with gambling regulators?
Either way, the Nintendo company has spied a way to grab those Y100 coins for itself, using its charismatic frontman Mario as enticer-in-chief.
The capsule toy machine at the supermarket is known in Japan as gacha. The principle of inducing the young to make a blind bet on the item they want is hardly unique to this country (see everything from Panini football stickers to Lego mini-figures).
But the ubiquitous machines have, over time, staked out surprisingly outsized real estate in the lives of Japanese children, ruthlessly leveraging an adulation of novelty collectibles that can extend long into adulthood.
It was not surprising then that, as Japan led the world in mobile phone gaming in the mid-2000s, developers such as Konami realised just how stupendously revenue-swelling it would be if they could splice the gacha mechanism into the DNA of this digital entertainment genre.
The premise was simple: the game would be free and a player’s slow progress would be possible without parting with any cash. But, within the game, virtual gacha machines would offer the chance to pay real money for quicker advancement. Not to buy better equipment or characters but for the chance to win them by luck. The concept of the loot box was born.
Japanese gamers were immediately swept up by the idea, and other Asian gamers have piled in around them since. Mobile games now account for just over half of the gaming industry’s vast revenues and the lion’s share of that is generated in Asia.
Even then, Japan stands out. For absolute mobile game revenues, it is ranked third after China and the US, but in terms of spend per player it is by some margin top of the pile because of the gacha factor.
Of the top 10 mobile games in Japan by revenue in 2018, nine were monetised through gacha mechanisms; where games have only offered direct purchases of items, they have performed less well.
As these mechanisms have spread to markets around the world, various controversies have erupted. Regulators, not quite sure where lines should be drawn, have stumbled in.
Elsewhere in the world, gamesmakers have provoked the rage of their own customers when they have hidden the most desirable goods behind loot-box mechanisms.
But the hottest question around this subject is how closely an addictive, cash-ingesting game of chance skirts your definition of gambling. Some authorities, most prominently in Belgium, have decided that it steps clearly over the line and have banned games with certain gacha elements.
As a measure of how serious the issue has become, a forum of gambling regulators from 19 European countries has for the past year been locked in a study into gacha-style transactions in games. On October 2, it strongly recommended that individual countries should take the initiative in setting out clear rules.
Just days before, Nintendo launched Mario Kart Tour — a mobile game that, to a staggering degree, incorporates gacha mechanisms into the pantheon of cartoonish characters that gamers of all ages know and love. Better vehicles, new characters and other equipment all lie hidden in fixed-odds gacha, which can be bought for real money.
Some analysts are already predicting that gacha and other micro-transactions used to make games more addictive and lucrative are due a grand reckoning — not just in the court of public opinion, but in actual courts. That may be a way off but, with Nintendo’s latest move, it feels like a Rubicon may have been crossed.
Leo Lewis is the FT’s Tokyo correspondent
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