MIKE SELLERS: Game developers often talk about compulsion loops. How do I keep the player playing? How do I keep them coming back? How do I keep them paying?



NARRATION:Last year the world spent more than a hundred billion dollars on video games. Thats more than twice what we spent going to the movies.

EDWARD CASTRONOVA (ECONOMIST, PROFESSOR AT INDIANA UNIVERSITY): Its just continued to shoot up.This is going to be the century of games.

NARRATION: Which means the Game Developers Conference in San Francisco is one placeyou come to get a glimpse of the future of entertainment.But the leading edgeof thatfuture is not where youd necessarily think to look. Its inside this tiny, indiscriminate booth run by a scientist named frica Periez.What shes working onisnt goggles, or guns, or even a particular game. Its data.

FRICA PERIEZ(CEO, YOKOZUNA DATA): We record every single click. Every single interaction that the players do into the game. You can study motivations, how humans interact to challenges, to strategies.

NARRATION: frica used to do mathematical modeling in string theory physics at CERN, the European organization for nuclear research, but now shes betting her future on applying mathematical models to tailor video games to individual players.

JULIAN TOGELIUS (DIRECTOR, NYU GAME INNOVATION LAB): Maybe the game has seen you play for a while and has realized that these are the kind of things that you seem to want.Maybe you really like driving, maybe youre not good at all the shooting. Maybe there are things in there that the game, by analyzing your behavior, knows that you would like but you dont know you like. And then it creates something like this for you.

NARRATION: Over the decades, the rise of video games has drawn plenty of criticism.Much of it has focused on how violence in the games affects us long-term.

ARCHIVAL (C-SPAN, 4-28-99):SENATOR JOSEPH LIEBERMAN: Our children are growing up in a culture of carnage.

CHRISTOPHER FERGUSON (PSYCHOLOGIST, STETSON UNIVERSITY): People get an emotional reaction to something, and they just assume it has to be bad.

ARCHIVAL (MSNBC, 1-9-13):CHRIS CHRISTIE: You cannot tell me that a kid sitting in thebasementfor hours playing Call of Duty and killing people over and over and over again does not desensitize that child to the real life effects of violence.

CHRISTOPHER FERGUSON: We actually just published a study looking atkids and their exposure to shooter games.Sevenyears later we were not able to find any evidence of a predictive link between playing shooter games at one time period and these kind of behavioral problems that people worry about at a later time line. Were just not finding this kind of predictive evidence that early game playing is associated with later problems in kids.

NARRATION: Critics have paid way less attention to the more immediate influence games have as in, how they affect our behavior right when were playing them. Andthat might be the more important question right now. Because were spending more time than we ever have playinggames. And theyre with us all the time.

Smartphones have changed where, how and how often people play games and theyve changed whos playing them.

MIKE SELLERS (PROFESSOR, INDIANA UNIVERSITY): The classic view of a typical gamer is, you know, a 15, 20-year-old guy in a basement somewhere with a controller in his hand in front of a TV, and thats just not the case anymore.

NARRATION: Today, the typical gamer is more likely to resemble that boy in the basements mom. The largest demographic of gamers in the U.S. right now is adult women.

EDWARD CASTRONOVA: That group dont see themselves as gamers. They see themselves as playing Bejeweled.

NARRATION: You can download and start playing Bejeweled and most casual phone games right now for free. Many of them make money through microtransactions, selling you things in the game. Want to upgrade your characters looks or abilities? Get an extra life or unlock new features? Pay a buck or two, and then youre in business. And so is the game.

The biggest game on the planet, Fortnight, is free to play, and its on track to make two billion dollars in 2018.

EDWARD CASTRONOVA: And so instead of paying for everything upfront youre paying in little streams of $1, $5, $10 to the game company and it turns out the companies make tons more money in that model then they ever did back in the day.

NARRATION: And the money pouring into a lot of games isnt coming from casual players, it comes from a very small group of big spenders, known in the industry by a special name: whales.

FRICA PERIEZ: A whale is a player that spends a lot and play a lot.

EDWARD CASTRONOVA: They really love this game and the love being powerful and special, and the big spenders will drop $2000 to $3000a month on a single video game.

NARRATION: Whales make up just a tiny fraction of total players, but they can generate more than half of a games total revenue. Which means finding and nurturing potential whales is the name of game. How do some companies do that? They turn to people like frica.

FRICA PERIEZ: We have two ultimate goals. Predict every single action that the player is going to take, if hes happy or not, we know that and then try to make them happy.

NARRATION: frica runs Yokozuna Data, based in Tokyo. They work withseveral game companies to comb through their data, and better understand whos playing. To keep with the sea life metaphor, you can call non-paying players krill, and occasional spenders dolphins. In thisnew ecosystem, games arebuiltfrom day oneto moveplayersup the food chain.

FRICA PERIEZ: We identify who has potential to become paying users, and also those paying users that has a strong potential to become whale. For VIP players, we can increase their revenue up to 20 percent.

JULIAN TOGELIUS:With Google and Facebook you know youre being watched. When youre playing a game you think of yourself playing in your private universe, but actuallywe hand over so much information about ourselves.

NARRATION:Every decision you make in a game can be tracked.If you turn right instead of left, jump instead of duck, crush a blue candy instead of a green one, these are all tiny decisions that when added together can say a lot about you.

JULIAN TOGELIUS: You can predict elements of your personality from how you play many games. You can predict age; you can predict gender. You can probably predict a lot of more sensitive things, um, but hey I havent done that follow-up research and Im not sure I want to do it. But Im sure someone is doing it.

MIKE SELLERS: We can leverage human psychology to increase the probability of someone purchasing something. Now, this is true of any product. This is why we have advertising on TV. The thing is here were operating a little bit closer to the human brain, if you will. That is something we do need to be careful with, and there is a degree of ethical conduct required of game developers.

NARRATION: This worry has way less to do with hazy links between on-screen violence and violence in real life, and way more to do with addiction and compulsive spending. That analogy about whales and what they spend sounds like it was borrowed from a casino. Maybe thats not an accident. Maybe video games arent justthe future of entertainment, theyre the future of gambling, too.

CHRISTOPHER FERGUSON:So it becomes kind of like a slot machine, and the way that slot machines tend to hook users is they give you little reinforcements every so often, but with a promise of a big payout.

NARRATION: Maybe, the most distilled example of this comes wrapped up in a box.

ARCHIVAL (YOUTUBE VIDEO):GAMER: Please dont screw me over. Give me something. Anything!

NARRATION: The loot box.

ARCHIVAL (YOUTUBE VIDEO):GAMER: Now I get to pay too much to pen loot boxes.

NARRATION: These are boxes you purchase with in-game currency, or real dollars, without knowing whats inside. Its easy to see how this starts to look like a gambling problem.

ARCHIVAL (YOUTUBE VIDEO):GAMER: Aww, come on, come on, give me something. Give me at least one of the new ones.

ARCHIVAL (YOUTUBE VIDEO):GAMER: No, no, no, no, noooooo.

CHRISTOPHER FERGUSON:From just saying, Hey, look.Ill give you this item if you pay $5. You know, thats a fairly straightforward transaction, and thats probably okay.If you say, Pay $1 and well see what you get, that is a bit more manipulative, and for some players they may find that its difficult for them to disengage from that process, because theyre always thinking the next dollar, the next five dollars whatever it may be will be the one thatll get me what I want.

ARCHIVAL (YOUTUBE VIDEO):GAMER: Thats kind of all I wanted to spend. You know what? Lets do a little bit more. Twelve hundred squares. Last time, last time

NARRATION: Depending on the game, it takes on a different shape, or name, but the idea is the same. You pay, you open, and you either win, or more likely, you dont.

ARCHIVAL (YOUTUBE VIDEO):GAMER: Fuck this game! Are you fucking kidding me?

EDWARD CASTRONOVA: The ability to suck money out of people with these kinds of methods has become so advanced that in some countries like Japan, they have explicitly banned certain kinds of game design because its really unfair to users. It just hauls money out of them.

NARRATION:Japan, South Korea and China have all taken steps to regulate or ban games with loot boxes they deem deceptive. This spring, Belgium banned any game containing a loot box, a decision that could ripple through Europe and possibly the world. Apple also just recently started requiring games with loot boxes to disclose their odds.

EDWARD CASTRONOVA: At a minimum, anybody consuming any product should understand fully what it is and how it works. So games should be completely transparent about whats the revenue model.

NARRATION: Unlike a slot machines, these games dont currentlyhave age restrictions, and some of them are marketedtokids.

And unlike slot machines, the next generation of games may be studying you: learning what it takes to keep you playing, or what it takes to keep you spending.

JULIAN TOGELIUS: What will game companies be allowed to do with information they can gather about you and things they can extract from you from this information? Now this is going to be a real issue.

MIKE SELLERS: I dont think theres a bright line between whats not ethical and whats ethical, or whats manipulative and whats not. With any new technology, theres always complaints and worries. This goes back to Socrates who was worried that students were writing things in books and would no longer remember.

NARRATION: And those on the industrys cutting edge say that games becoming more sophisticated, immersive and personalized is one of the key reasons theyre becoming something more profound.

JULIAN TOGELIUS: More immersive games that actually give us better, deeper, more profound, more significant experiences are fantastic. Its a bit like asking, Why should we have better literature? Why should we have better writers?

FRICA PERIEZ: Video games is another world. You move to another world. Live another life, and suddenly you become not only another person, you become another entity.