Microtransactions were initially introduced in a very limited fashion to some video games in 2006 but did not generate meaningful profits compared to the sale of the actual video game. However, microtransactions really took off after smartphones were powerful enough to play video games on. Around 2012 there was a significant rise in "free-to-play" video games on mobile. Microtransactions were incredibly popular in these "free-to-play" games as a way to provide a source of revenue to video game developers and publishers. "Free-to-play" video games that include microtransactions are known as "freemium" games, which are no longer only mobile games. By 2014, microtransactions had become a normal revenue model for video games on all gaming platforms.

When microtransactions were first introduced they were typically "skins", or a way to make an in-game character appear differently. What could be purchased as a microtransaction in-game was purely cosmetic - it did not impact gameplay. Most gamers were indifferent to purely cosmetic microtransactions. However, video game developers quickly learned that they could make significantly more money if the microtransactions would give a player an advantage. These pay-to-win type microtransactions are highly addictive and despised by most gamers. Who is the "best" at a video game is no longer a degree of skill, but who paid the most money.

With the advent of video games being downloadable and not needing a disc, microtransactions evolved to also be a way to unlock (or block behind a paywall) additional content. This additional content that can be purchased is known as DLC (downloadable content) and it is typically a fraction of the full game price. DLCs were initially very well received by the gaming community as they provided large expansions to existing video games at a reduced price, instead of having to buy a sequel video game and starting all over again. However, video game developers quickly realized that they could just publish buggy and incomplete video games before they were actually finished and then make those who buy the video game buy a DLC to fix the bugs and provide the in-game content that was always planned for the game. Furthermore, the psychologist who helped develop these video games realized that if a child purchased DLC via an in-game microtransaction, that child would be more likely to then buy in-game items via a microtransaction.  

In many video games, the constant solicitation of microtransactions to children is intrusive and unavoidable. At every turn of the video game, be it when you win, when you lose, or while waiting to play, microtransactions are being heavily pushed on the player.  Even more egregious, many video games now give children a free lower-quality loot box every once and a while in an attempt to normalize loot boxes to the child and get them addicted. The video game is giving your child a free loot box for the same reason a drug dealer gives someone their first hit for free - they want their customer to get addicted.

Microtransactions in video games were intentionally designed to use operant conditioning to make sure that the impulsive behavior of players, the gaming environment, and peer pressure would drive more purchases. An example of a microtransaction being designed to make a player make an impulsive buy is by making the microtransaction only available for a limited period of time. Also, a video gamer's desire to be the first among a friend group to obtain an in-game item or to be at a higher level than their friends drives these gamers to purchase pay-to-win microtransactions. However, there are always new items introduced and there are always higher levels to achieve.

A "loot box" is an in-game reward system that contains a random selection of virtual items. Loot boxes can be purchased with real-world money as often as a child would like. By purchasing a loot box, a child will get a seemingly random assortment of in-game items or boosters. Some items that can be obtained via loot boxes are extremely rare (less than 1 in 1,000). Therefore, a gamer must purchase an indeterminate number of loot boxes to obtain the in-game item they desire. No skill, nothing but money is needed for a randomly determined outcome/prize. Loot boxes are a video game version of a lottery that are aimed at children.

Similar to other forms of gambling, loot boxes utilize additional features to promote more dopamine being released when the gamer purchases a microtransaction, such as opening animations, bright colors, and catchy sounds. The goal is for loot boxes to be as pleasurable and addictive to a child opening them as possible. 

After loot boxes were alleged to be a form of gambling, many games added the probability of obtaining rare items. However, disclosing to children that their odds of winning are exceeding low does not change the fact that loot boxes are a form of gambling. It is common knowledge that gambling addiction is a severe issue and a big risk when adults play lottery-style games. It is unacceptable to target children with lottery-style games within video games that were already designed to be highly addictive.

The sunk cost fallacy describes our tendency to continue with an endeavor we've invested money in, even if the current costs outweigh the benefits. Once a child has purchased a microtransaction, especially a pay-to-win microtransaction, they feel invested in the game. The more microtransactions a child has purchased in a single game, the more invested they feel, and the more addicted they become. The same is true for spending large amounts of time in a video game - the child has invested large amounts of time to "progress" in the video game and will feel increasingly invested in the game as they play for extended periods.

Yes, children are the most vulnerable, but what is going on with microtransactions is much more nefarious than that. Our video game addiction attorneys have alleged that the video games are collecting and using individual player data to manipulate the nature and presentation of purchasing offers in ways that maximize the likelihood of the player spending money. For instance, video games are capable of tracking various player metrics and adjusting their design in automated ways to elicit in-game purchases. The information gathered from gamers allows the gaming industry to use its knowledge of a player's game-related preferences, available funds, playing habits, and spending habits to present offers determined to maximize the likelihood of eliciting player spending. Furthermore, if a video game is linked to a gamer's social media pages, the game can gather more information in order to personalize for sale content to a gamer's unique interests and preferences.

As the video game gathers more and more data on how a player behaves under certain conditions, the game becomes better and more successful at presenting in-game events and purchasing situations that will elicit the desired behavioral outcome - spending or player longer.

While some microtransactions have a set price that is the same for everyone, many microtransactions a dynamically priced, such that the microtransactions cost a different amount of real-world money for one person compared to another. How the cost of an in-game item is priced can be based on the amount of available funds the gamer has available and prior cost sensitivity to certain items. Pricing microtransactions in this fashion allows the video game to extract the maximum amount of money from each player. Of course, pricing models such as these are not disclosed to the gamer.

As microtransactions have evolved and video games have been designed to be more addictive, video game developers have realized that revenue from a microtransaction system will far outperform the revenue from a one-time-purchase game model. As many parents now know, microtransactions spending can quickly and easily add up to hundreds to thousands of dollars per child on a single game. Currently, microtransactions account for approximately one-third of the total gaming revenue earned across the entire video gaming industry.