By Julie Jargon
Lisbet O'Connell wasn't aware her 13-year-old son was spending
money on virtual weapons and vehicles in his videogames until she
noticed a series of $20 and $30 charges from Microsoft Corp.'s Xbox
on her debit card -- all in one day. She then looked back and
tallied a three-year total for these incidental purchases:
$1,500.
The days of children blowing their allowance on comic books and
candy are long gone. Kids are now spending hundreds or even
thousands of dollars on more ephemeral goods such as outfits for
their videogame avatars and gems to help them level up in
games.
Virtual spending is leading to debate among parents and
lawmakers over whether it's creating unhealthy financial habits in
kids. Some parents are shocked. Others shrug and say, "It's their
money!"
The small dollar amounts spent here and there in games, called
microtransactions, are a lucrative business model for the gaming
industry. While many games are now free to play, kids can use
virtual currency backed by gift cards or their parents' bank
accounts to buy digital goods. In-game spending globally last year
totaled more than $93 billion, up from nearly $41 billion five
years ago, according to Nielsen's SuperData game research
group.
So why is this different than a child buying a candy bar that
will disappear within seconds? It's not about the product itself,
experts say, it's about the habits such spending instills. Walking
to the store to buy a candy bar requires planning and likely
involves cash. Once cash is gone, it's gone, and children can
understand that. Buying an item while playing a game is
instantaneous. Meanwhile, the dollar amounts add up without kids
noticing how light the piggy bank is getting.
"The danger with these purchases is that money turns magical,"
said Nathan Dungan, founder and president of financial-education
firm Share Save Spend. "Children's brains can't process these
virtual transactions because it's not tangible to them."
Ms. O'Connell, who works for an actuarial consulting firm in
Atlanta, asked her son, Steven Flaxman, about his $1,500 Xbox bill.
Steven told her that since the transactions were in virtual coins,
not dollars, he didn't realize they were tied to his mom's
purse.
"At first I was super angry with him. I was like, 'How could you
not understand this?' But the coins look so fake and playful that
you don't realize it's coming out of someone's bank account. He
didn't get it. I took most of the blame myself because I didn't
notice it for so long," she said.
She said Microsoft refunded her for 90 days' worth of charges,
about $450, and that she has since removed her debit card from his
Xbox account.
A Microsoft spokeswoman said Xbox has family settings that allow
parents to approve and limit purchases and to receive alerts when
purchases are made.
Now, Ms. O'Connell pays Steven his weekly $20 allowance in gift
cards, which he spends almost entirely on digital goods. "If he
wants to spend it on that, I can't complain because it's money he's
earned," she said.
Steven said it "feels a little weird" to spend real money on
virtual items but that buying cool stuff gives him something to
talk about with his friends and improves his game play.
In-game spending is starting to get more attention from
lawmakers, regulators and plaintiff's attorneys. Amazon.com Inc. in
2017 agreed to refund $70 million to customers who were charged for
unauthorized in-app purchases made by a child, as part of a
settlement with the Federal Trade Commission.
Lawyers last month filed suit in U.S. District Court for the
Northern District of California against "Fortnite" maker Epic Games
Inc. on behalf of an anonymous minor and his mother, claiming that
the game doesn't include a way for parents to make informed
decisions about minors' in-game purchases or to track players'
spending history. The suit is seeking class-action
certification.
" Fortnite" has made $3.9 billion in revenue since its July 2017
launch, with almost all of it coming from microtransactions,
estimates Nielsen's SuperData. Players can buy outfits (aka
"skins"), and even dances and other moves known as "emotes."
Epic Games declined to comment but pointed to its parental
control guidelines, which allow parents to create a PIN to restrict
purchases in the Epic Games Store.
In May, Sen. Josh Hawley (R., Mo.) proposed legislation to
prohibit makers of minor-oriented videogames from selling "loot
boxes" -- random collections of items -- and virtual goods that
give players an advantage. He likened the practice to gambling. The
FTC plans to discuss whether loot boxes raise consumer-protection
concerns during a workshop in August.
Chicago doctor Jyoti Patel recently discovered that one of her
teenage sons had spent $5 on gems in "Clash Royale" after seeing a
charge on her credit card. The amount was small but she worried it
would get out of control so she had a stern talk with him and his
twin brother.
"It's this imaginary world where money goes and I don't think
they understand what it means," she said.
The twins, Akshay and Kiran Garapati, 14, say they get it now.
Both have spent iTunes gift cards on items in the popular online
multiplayer game "Fortnite," and a group of about 30 friends from
school have been playing against each other in "Clash Royale,"
where they said there is pressure to buy gems to advance more
quickly in the game.
As both a father and the chief architect of financial software
developer Intuit Inc., Alex Balazs says he has given lots of
thought to virtual spending. When it comes to teaching his
14-year-old, Gabriel, about financial responsibility, he said his
philosophy is to show his son that every choice has a
consequence.
"We try to create scenarios where he has choices to make and if
he chooses to spend in a game it has to be at the expense of
something else, " he said.
More than a year ago, when Mr. Balazs and his wife were planning
to see the movie "Guardians of the Galaxy Vol. 2," his son was
weighing whether or not to join them. His options were the movie
ticket or a "Fortnite" skin. Gabriel chose the movie.
"I really did want to watch that movie with my parents and I
didn't think it was worth sacrificing that family time for
something in a game, " Gabriel said.
How to Manage Your Child's Virtual Spending
Define your values. Nathan Dungan of Share Save Spend advises
parents to define their values around money and communicate them
clearly to children. When kids say all their friends are paying to
level up or buying cool skins and weapons, parents can reply,
"Well, these are the values of our family." Unlike that pair of new
sneakers your kid might covet, virtual goods are more instant --
and never-ending. "Having rules in place ahead of time will save
you pain," Mr. Dungan said.
Control the money. "You are the bank," said Joost van Dreunen, a
co-founder of Nielsen's SuperData who also teaches a course on
videogame economics at NYU. "At all times you must be in charge of
the credit card."
Gaming consoles and mobile devices all have different settings
to restrict spending. The Xbox One console, for example, allows
parents to require a passkey before any purchase can be
completed.
PlayStation Network suggests parents create a child account
where they can establish monthly spending limits.
The Screen Time function on the iPhone, iPad and iPod Touch can
be used to prevent unauthorized App Store purchases. Parents can
disable in-app purchases altogether or require children to request
to make any downloads or in-app purchases.
Apps and games in the family section of Google Play
automatically request password authentication before a purchase is
made on Android devices. Google also allows parents to turn on
password authentication outside of the family section.
Balance the spending. Parents who allow their children to make
in-game purchases should also maintain other goals around money,
such as saving or donating a portion of their allowance, experts
say.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
July 16, 2019 11:44 ET (15:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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