20 May, 2024 | Asia Focus 2024

Why Gacha games are so successful in Asia

Gacha games are huge in Asia, especially on the mobile gaming scene, but how can this mechanic be so successful in countries where gambling is banned, like China, Japan and Korea?

For those of you who aren’t already familiar with the concept, let’s introduce gacha. The original Gashapon is a trademarked machine from Bandai, where you put a coin in, turn the crank and the machine dispenses a little capsule toy for you. You’ve very likely seen them and not realised there was a name for them.

There is. It’s Gashapon. But how are these a commentary on the Asian online casino industry? Let’s take this one step at a time. If you’re familiar with loot boxes, then you’ll understand what a ‘gacha mechanic’ is.

In certain video games, you can purchase a set number of rewards, although their in-game value will be randomised. You could get something boring, or you could get the best character in the game – there’s no way to influence what you could win from these loot boxes.

Gacha games exploded in popularity in the 2010s across Asia, particularly in China, Japan and Korea. Some of the biggest titles include Genshin Impact, Nier Reincarnation, Fire Emblem Heroes and Fate/Grand Order. Most of these can be played on mobile, which is arguably bigger than many other platforms for gaming, especially in Japan.

These aren’t your standard mobile games either, Genshin Impact alone has over 65 million monthly players and is one of the most profitable games in the industry. While there aren’t any concrete figures, it’s estimated that it generated US$1.5bn in revenue through iOS and Android devices from Chinese markets alone in 2022. Let that sink in for a moment.

So, what’s the problem? Well, a lot of countries across the world are beginning to crack down on loot boxes. Belgium has banned them outright, while the Netherlands, Austria, Germany, Australia, the UK, the US, Canada, Spain, Finland and Brazil have all made some kind of legal case against them – whether it’s taking them to court or placing limitations on them.

These are all countries where online casinos are regulated, licensed and flourishing more than ever. However, the countries where these gacha games are the biggest – China, Japan and Korea – still have bans on online gambling. The Kansspelautoriteit (KSA), the Netherlands Gambling Authority, has taken a particularly strict stance against loot box mechanics.

“The KSA believes it is crucial to shield vulnerable groups, such as minors, from exposure to gambling,” Chairman René Jansen said. “For that reason, the KSA supports a strict separation between gaming and gambling. Gamers are often young and therefore particularly susceptible to developing an addiction. As such, gambling elements have no place in games.”

Well, this angle depends on whether you view the gacha mechanic as gambling or not. Is there a chance for you to win an item with real-world value or money back? No, everything from these boxes are in-game items only. But this mindset alone is very UK-centric. It can be argued that this shouldn’t be the only definition of gambling, as it’s a very multi-faceted concept.

Even if they don’t reward the player with cold hard cash, gacha mechanics are addictive, can be bought with real money and use several predatory tactics. Rather than simply giving players the option to spend in-game currency to win prizes, gacha mechanics are a little more intense than that. Several gacha games employ the mechanic where you either keep trying for the rare item that you want in a set time period, whether you can afford it or not, or you stop part-way through and gain nothing.

They’ll also only have a particular character or item available for a limited time, meaning that if you want to win them, you’ve only got a set period to accumulate that free in-game currency, otherwise you’ve got to start paying real-world cash. That’s right, almost all gacha games are free-to-play, with the ability to spend free in-game currency to take a risk on these loot boxes. There’s no need to spend money on them at all, but the fear of missing out and the pressure to get these lucrative characters and items will often drive people to start spending real money.

Not to mention that many of the people who play gacha games are younger, often children. There’s also the question as to whether the items obtained through gacha mechanics are really free from any real-world value. In some of these games, they can be traded between players – even if this is only through shady third-party websites.

This brings gacha mechanics just a little bit closer to real-world money, and therefore by definition, gambling.  Japan looked into this issue in 2012, albeit only briefly, and ruled that virtual characters and items obtained through gacha could be ruled as prizes won through gambling. Even though gacha mechanics managed to fly under the radar for a while, they have started to garner more legal attention recently.

A few different newspapers in Japan have written articles condemning them for being gambling and even calling on the Japanese Consumer Affairs Agency to investigate the matter further.

While there haven’t been too many academic studies into gacha mechanics, the few that have been completed have noted that the gacha system is problematic and addictive However, little has been done about this since. But we’re not here to debate the ethics of gacha mechanics; we’re here to view it through a very specific lens.

While gacha mechanics are absolutely thriving in the Asian mobile gaming market, there is very little movement to legalise mobile gambling. Korea has opened the Mohegan Inspire resort, but will only accept foreign players on the casino floor (much like many of its neighbouring jurisdictions), while Japan has finally agreed to open its first casino in Osaka in 2030. It’s about time, too; the Korean Japanese Pachinko business is estimated to be worth US$130bn per year.

So what does the future of gacha games hold? There are a few different theories we can speculate on. One of them is that they will drive long-standing Asian views on online gambling to change and become legalised, while the other swing of the pendulum would be for them to be classed as gambling and outlawed. Both of them seem equally as unlikely, to be honest.

It’s much more likely that these gacha games will continue to exist in a grey area; thriving in jurisdictions that would never legalise them while adapting to those who wish to ban them. So, ultimately, the gacha mechanic may well remain a reminder of the pull gambling has on human nature, whether it’s through an online casino or not.