Self-Regulation and the Video Game Industry: A New Stigler Center Case Study

A new Stigler Center case study explores questions surrounding the ESRB, the self-regulatory body responsible for assigning age and content ratings to video games. 

 

 

The debate over regulation of the video game industry has flared up again in recent months, as regulators and policymakers worldwide began to crack down on so-called “loot boxes”—a common gaming practice in which players can purchase in-game packages that include randomized rewards (from character costumes to valuable weaponry) and which has been compared to gambling. The Federal Trade Commission has pledged to investigate the now-booming multibillion dollar industry, and some European countries have banned loot boxes altogether.

 

The backlash has also brought renewed attention to the Entertainment Software Rating Board (ESRB), the self-regulatory body responsible for assigning age and content ratings to video games in North America. The ESRB, set up in 1994 following public and Congressional backlash over violence in video games, is overseen by The Entertainment Software Association, an industry lobbying group representing video game publishers. Its rating system is voluntary, though most major retailers and console makers prohibit unrated games.

 

Over the years, debates over the effectiveness of the ESRB rating systems and the overall efficacy of the industry’s self-regulation have been rekindled periodically, particularly following school shootings committed by avid gamers. When Pennsylvania lawmakers considered a 10 percent tax on games rated Mature or Adults Only by the ESRB earlier this year, industry lobbyists claimed the proposed tax would constitute a violation of the First Amendment.

 

As gaming becomes more ubiquitous and the industry continues to grow rapidly, scandals related to violent or sexual content in video games are unlikely to go away any time soon. Is self-regulation enough to curb the dangers associated with violence in video games, or should government and legislators interfere? A new Stigler Center case study, written by Brian K. Richter, explores these questions and more.

 

The Stigler Center launched its case study series in 2017 with the intention of enhancing teaching on issues related to regulatory capture, lobbying, and the subversion of competition by special interest groups. Richter’s case study explores various controversies related to video game violence, as well as recent attempts by legislators to increase oversight of the industry. It also delves into the larger debate over which entity is most suitable to regulate video game publishers: the government through public policy, or the firms themselves through industry associations?

 

Read the full case study here.

 

Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy