The debate surrounding the monetisation of video games has long since become a core issue within the gaming world. For some time now, the focus has primarily been on all forms of loot boxes. However, the constant evolution of technology, society, and the economy has introduced a challenger to loot boxes as a prevalent and long-term monetisation system: the Battle Pass.
The relevance of monetisation systems and practices was most recently brought into the public spotlight with the record settlement of USD 520 million (approximately EUR 473 million) between Fortnite developer Epic Games (“Epic”) and the United States Federal Trade Commission (“FTC”). The FTC accused Epic of violating the Children’s Online Privacy Protection Act (COPPA) and employing design tricks, known as dark patterns, to lure millions of players into unintended purchases.
For more on this, see our article “FTC vs. Epic Games: Illegal Dark Patterns?”.
Overview
Loot Boxes: Rise (and Fall?)
Alongside downloadable content (DLC) and other digital in-game items (such as individual weapon or character skins), loot boxes have established themselves as one of the most lucrative monetisation systems in the gaming industry in recent years.
Loot boxes are entirely virtual “chests” filled with random in-game content (e.g., skins, weapons, heroes, abilities, etc.) that can sometimes be earned for free but are primarily purchased using in-game currency or real money. The content within loot boxes is categorised by rarity, and the likelihood of receiving specific items corresponds to their rarity.
Recently, however, loot boxes have fallen out of favour. In 2018, they were outright banned in Belgium. The Netherlands has also announced plans for a nationwide ban last year. The primary concern is the increasing comparison of loot boxes to gambling, with children and young people—who are the target audience for many games—being deemed particularly at risk. Austrian case law on loot boxes is also intensifying, with consumers filing claims for reimbursement against providers (see our article “Gaming: Gambling Ruling in Austria – Sony Must Refund Loot Box Purchases”).
The debate has also reached Germany. The revised Youth Protection Act, which came into force on 1 May 2022, places significant emphasis on protecting children and young people in the media. Under Sec. 10b para. 3 of the German Youth Protection Act (Jugendschutzgesetz, “JuSchG”), risks from gambling-like mechanisms and mechanisms promoting excessive media usage are explicitly recognised as “risks to the personal integrity of children and young people.” Preventative measures against such mechanisms can be taken under Sec. 24a paras. 1 and 2 JuSchG. As of 1 January 2023, the Entertainment Software Self-Regulation Body (USK) also introduced new rules for assessing digital games. In-game purchases, chats, and loot boxes are now included as criteria for age ratings.
Battle Pass: The Future of Gaming?
To counteract this trend and prevent jeopardising their monetisation strategies, major video game developers (including Epic Games, Activision Blizzard, Ubisoft), along with numerous mobile and browser games, have developed and implemented new monetisation models in several of the most-played AAA games (such as Fortnite, Overwatch 2, Call of Duty: Warzone, Rainbow Six Siege, etc.).
The so-called “Battle Pass” is gaining ground. The Battle Pass rewards players for actively playing the game and achieving specific in-game objectives (e.g., “Win three matches”) with experience points or similar incentives, as well as for reaching milestones (e.g., levelling up). This model is predominantly used in free-to-play games to ensure a stable and somewhat predictable source of funding for the ongoing development and maintenance of the game.
Battle Passes are generally designed to include both free rewards and premium rewards. Players can preview all the rewards before purchasing the Battle Pass and base their purchasing decision on this information. A subsequent purchase of the premium version of the Battle Pass retroactively unlocks rewards for levels and objectives already achieved. Players also frequently have the option to purchase specific levels in addition to the Battle Pass itself, enabling them to obtain certain rewards without investing the necessary playtime.
Legal Questions Surrounding the Battle Pass
The rise of a new monetisation model in gaming inevitably raises questions regarding its legal classification. The key issues include:
- How is the purchase of a Battle Pass concluded?
- What type of contract governs the purchase of a Battle Pass?
- What rights and obligations arise?
- What problems and risks exist?
How Is a (Premium) Battle Pass Purchased?
First, players must enter into a contract to play the game. Since Battle Passes are primarily used in free-to-play games, this contract is typically either a loan agreement under Sec. 598 BGB if the game is provided free of charge for a limited period or a gift agreement under Sec. 516 BGB if the game is provided free of charge indefinitely. Free-to-play games benefit developers by attracting a large player base, as no initial investment is required. The larger the player pool, the higher the likelihood of generating revenue through in-game purchases.
Next comes the purchase of in-game currency. Battle Passes are generally structured so they cannot be purchased directly with real money but instead require “premium” in-game currency. This currency can be bought with real money or earned in small amounts through in-game tasks (e.g., challenges). In some games, players who purchase the premium version of the Battle Pass receive rewards in the form of premium in-game currency, which can sometimes be sufficient, upon fully levelling the Battle Pass, to purchase the next Battle Pass without spending real money.
The Battle Pass can then be purchased using the in-game currency, granting players access to the bonuses, rewards, and other content associated with the Battle Pass.
What Is the Legal Nature of Battle Passes?
To determine the legal nature of a Battle Pass, the in-game currency used for its purchase must first be classified.
With the revision of purchase law on 1 January 2022 to implement the EU Directive on certain aspects concerning contracts for the supply of digital content and digital services (Directive (EU) 2019/770), the “consumer contract for the purchase of digital content” was incorporated into Sec. 453 para. 1 sentence 2 BGB. The legal definition of “digital content” is provided in Sec. 327 para. 2 sentence 1 BGB, which defines it as “data produced and supplied in digital form.” This applies to in-game currency, meaning its purchase by players is governed by Secs. 453 para. 1 sentence 2, 433 para. 2, and 327 et seq. BGB.
It remains an open question whether purchasing a Battle Pass using in-game currency also establishes a contractual relationship. Some have argued that acquiring in-game currency constitutes not a purchase but the acquisition of performance-determining rights under Sec. 315 BGB. When players use in-game currency to unlock content (including the Battle Pass), this is seen as an exercise of acquired performance-determining rights. As such, the individual “purchases” of content would not constitute separate contracts but rather modifications to the fulfilment of the main contract.
Since the purchase law revision, this view is no longer easily defensible. A Battle Pass must now be classified as a “digital product” within the meaning of Sec. 327 para. 2 sentence 1 BGB. Players are predominantly consumers (Sec. 13 BGB), and the provision of “digital products” by developers as entrepreneurs (Sec. 12 BGB) against payment of a price falls under Sec. 327 para. 1 sentence 1 BGB. In-game currency itself is not only categorised as “digital content” but also understood as a digital representation of value. According to Sec. 327 para. 1 sentence 2 BGB, a “digital representation of a value” is considered a “price” within the meaning of Sec. 327 para. 1 sentence 1 BGB. Thus, the provisions of Secs. 327 et seq. BGB apply.
If this legal interpretation is adopted, it would have far-reaching consequences.
What Rights and Obligations Are Created?
The rights and obligations resulting from this contractual classification for developers and players are primarily governed by the general rules for “digital products” in Secs. 327 et seq. BGB.
Players are obliged to pay the purchase price in in-game currency under Sec. 433 para. 2 BGB. Developers, in turn, are obligated to provide the Battle Pass and its associated digital content according to the unlocking conditions. If they fail to meet this obligation, players may terminate the contract under Sec. 327c BGB and assert claims for damages.
Consumers also enjoy tailored warranty rights for digital products in cases of defects (Sec. 327e BGB) or third-party rights (Sec. 327g BGB), which replace general sales law warranty rights pursuant to Sec. 453 para. 1 sentence 3 BGB.
What Problems and Risks Exist?
Warranty claims for Battle Pass purchases (or other in-game purchases) present a significant challenge in damage assessment. If the game ceases to operate, refunds in in-game currency are practically unfeasible. Since in-game currency cannot always be directly converted to real money—given that it can be earned for free by playing the game or sold at discounted rates during sales—valuation issues arise.
Further problems also concern youth protection. Many games target children and young people, raising questions about the validity of contracts. Under Sec. 107 BGB, a minor requires the consent of their legal representatives for a valid contract. If in-game currency is purchased with consent, this likely extends to purchases made with that currency. However, if in-game currency was acquired without consent, purchases made with it are also affected, rendering contracts void until subsequently approved. Without approval, these contracts are permanently void, necessitating rescission and potentially giving rise to refund and compensation claims.
Conclusion
The monetisation of video games is undergoing a transformation. While loot boxes are increasingly criticised due to legal concerns and youth protection regulations, the Battle Pass is emerging as a more transparent and predictable alternative. This model allows players to unlock new content by actively playing and achieving goals, with the rewards clearly outlined beforehand.
Nonetheless, the Battle Pass also raises legal questions. From its contractual nature to the rights and obligations it entails, as well as potential risks—particularly concerning youth protection and the validity of contracts with minors—numerous aspects require careful consideration. Developers and providers must ensure compliance with legal requirements to avoid disputes.
Are you a developer or publisher seeking legal certainty? Feel free to contact us for tailored advice on the legal aspects of monetisation models in the gaming sector.