The ESA must adapt or die

SuperData CEO Joost van Dreunen argues that the trade body no longer actually represents the industry and must step up its game

Two weeks ago, the Entertainment Software Association (ESA) lashed out at market research firm NPD. Most of us know that NPD has been the primary source of industry information when it comes to games sold at retail in the United States. The ESA hosts a conference each year that caters to retailers and allows publishers to show off their new wares: E3. Unsurprisingly, because of their shared interest in catering to companies that generate revenue from retail-based game sales, NPD and the ESA are long-standing partners. And the ESA honored this partnership by publicly shaming NPD. Again.

What's wrong with these people?

Besides the obvious insensitivity, it is comments like these that tell you how close an association like the ESA is to becoming irrelevant. For one, the industry is changing drastically, and that should not come as news to anyone watching over the last ten years. Today, at $75 billion across categories, the worldwide market for interactive entertainment is more than three times larger than it was ten years ago. People now play games on a wide variety of devices, publishers draw earnings using several new revenue models, and the process of development and distribution has unprecedentedly low barriers to entry. But perhaps most importantly, gaming has, finally, graduated to becoming a mainstream form of entertainment.

"The very ground that the ESA was built on is starting to crumble"

In the United States, video games represent a $24 billion industry and are now bigger than newspapers ($21 billion), radio ($17 billion), magazines ($16 billion), film box office ($11 billion) and music ($9 billion). Of every dollar spent on entertainment, $0.13 goes towards gaming. It is remarkable then that the best-known association that looks after the interests of an industry that has tripled in size, has somehow managed to become less important.

With regards to growing share of digital revenues for game companies, the ESA states: "Scores of millions of consumers purchase innovative content in myriad ways." That is about as vague as a statement can get. It suggests that beyond the mandatory hyperbole, the very association that looks after one of the biggest games markets in the world is clueless to even quantify the market at its most basic level. Worse, according to its website, the ESA currently has 33 members, of which only four are digital-only companies. By comparison, its counterpart in the United Kingdom, Ukie, which represents a market that is roughly one-fifth the size of the US, counts 250 members. And this includes many of the same names and big publishers. The ESA also tells us that nowadays consumers are spending money via "subscription services, digital downloads, and via their mobile devices." Yet we notice an absence of companies like Apple, Facebook, Google, Valve, Supercell and King, each of which represents a household name in gaming and holds a vested interest in the US market.

You can't sit with us

Last week, Electronic Arts announced that instead of buying itself a booth at E3, it had decided to leave the show floor and will be organizing its own fan-oriented event elsewhere. After years of criticism that E3 doesn't provide enough coverage on game categories that lie outside of retail, now one of the majors is fleeing the nest. At the same time, we've reached the peak of the current console cycle, arguably the very core of the traditional games industry, which means that the focus in the next few years will move to mobile, PC, virtual reality and eSports.

Central to all of this, of course, is an inevitable decline of specialty retailer GameStop. While some of its digitally focused assets like Kongregate continue to do well, the firm has made a clear decision to diversify its overall retail offering with the acquisition of related businesses such as Cricket Wireless, ThinkGeek, Spring Mobile and Simply Mac. Confronted with a decline in the number of unique physical titles released every year, dropping to under 200 in 2015, GameStop is now experimenting with becoming a publisher and partnered with Insomniac Games on Song of the Deep. And with the holiday season behind us, we anticipate that GameStop will announce layoffs and a reduction of its overall retail footprint during its next earnings call, possibly arguing that it is the result of a seasonal pattern. The very ground that the ESA was built on is starting to crumble.

Step up or step off

The games industry is riddled with people that hold strong opinions. Consumers, developers, press: everyone's a critic. But when it comes to stepping in and advocating for a real cause, there's a lot left to be desired. Case-in-point: as the top trade body for the games industry, the ESA probably could have done more when the chaos around Gamergate erupted last year. At the very least, something a bit more proactive than emailing a boilerplate response and then only after being asked by a reporter.

"...we need true leadership, not a bunch of people ready to step on others to elevate themselves. If the ESA finds there is not enough market transparency, it should encourage and not criticize"

As an industry researcher, I share the frustration and challenge that comes with analyzing and accurately capturing what is clearly the inevitable future of interactive entertainment. But beyond my own personal fascination and business agenda, this is also an industry that struggled for years to gain relevance with mainstream audiences. Anyone who works in the industry, regardless of what side of the fence you're on, has dealt with incredulity and mockery. Now that games are finally getting the respect stakeholders have fought so long to obtain, we need true leadership, not a bunch of people ready to step on others to elevate themselves. If the ESA finds there is not enough market transparency, it should encourage and not criticize.

We all understand that the industry is changing and that digital is the future. And it would suit the top trade body for the games industry to take some initiative and provide guidance. Different from ten years ago, there now is a generation of academics and analysts who would like to see games truly evolve. In the past few years a slew of academic programs at esteemed institutions like NYU and USC have popped up that encourage young adults to consider a career in programming, design and development. As a colleague recently remarked: "Game developers hone skills that are applicable across a range of industries, and not just gaming." At the same time, there still exists a lot of uncertainty around recently emerged categories like mobile casino games and free-to-play games that target kids. These are all areas where a strong regulatory body could play a critical role, build relationships and find common ground.

So, with the very foundation of the games industry shifting, I invite the ESA to step up to the plate. What we need is leadership from an association that is in touch with the industry and cares for its constituents. Instead of booing the ESA should be building bridges. And in return, we can help you lose the ever-stronger stench of irrelevance.

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