A Positive Move

In the wake of the ESA's decision to bring an end to the annual E3 spectacle at the Los Angeles Convention Centre and instead create a much smaller, "more intimate" event in July, leading industry analyst Michael Pachter of Wedbush Morgan Securities shared his thoughts on the end of an era - and, potentially, the beginning of a new one...

As a gamer, I actually enjoyed the spectacle of E3, and the interaction with all of the masses of people who knew a lot more about all of these games than I would ever hope to know. As a professional industry observer, I think a smaller format will be more beneficial for the sponsors of the event.

I think it's important to ask why the event existed in the first place. There are really only two reasons - either for the publishers and console manufacturers to attract attention for their products from their most important constituents (retail and their investors, with a healthy assist from the media), or for the sponsors to promote their products to the industry as a whole with an assist from the media. I think that the business purpose for the event is the former, and apparently that thought is shared by the key sponsors.

If, in fact, Sony, Microsoft, Nintendo and EA are interested in presenting their products to retail and their investors, and in attracting sufficient media attention to ensure that the presentation receives appropriate publicity, E3 as it was configured in past years is an inefficient and costly delivery mechanism. The sheer number of resources required to operate a 50,000 (guess) square foot booth, ensure that games are ready for presentation up to six months before launch, and manage the traffic flow of a 60,000 person convention is overwhelming.

It is probably harsh to say that E3 "failed". I don't think it failed, as much as it grew too costly to justify from a return perspective. I think that the sponsors were looking for an alternative that accomplished the same business goals at lower dollar and personnel cost. It is likely that teams of people at each company worked year-round on E3, and this is probably not the best use of human capital.

It's hard to comment on trade shows in general. For example, a footwear show is probably required because of the large number of new products every year, the fragmented nature of retail, and the lack of media coverage. The same cannot be said for video games, with 80% retail concentration among a handful of retailers, incredible media coverage, and products that are known years in advance. I do think that other trade shows will gain in significance, as their "spread out" timing will allow for product introductions to the media throughout the year, and will place less emphasis on having games "ready" at E3.

It is clear that an event held ONLY for the media, retail, and investors will accomplish most of what the sponsors desire, with greater control over the news flow and a far more sympathetic audience. I envision an E3 with 5,000 attendees (yes, including online media and a large number of bloggers), but not an E3 with friends and neighbors of people who used to work for EA three years ago in attendance.

I think that a move to July makes sense for two reasons: first, the games shown will be two months closer to being finished, and therefore far more polished; and second, the resources required in the past for a pre-E3 show, E3 itself, and a follow-up showing in July when games are more polished can be reduced into a single show with maximum impact.

Ultimately, I think that the losers are going to be smaller companies, who may find it inefficient to host an event without the 60,000 person traffic flow, and industry workers who added a lot to the overall enjoyment of the experience. I think that over time, the blogging world will consolidate into a few higher profile blogs (much as Internet portals have consolidated), and the more important bloggers will be added to the list.

I envision an event similar to the Cannes Film Festival, or the Sundance Film Festival - exclusive, yet high profile. We'll see if the ESA can pull it off. I hope so.