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The ESA hits a low point

10 Years Ago This Month: Self-regulation helps fend off threatened legislation, but mismanagement of E3 has members jumping ship

The games industry moves pretty fast, and there's a tendency for all involved to look constantly to what's next without so much worrying about what came before. That said, even an industry so entrenched in the now can learn from its past. So to refresh our collective memory and perhaps offer some perspective on our field's history, GamesIndustry.biz runs this monthly feature highlighting happenings in gaming from exactly a decade ago.

Self-regulation works

With all the fuss over loot boxes and gambling laws that have hit the industry in recent months, there has been no shortage of calls for the industry to get together and self-regulate, lest it invite governmental intervention and risk causing far greater damage to the industry. After all, that's more or less what happened in the mid-'90s when there was a parental panic over violent games like Doom and Mortal Kombat. In North America, publishers came together to form the Entertainment Software Association (then the Interactive Digital Software Association) and a universal ratings system to appear on all game packaging and advertising.

In 2000, children were able to buy M-rated titles 85% of the time. By 2008, it was down to 20%.

That helped stem the criticism at the time, but a decade later when Grand Theft Auto III and other titles started pushing the envelope when it came to gore, sex, and profanity, concerned parents' groups and politicians again raised their voices. Their anger was partly justified, as the rating system the industry held so dear was being very loosely enforced.

In 2000, a Federal Trade Commission study found underage shoppers were able to buy M-rated titles at major retailers 85% of the time. The industry responded, this time working with retail partners to ensure that its oft-touted rating system was actually being enforced by retailers so kids couldn't get their hands on M-rated titles. By 2006, the number was down to 35%.

10 years ago this month, the FTC released a follow-up report, which found considerable further improvement in ratings enforcement, as underage shoppers were only able to purchase M-rated titles 20% of the time. They were even better at video game-specific chain GameStop, where underage shoppers were only able to get M-rated titles 6% of the time. On top of that, the games industry's enforcement at retailers was far better than that of R-rated and unrated DVDs, or music CDs with explicit content labels.

It may have cost game publishers some sales in the short-term, but it was a necessary move to maintain the credibility of the rating system and prevent government interference, which was a distinct possibility with numerous pieces of legislation making their way through statehouses and courts at the time. When California's law restricting violent game sales to minors was struck down by the Supreme Court in 2011, the Court specifically noted the FTC's findings about effective enforcement of the ESRB system to deny the state needed legislation to help parents control their children's exposure to violent games.

Big names go ESA-WOL

That might lead one to think the ESA had its act together, but it was actually a low point for the organization in the "having its act together" department. That's most clearly evident in the way the ESA handled it annual centerpiece, the Electronic Entertainment Expo. For years publishers and industry attendees complained about how big the show had gotten, how it was so jam-packed with people it was difficult to get business done properly, how expensive it had become to have a big flashy booth that might be lost in the spectacle and blaring music of the booth next door.

In response to these ongoing complaints, in 2007 the ESA moved E3 from the Los Angeles Convention Center to a number of hotels in nearby Santa Monica, cut attendance to a fraction of what it had been, and abandoned the big show floor and replaced it with a gathering of modest kiosks in an airplane hangar a drive away from all the other events.

Moving E3 to Santa Monica cost the ESA $5 million in broken contracts and $15 million in lost revenue. E3 moved back to LA after one year.

The relocation cost the ESA $5 million for breaking its contract with the LACC, and a whole bunch more in money it was no longer collecting in fees from renting out the E3 floor and plastering every flat surface of the LACC with advertising. In 2006, E3 brought in almost $18.5 million in revenue for the ESA. The 2007 Santa Monica show only brought in about $3.5 million.

In the end, the Santa Monica show was not well liked, and the ESA swallowed its pride and returned to the LACC for 2008 anyway. As if that weren't enough of a gong show, the ESA's plan to make up for lost revenues was to jack up membership fees; it went from collecting about $1 million in member fees in 2005 to $17.4 million in 2007. So any possible member savings from the smaller E3 had to be reconsidered in light of the increased tab they were paying for the trade group to do basically the same things it had been doing for years, minus putting on a huge industry-promoting spectacle that generated buzz and mainstream awareness for their products.

Most of that was more than a decade ago, but the context is key for explaining May of 2008, when the soon-to-be-merged Activision and Vivendi Games left the ESA. They were quickly followed by LucasArts, and later in the month id Software cut ties as well.

At the time, Electronic Arts VP of corporate communications Jeff Brown told GamesIndustry.biz, "I think having [Activision and Vivendi] pull out of the ESA reflects an unfortunate lack of leadership." In context, Brown's remarks are clearly directed at Activision and Vivendi for refusing to take a leadership role befitting their significance to the industry. However, it could also be read as a shot at ESA president and CEO Michael Gallagher, who had just joined the ESA the prior year, months after the Santa Monica move had been announced but before the show itself. Not only was he inheriting a messy transition for the show, but he was also entirely new to games, having previously served as a telecom and internet policy advisor in the George W. Bush administration.

Since that time, things have settled down at the ESA somewhat. For one, Activision Blizzard and id Software (through its parent company Bethesda) are members again. The last decade has seen E3 regularly return to the Los Angeles Convention Center and return to its former scale. The ESA has even opened up the show by selling some tickets to fan attendees, which seems a necessary concession for an increasingly influencer-driven industry. However, the ESA's golden goose is changing in undeniably concerning ways.

For the last couple years, Electronic Arts has abandoned the show proper to run a nearby EA Play event instead. Xbox is skipping the show floor this year as it sets up shop in the LACC-adjacent LA Live complex (although it is still an official E3 event). Two years ago, Activision Blizzard didn't even bother with a satellite event when it skipped the LACC. Nintendo still has a booth on the show floor, but it hasn't run an E3 press conference in several years, choosing instead to make its big announcements online through a pre-recorded video instead.

For whatever reason, more and more of the larger publishers are deciding they don't need to be fully involved at the show every year, that they can achieve their objectives better elsewhere. Having so many of the biggest and most successful ESA members down as a "maybe" to attend each year means the show, and the organization itself, is perpetually just a couple bad breaks from a serious problem. The ESA's role is to make an E3 that meets the needs of its members. Whether they can achieve that remains to be seen, but either way, it's a safe bet E3 10 years from now will look a lot different than the E3 of today.

Distinctly 2008

● Inspired by the success of Guitar Hero, Konami announced Rock Revolution, somehow managing to show up late to the rhythm game party it conceived, organized, and kept going for years with DanceDance Revolution, Karaoke Revolution, GuitarFreaks, and DrumMania.

● James Cameron was hyping 3D for everything, including the Ubisoft adaptation of his upcoming blockbuster Avatar. "You are in the game," he said. "This is the ultimate immersive media." Avatar was indeed a smash and 3D games soon became commonplace, but their appeal quickly faded. These days virtual reality gets the "ultimate immersive media" hype and 3D seems like a vestigial novelty movie theaters have clung to so they can charge an extra $5 per ticket.

● Valve president Gabe Newell reveals that the company is at a tipping point where digital revenues will soon total more than its income from packaged retail game sales. That shift continued, as a little back-of-the-envelope calculation suggests that the company's current income from packaged retail game sales total roughly 0% of its annual revenue.

Distinctly timeless

● Hey, did you hear? This is the last generation of consoles.

● Hey, did you hear? Single-player games are dead.

● Hey, did you hear? Some big video game is being turned into a movie that will never come out.

● Hey, did you hear? Some game publisher wants to do for game movies what Marvel did for comic movies.

● Hey, did you hear? Hideo Kojima thinks games and movies should be the same thing and wants to move on from Metal Gear. (Although to be fair, it looks like that last bit has finally happened for real.)

Milestones

● Happy anniversary to Sony's Shuhei Yoshida, who has been the company's president of worldwide studios for 10 years now.

● Chair Entertainment is one of our happy acquisition anniversaries, as the developer was purchased by Epic 10 years ago and is still around, hard at work on Spyjinx, BattleBreakers, and providing support for other Epic efforts like Fortnite.

● Happy (sort of) anniversary to PlatinumGames, which had its first big reveal 10 years ago when it announced a four-game deal with Sega. Those games would be two games that practically defined the company's reputation--Bayonetta and Vanquish--and two games that did not: the violent Wii brawler MadWorld and the Nintendo DS sci-fi tactical RPG Infinite Space.

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