We are in Los Angeles for E3. E3 is always exciting and fun, but it has had a strange history.
Here’s what I experienced as a video game studio executive.
When I first got to Rainbow we were the kids at the back of the pack. Jumping up and down, we were outsiders. People knew who Rainbow was, but no one really wanted to see us. Then, Rainbow Shipped Motocross Madness and things changed. People wanted to speak to us. So we were invited to go to E3.
People started bringing us into closed door meetings. That we were working on Motocross 2 didn’t hurt. Microsoft treated us well and showed the game off for the press. E3 was a gas because you always needed to produce a working version to impress people. In some ways, in many ways, E3 was more stressful than launch. You had to take all of this stuff months before it was ready and make it look gorgeous and fun. The playable part was the hardest.
Somewhere along the way, we went from the back of the pack kids to the front of the pack. Publishers wanted to see us before we got to E3. They would fly out to meet us. Yes we would still have closed door meetings at E3, invited to every party at E3, but now people were talking about buying the studio. Eventually the studio was sold to THQ and then we became insiders in a different way. We watched as THQ would setup their million dollar booths. They would create these elaborate stages and platforms to show games. It was all exciting, it was all cool, but what was it all for? As developers we never really asked that question. We were just excited to be there. We wanted to show off our game, win some awards (hopefully), impress the press and win some fans. But most of all we wanted to have a big party, geek out on our favorite games (the ones we weren’t making) and check out what everyone else was going.
E3 was nothing if not electric.
Then a funny thing happened. Right about the time I left development to start my own company, E3 STOPPED. Cold. They just stopped doing it. I have heard a lot of rumors as to what happened, from too many fan boys were coming, to the show got too big. On the day of E3 I will now add my own speculation to the mix.
By 2006 a couple of interesting things were happening in the industry. First you have to ask yourself, what is E3 for? What purpose did it serve? E3’s primary purpose was to sell games to retailers. It’s secondary purpose was to build demand via the journalists attending the event.
If you have ever been to Toy Fair in New York, you know what I am talking about. It is a massive exhibition to help the many thousands of retailers know what to buy in the coming months. Much like video games, the toy industry is an industry that makes the lionshare of its revenue in the 4th quater.
Even today Toy Fair caters to many many retailers. Even my company, GameTruck qualifies as a specialty retailer. We have meetings with toy companies. But in the video game industry Walmart changed everything. While E3 was getting bigger and bigger, the retail industry was consolidating.
When Walmart entered the video game industry, they told a friend of mine, “We will be 30% of the video game industry revenue in three years.” He laughed. Who would go to Walmart to buy video games. The answer? America. Within three years Walmart represented 40% of video game industry sales. And Walmart buyers rarely leave Bentonville. In short, they don’t go to E3.
In a very short amount of time, nearly half the buying capacity of the industry did not travel West to Las Angeles for a video game show. Those buyers expected you to pay them a visit. The story I mentioned about how Publishers started to come visit us ahead of E3, played out with all the major retailers, and the journalists as well.
If your sales team was going to make a trip to Bentonville, then they had better hit Minneapolis the homeland of Target to pay them a visit as well. In the mid 2000’s 80% of video game retail counted on just 10 accounts. Woa be to the major publisher who did not lavish attention on those accounts before E3.
But there was more. The rise of the successful movie video game meant that the really large licensors had to bring more properties to bear to get shelf space for their video games. DreamWorks would make custom videos featuring Shrek for the Walmart Channel. Those efforts were not cheap or easy.
And they did the same thing with the Press. For the making of ATV OffRoad Fury 2, Sony flew out journalists from every major magazine, we rented race quads (not an easy task) and fitted everyone out in custom uniforms from our gear sponsors that went into the games. This was not a cheap day, but it was an absolutely blast riding quads in the desert.
If you are spending time at the retailers office, and you take the press out on fancy junkets with the developers to get early playable looks at the video games… what exactly are you doing at E3? And who exactly are you talking to?
That became the core problem with E3. Companies were spending millions, and I mean, Milllions of dollars on booths, and demos, and space to show their games… to fans? To the smallest possible buyers and the press not important enough to visit?
I heard that EA was the one who pulled out first. Followed by Microsoft, Sony and Nintendo. With the anchor booths gone the whole show evaporated nearly overnight. That lead to the year of no E3.
I think most people realized pretty quickly that was a mistake, but the reasons were not so obvious. So the show organizers went to the big dogs and said, what do you need? On the one hand, they felt they needed to return the show to a true industry event. It was becoming like comicon, but the costs had also grown way out of control.
So they arranged the event at Santa Monica. That addressed some of the problems, but from what I could tell – it did not address the real problem created by the absense of a big E3. Excitement. The video game industry as an entertainment industry thrives on excitement. E3 was the one time a year when the entire industry came together and companies like Sony, Nintendo, Microsoft could throw their corporate muscle behind having fun.
Having one place where virtually every developer, every executive, every staff member of every level shows up to look at everyone elses games – was valuable, but perhaps the single most valuable thing? Auditoriums full of cheering video game fans to announce your products to. There is an energy around a large audience anticipating a major announcement. You just can’t get that kind of energy from a conference room with 30 people or an auditorum full of staff told they have to be there.
E3 has become a cultural platform, a stage where the industry tries to convince themselves they have created something that will entertain the world. While expensive, the feedback they get from this process is invaluable. No in store demo, no card board merchandising rack can generate the level of excitement a well constructed booth can create at E3.
In many ways, E3 is where video games are really born to the world. They come out of hiding, they are dressed up to be as beautiful as possible and they tell us the future is bright. And I don’t know anyone who travels to E3 not expecting to buy that bright future.
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