End of an E3ra | This Week in Business

This Week in Business is our weekly recap column, a collection of stats and quotes from recent stories presented with a dash of opinion (sometimes more than a dash) and intended to shed light on various trends. Check every Friday for a new entry.

The Entertainment Software Association made it official this week. The Electronic Entertainment Expo is no more.

QUOTE | "After more than two decades of E3, each one bigger than the last, the time has come to say goodbye. Thanks for the memories." – The ESA confirms the show's demise on social media.

First off, that's a pretty blatant lie. Each E3 was not bigger than the last. In 2007, the show floor moved from the massive Los Angeles Convention Center to an airplane hangar in Santa Monica and cut attendance to less than one-tenth of 2006's show, for Frogger's sake.

The biggest E3 by any reasonable definition was almost certainly E3 2005, with an announced attendance of more than 70,000 and an LACC so packed that the event was taking up meeting rooms in the neighboring Staples Center.

QUOTE | "I think if I had one more inch of space, I would have sold it. I don't think that there's any spot left untouched in the building..." – E3 show director Mary Dolaher, after the 2015 show.

Anyone who attended the shows could tell you E3 2005 and 2006 were on a different level to any of the more recent E3s, the ones where Kentia Hall served not as an overflow show floor for a horde of exhibitors that couldn't land space in the main halls but as a parking lot. The ones where the South and West Hall show floors sadly petered off into nothing well before you reached the back wall, and you started to wonder if they could have fit a few more parking spaces up there as well. The ones with conspicuous holes in the attendee list, like EA, Sony, and Activision.

E3 was on a downswing for years before the ESA pulled the plug. For more than a decade, depending on who you ask. And even if the trade group's social media channels don't want to admit that, at the very least ESA president and CEO Stanley Pierre-Louis acknowledged the truth of the matter.

QUOTE | "There were fans who were invited to attend in the later years, but it really was about a marketing and business model for the industry and being able to provide the world with information about new products. Companies now have access to consumers and to business relations through a variety of means, including their own individual showcases." – Pierre-Louis, in an interview with the Washington Post breaking the news of the show's demise.

So we've got a couple causes of death alluded to in that statement.

E3 as a marketing event grew obsolete because companies realized they could just have their own showcase targeting gamers directly and it would be cheaper, without carrying any of the risk that their latest big game would end up being compared unfavorably to the competitor's big announcements of the day.

E3 was a habit for many of us, an annual centerpiece around which the gaming calendar revolved

And E3 as a cornerstone of the business model became less relevant as the industry shifted to digital distribution, meaning companies weren't living or dying on holiday orders made by retail partners who needed to determine what they'd be carrying and pushing to customers during the summer.

The industry has changed, and there's no logical reason for the biggest players in the industry to spend irresponsible amounts of money to put on a big song and dance when they can accomplish their business objectives more cheaply and reliably through other means.

Even so, E3 was a habit for many of us, an annual centerpiece around which the gaming calendar revolved. It was a time to converge in one place, see old friends around the industry, and excitedly debate the merits of what we saw, who seemed to have it all figured out, and who was almost certainly doomed. And really, that was sometimes as much fun as anything on the show floor.

So to mark the end of a grand tradition, let's do this one last time and run down the winners and losers of E3.

E3 Winner: Hype

If there was one thing E3 exceled at, it was getting people stoked about buyin' stuff.

As far as consumerist orgies go, it was fun

It was when Microsoft, Nintendo, and Sony took their biggest swings of the year, all in rapid succession. Third-party publishers like EA, Ubisoft, Square Enix, Konami, Bethesda, and others would pad out the undercard with their own events. Retailers would run big sales on preorders for the week to capitalize on the enthusiasm of a barely informed public.

And as far as consumerist orgies go, it was fun. There was always the promise of something new, something bigger and better than we'd ever seen before, something that pushed the boundaries of what could be done with games. It was a high achieved by mainlining pure potential, completely untethered by unpleasant reality.

Unfortunately, every high has its comedown, which brings us to…

E3 Loser: Truth in advertising

You can't tell the story of E3 without talking about how much borderline fraudulent nonsense was passed off as real.

Halo 2's E3 2003 demo made such an impact it was still being referred to as "The famous Halo 2 E3 demo" on IGN last year was all smoke and mirrors, as a Bungie developer admitted seven years later, running on a graphics engine that was never going to be playable on an original Xbox.

The E3 2005 trailer for Killzone 2 was an internal pre-rendered idea of how Guerilla thought a next-gen first-person shooter could work, not something they expected to be made public, and certainly not billed as "running in real time on a PlayStation 3."

Aliens Colonial Marines shipped as such a shadow of an E3 gameplay demo from noted sleight-of-hand-aficionado Randy Pitchford that one disappointed player literally made a federal case out of it. Two years later, Sega and Gearbox had both agreed to separate settlements.

BioShock Infinite's E3 trailer generated all kinds of hype, but it promises a very different type of experience than the final game delivers.

E3 trailers were regularly misleading, or at least not representative of the final product

These are just a few of the more notable examples, but E3 trailers were regularly misleading, or at least not representative of the final product. Companies were often vague about whether they were showing gameplay, cinematics, target renderings, in-engine footage, or just complete bunkum.

Some of that is defensible, given that the games people care the most about at E3 typically aren't anywhere close to done yet. Developers can have good-faith ambitions more in line with the trailers but the realities of development force compromises and other changes as the game gets closer to completion. And because it was a hyper-competitive environment with each game's commercial fate arguably hanging in the balance, nobody had any incentive to be conservative about how awesome the final product would look or how innovative it would be.

But I can't help but feel the frequency of these E3 trailers promising an experience the games didn't deliver has left a mark on the audience over the years. They have been conditioned not to trust game publishers and companies. They have been primed to have an antagonistic relationship with them, to assume the worst, and to behave as if they are entitled to the product they expected because that's the misconception they based their pre-order off of. (A pre-order the company might have pressured them into with a limited edition or an exclusive extra in-game doodad.)

It's certainly not the only reason we've got such a dysfunctional relationship between players, the press, and creators in the games industry, but it definitely didn't do us any favors, either.

E3 Winner: Absurdity

Everyone who followed the show over the years no doubt has their own set of cherished memories from E3. I went to 16 of those shows, and at this point most of my memories of it are a sort of homogenous smear of violence, loud noises, and people wearing blazers over hoodies.

But there are still a handful of distinctly joyful memories of gaming's utter absurdity on full display, memories of live stage show disasters, ill-conceived "activations," and people wearing blazers over hoodies.

Like the time Sony leaked its own big hardware announcement the day before its E3 briefing.

Or that time EA paid people to pretend to be a church group protesting Dante's Inferno, but it was clearly fake because few people in the industry cared about Dante's Inferno, much less people outside the industry. And the religious zealot protestors of the day would have been many times more likely to attack an actually successful and popular game with demonic overtones, so they really would have had some much stronger options to go on.

Or that time Texas governor (and future woefully underqualified US presidential candidate) Rick Perry delivered the E3 keynote address to a humiliating turnout of maybe 25 actual people for a room that had been prepped for more than 1,000 attendees.

Or that time Ubisoft made its big press briefing the subject of mockery with James Cameron's extended rambling about the game adaptation for Avatar at E3 2009 without actually giving significant details or showing anything related to the game. (It was so long the YouTube video of it is split into two parts.)

Or that time Ubisoft made its big press briefing the subject of mockery with a live demo of a Lazer Tag knock-off in 2010 that was somehow both overly rehearsed and not planned out enough.

Or that time Ubisoft made its big press briefing the subject of mockery with Mr. Caffeine, an unknown pitchman who dutifully acted excited about everything, including a putrid script with Wayne's World references, Wii innuendo, and overt sexism that had already aged poorly in 2011.

E3 Loser: Dignity

One thing I won't miss about E3 is how the show was so often hostile to any sense of shame, from handsy attendees hassling booth babes to journalists hooting and hollering at press conferences to people being unable to go to the bathroom without being worried about a wig-wearing influencer livestreaming their business for the world to see.

While none of those applied to me personally, the show could rob you of your dignity in a million different ways. Like that time I got stuck in an LACC toilet stall when the lock broke, and I had to commando crawl out on the alarmingly filthy bathroom floor. Or worse, that time I had to sit through Jamie Kennedy's anti-comic Activision press briefing.

Nobody gets out of E3 completely intact.

E3 Winner: Everyone who ate at Fernando's Taco Inn

Located just a couple blocks away from the LACC, Fernando's Taco Inn was one of maybe five places to eat within walking distance of the convention center for the first decade or so of the show. It was an oasis for weary show-goers who simply couldn't stomach the idea of overpaying for another of the on-site café's Ham Duet sandwiches, which tended to be alarmingly moist on the outside yet dry and almost chalky once you bit into them. Fascinating, but not appetizing.

Maybe it was just great in comparison to the other options, but even now I'm confident Fernando's was hands-down the best taco joint in the side of a car wash I've ever been to.

When I found out Fernando's Taco Inn had shut down during the pandemic, I wondered what the point of even having another E3 would be. It turns out the industry agreed with me.

Also, anyone who went to E3 after playing Tony Hawk's Pro Skater 3 might have gotten a little thrill out of seeing one of the real-life inspirations for the game's LA level.

E3 Winner: The Entertainment Software Association

The ESA is a trade group comprised of many of the biggest companies in gaming, a cheerleader for the industry. And for much of the organization's existence, E3 has been one of its chief acts of boosterism.

E3's job was to promote the companies and products the games industry had to offer, and to make them a mainstream news event. It absolutely did that effectively for much of its lifespan.

STAT | $7 billion – The total amount spent on game software in the US in 2003, according to the NPD Group.

STAT | $47.5 billion – The total amount spent on game software in the US in 2022, according to the NPD Group.

The fact is that the games industry has been so successful it actually outgrew the need for E3

The fact is that the games industry has been so successful it actually outgrew the need for E3. It grew by leaps and bounds thanks to the expansion into mobile and live service games, neither of which works in a way that lends itself to being featured at E3. Mobile games don't get pre-release hype like console and PC titles, while it doesn't make sense to spend a ton of money to bring your latest live service game's quarterly update to an annual showcase where attendees will glance at it and think, "Oh, that game's still going, I guess. Where's the next big thing?"

Gaming's flourishing diversity in platforms, business models, creators, and audiences mean one show in the summer couldn't possibly reflect all the medium is these days, and the fact that the major players in the console and PC corner of the industry no longer even need to band together to get attention on their products is a meaningful victory as far as the ESA is concerned.

E3 Loser: The Entertainment Software Association

The ESA serves a number of functions for its membership, not the least of which is the political lobbying efforts it will continue to do. But E3 has historically been a huge part of the ESA operation.

STAT | 81% - E3 accounted for 81% of all revenue the ESA brought in for the year ended in March of 2005.

STAT | 43% - E3 accounted for 43% of all revenue the ESA brought in for the year ended March of 2020, the last year that included an in-person E3 show.

As you can see, that number has decreased significantly over the years, starting with the 2007 downsizing of E3. The trade group made up for the loss of show revenue by hiking membership dues through the roof, going from about $1 million put together in 2006 to more than $17 million in 2008. But even after E3 returned to a full-size event, member dues remained many times their previous levels.

STAT | $15.7 million – Membership dues collected from the ESA for the year ended March of 2020, or about 40% of its total revenues for the year.

With no E3 in recent years, the dues are once again soaring.

STAT | $26 million - Membership dues collected from the ESA for the year ended March of 2022, about 40% of its total revenues for the year, about 68% of its total revenues for the year.

Without E3, the ESA relies on membership dues to fund its activities. But without E3, how many companies will feel those dues are worth it?

Without E3, the ESA relies on membership dues to fund its activities. But without E3, how many companies will feel those dues are worth it?

Beyond E3, the ESA's activities include the ESRB, which should stick around come hell or highwater, continuing its work with the ratings fees it collects. So the pitch for membership then becomes the ESA's lobbying efforts, its IP rights enforcement programs, and some positive PR and message spreading, all of which are things the biggest companies engage in on top of their contributions to the ESA.

And as much as we think of the ESA as the group representing the games industry, its membership has some very conspicuous gaps in its ranks. Neither Apple nor Google is an ESA member, so the most important companies in the mobile sector that makes up a majority of the games industry are already absent. Valve isn't there either.

As for who is there, it's still plenty of big names, and most of the key players in the console space. But there are also mobile and PC-specific companies, and giants with expertise in one field trying to break into the others. That covers a wide assortment of businesses, and a similarly wide assortment of legislative interests that we can expect to come into conflict.

The question about platform holders' ability to dictate a 30% revenue share seems pretty relevant these days, but you can bet third-party publishers like Epic have a different view on the matter than Nintendo, Sony, and Microsoft.

Beyond that, will software makers continue to see the value in lobbying against right-to-repair bills that impact hardware makers most directly?

Should questions about the legality of generative AI training data pop up, will deep-pocketed ESA members invested in the field want the ESA to take its usual overly aggressive approach toward intellectual property protection? Will the members without such investments tolerate the trade group remaining on the sidelines of such a hugely impactful debate for any creative field?

Do companies that specifically avoid loot boxes care that the ESA would spend its resources lobbying to protect the business of competitors who do?

When it comes to lobbying, any kind of trade group's responsibilities include getting its disparate membership to understand the value of coming together and pulling in the same direction even if it doesn't make the most sense for a specific member in the near term.

QUOTE | "There's always tensions inside these organisations, but for the most part it works... I think that the onus is on the ESA to prove that membership in it is good for the company and good for consumers. And I think we're going to see the ESA redouble its efforts to prove that." - In talking about Activision and Vivendi leaving the ESA and skipping E3 in 2008, EA VP of corporate communications Jeff Brown makes it clear that dissension in the ranks is nothing new for the trade group.

The issue that brought the industry together to form the ESA in the first place has already been addressed by the Supreme Court

That said, the issue that brought the industry together to form the ESA in the first place – possible legislation around video game violence – has already been addressed by the Supreme Court, and it went in the industry's favor. While the topic can always be revisited with every school shooting demanding a scapegoat – and the current Supreme Court has certainly shown an eagerness to revisit supposedly settled matters – it's not the existential threat it seemed like 30 years ago.

That can't help but make the ESA's job harder as it becomes less about rallying the troops to a common cause and more like herding cats. And the last five years or so have raised serious questions about the ESA's cat herding aptitude.

QUOTE | "The biggest complaint about the trade organization [from ESA members] is what those companies perceived as a lack of strong support when it matters. One called the ESA 'hopelessly emasculated' while another said it has a 'mysteriously soft voice for an industry-leading body.' Another noted that the group should push harder for industry self-regulation. Other companies see the association as a way to get discounts and better access to E3, but feel disconnected from the 'high-level discussions.'" – A 2019 Variety report into disarray at the ESA dating back to the latter days of former president Mike Gallagher's tenure.

Gallagher left the ESA in 2018, and I'm not sure there's much reason to think those complaints have changed.

Never mind the ESA's woefully half-hearted attempts at loot box self-regulation, we can just look at E3 itself as an example of the trade group's inability to build consensus even when it has a specific goal in mind.

QUOTE | "We look forward to bringing you E3 2021 as a reimagined event that brings fans, media and the industry together in a showcase that celebrates the global video game industry." – The ESA, when it announced that E3 2020 was canceled due to the pandemic.

QUOTE | "We remain incredibly excited about the future of E3 and look forward to announcing more details soon." – The ESA, when it announced that the in-person part of E3 2022 was cancelled.

QUOTE | "We will devote all our energy and resources to delivering a revitalized physical and digital E3 experience next summer. Whether enjoyed from the show floor or your favorite devices, the 2023 showcase will bring the community, media, and industry back together in an all-new format and interactive experience." – The ESA, when the virtual part of E3 2022 was cancelled.

QUOTE | "We're committed to providing an industry platform for marketing and convening but we want to make sure we find that right balance that meets the needs of the industry." Pierre-Louis, when E3 2023 was cancelled.

E3 2023's non-existence isn't solely on the ESA, of course. After years of seeming uncertainty about what to do with the show, it brought in GamesIndustry.biz parent company ReedPop to organize it, but that obviously didn't go as everyone had hoped.

And I would be 0% surprised if the publishers themselves have given the ESA mixed messages about their interest in the show over the years. Even this year we had Ubisoft publicly committing to E3 in February, and then publicly uncommitting in March.

If you read through the interview that last Pierre-Louis quote was pulled from, you'll see we specifically asked him about the lack of E3 hurting the ESA's ability to function as a lobbying group.

QUOTE | "Our member companies have been very supportive with that program and understand its vitality particularly as our industry has gained prominence and cultural relevance in very positive ways. We are moving forward with our programming given the needs of our industry but also the desire to ensure we are viewed in a favourable light and advocating in a way that demonstrates our cultural impact." – Pierre-Louis says the ESA's lobbying activities are safe and sound.

That should be reassuring, but Pierre-Louis' message is coming across with roughly the same level of confidence the ESA was giving when it talked about how it was going to put on a great E3 for the past four years.

Best of luck with the cats.

The rest of the week in review

QUOTE | "E3 had its problems, but at least the ESA didn't materialise as a single man who'd rather be talking to muppets and celebrities on stage than the games they're supposedly here to promote and celebrate." – Rock Paper Shotgun editor-in-chief Katherine Castle gives one of the more entertainingly pointed eulogies in our round-up of industry reactions to the demise of E3.

QUOTE | "Today's verdict is a win for all app developers and consumers around the world. It proves that Google's app store practices were illegal and they abuse their monopoly to extract exorbitant fees, stifle competition and reduce innovation." – Epic Games responds to a jury siding with it on every count in its lawsuit against Google over anti-competitive practices and its mandatory 30% cut of revenues from apps distributed through Google Play.

QUOTE | "The Epic v. Google verdict shakes things up, offering indirect ammo for Epic's battle against Apple. It's a morale boost, sharpening Epic's legal edge and potentially swaying public and regulatory views on app store monopolies. However, it's not a direct legal silver bullet for Epic's Apple fight." – In our round-up of reactions to the jury verdict in the Epic-Google case, Gamma Law managing partner David B. Hoppe makes it clear we're a long way from resolution when it comes to app store antitrust litigation.

QUOTE | "We understand that it may be a meme, but please refrain from this behavior for the safety of your health." – A Steam support message to a user on Reddit who asked if it was OK to inhale fumes from the Steam Deck's top vent, as reported by Kotaku. Really, that's just good life advice in general though.

STAT | 7% - US spending on video games declined 7% in November, according to the latest Circana sales report.

STAT | 1,100 – The number of jobs being cut at Hasbro. The layoffs include cuts to Wizards of the Coast's digital gaming segment, despite the banner year it has had with the launches of Monopoly Go and Baldur's Gate 3.

QUOTE | "It's with a heavy heart that we must announce yet another difficult decision. Today, we have to confirm the official closure of Free Radical Design, and say goodbye to many remarkable, talented and hard-working people." – Plaion confirms the closure of Free Radical Design, a month after it was first reported and weeks after it denied a report that a closing date had been set for this past Monday.

For a publisher that's already suffering reputational damage by dripfeeding layoffs and studio closures over months and months and ensuring a constant flow of headlines to remind the world how badly it messed up, it's a real curious choice to handle the closure of a studio with a beloved franchise like TimeSplitters so that it hits the news cycle three separate times.

QUOTE | "The agreement commits ZeniMax to uses of AI that augment human ingenuity and capacities, to ensure that these tools enhance worker productivity, growth and satisfaction without causing workers harm." – The ZeniMax Workers United union announces that it has reached a deal with ZeniMax governing how it will use AI and committing to give the union notice when its employees' jobs are impacted by AI, and to negotiate those uses on request.

QUOTE | "I've always been drawn to stories that make your mind spiral along with its characters, but Alan Wake 2 makes you feel as much a part of the story as Alan and Saga." – Sophie McEvoy, in her Game of the Year write-up for Alan Wake 2.

QUOTE | "Baldur's Gate 3 isn't just my Game of the Year. It's my favourite game of the past 24 years." – Marie Dealessandri doesn't mince words in her Game of the Year write-up of Baldur's Gate 3.

QUOTE | "Bomb Rush Cyberfunk tells you precisely what it's about within the game's first five minutes. You bust someone out of custody and spray paint art on the walls of New Amsterdam's police headquarters. All the while learning the game's basic controls - this is now my favorite tutorial chapter of a video game to date." – Jeffrey Rousseau enjoys the pointed messaging in his Game of the Year write-up of Bomb Rush Cyberfunk.

QUOTE | "Even when you're not focused on a side or main quest, you feel like you're creating your own story. The outcome of every enemy encounter feels like something unique to you, especially if you're trying something a little more unorthodox to overcome them. Every triumph is yours and yours alone, every failure an amusing anecdote. I don't want to leave this world, I want to experience every tale it has to tell." – James Batchelor writes about The Legend of Zelda: Tears of the Kingdom as his Game of the Year.

STAT | 0 – The number of Pikmin I lost in my playthrough of Pikmin 4, my own choice for Game of the Year. That's not bragging, just a note that the game makes this doable without unreasonable commitment, which speaks directly to why it's my pick for 2023.