The Real Reason E3 Died

Hello. So, this week I would like to talk about E3 and Summer Game Fest. I just got back from Los Angeles, where I spent about a week checking out games, and talking to people, and interviewing people. That was a lot of fun. You'll be able to find my coverage on Bloomberg and on the Triple Click podcast. But, in the meantime, I thought I would talk a little bit big picture about what E3 was, why it has turned into Summer Game Fest, and how this all happened. I've actually seen a lot of misconceptions out there about E3 and why it died. I've seen a lot of people saying things like, "Oh, Nintendo Directs killed E3. Live streaming killed E3." But, I actually I think that kind of shows a misunderstanding of what E3 actually was and why it existed. So, a little bit of history here first, and then I'll get into some Summer Game Fest stuff. So, E3

started in 1995, and it started as a trade show for the video game industry. Before that, the video game industry had kind of glommed onto CES, which was a broader tech show, and still is. And the gaming industry people decided they needed their own conference. Um it was in Atlanta, and it was in Los Angeles, and it has a long and turbulent history. For a couple years, it was in Santa Monica, which is kind of a the black sheep years, the misguided years, the years that we don't talk about when it comes to the E3. But, it evolved quite a bit over the years, and it tried a whole lot of different things. But, here's the important part. E3 did not exist, at least at first, as a consumer show. E3 was a an industry show. It was a B2B show. It was a show for one real purpose. I mean, it had a few purposes. The the the the core idea was, "Hey, we make games. We're going to show off our new games to everybody who

attends, to other people in the industry who attend." But, there was one real purpose, and that is retail. Um some people might not remember this. If you're if you're uh if you were born um in the 2000s, you certainly don't remember this. But, there was once a day when retail ruled the realm. When your game could only be only reach people by getting sold in stores, in Walmart and Target and GameStop, EB Games. And uh those stores don't just kind of pick up everything that comes to them. Not every single game was by default sold in a store, and certainly not every game got promotion by default in a store. So, what these companies needed to do was they needed to schmooze with retailers. They needed to wine and dine them, and they needed to show them what was coming in the future. And that is the kind of the main reason that E3 existed for many years was so game publishers, like EA

and Activision and Ubisoft, could show off their games to the people who would then stock them in shores and store shelves for the rest of the year, particularly around the all the all-important holiday season, which used to be the um the kind of the key time to sell your games. And so, you might Let's say you you were working on, I don't know, Grand Theft Auto IV in the in the mid-2000s, and you're at Take-Two. You're the kind of you're the the retail dev you're the retail relations guy at Take-Two. You might um just go around with people from Walmart and Target and GameStop all day and show them behind-closed-doors videos meant to hype up the game and show them why they need to not only stock it, but also give it top-notch promotion in the front of the store. You want GTA IV getting the banners. You want it getting the kind of you want it right in the back of where the clerk is at the store. You want it everywhere. Um and uh that that was really the kind

of the core purpose of E3 for a very long time. Now, E3 was broken up into two parts and it's a little it's important to understand the structure of this because if you were just kind of following E3 from home, you only saw one part really, which is the press conference part. Um traditionally, the big companies would have press conferences in the days ahead of E3. Um it kind of it was changing every year, but it settled into a little bit of a groove throughout the 2010s, the more more recent years of E3, which was essentially um your big first parties, so Sony, Nintendo, and Xbox, they would all have conferences, and then a handful of third-party publishers would have them. EA almost always had one, Ubisoft almost always had one, Square Enix would occasionally have one, Konami would occasionally have one. Those would really Those were really the uh the funniest ones. Um all sorts of batshit stuff happened during some of these press conferences, but those were meant at first again to appeal to the

industry and retailers, but as the internet um kind of took over and it became possible to live stream them, they became a little bit more consumer focused. And if you go on YouTube, if you if you search for some of these old press conferences, conferences from the '90s and like early 2000s, you watch them and you'll see like executives on stage rattling off numbers and showing pie charts as if they're at a Wall Street uh a Wall Street conference. Um and that's because these were not really meant to target consumers. They were not really meant for fan viewing purposes. It was only around the time of live streaming that that started to change. And in fact, uh many of the conferences back in the day, you could only really access the information in them and the new game announcements in them by reading an IGN live blog or finding some other way reading there was no social media back then so it's really IGN or GameSpot or one of the other websites you had to really keep track of them. Couldn't stream it online. So then what started happening in the 2010s is there was more live streaming

the conferences as a result of that they started tailoring these these showcases to be more consumer friendly. They got rid of all the pie charts and the boring business lectures for the most part occasionally they would still throw in a couple but for the most part it was like this is focused on players on consumers. And then at a certain point we started seeing them go pre-recorded and that happened first starting with Nintendo when they went to their Nintendo direct and then other companies eventually followed suit and did their own pre-recorded versions of these press conferences. But that was just part of E3 and it really it wasn't even E3 it was pre-E3. The E3 itself was a massive show that took place at the LA Convention Center for the most part at least in the the last two decades or so other than the Santa Monica kind of hiatus interruption. E for all they used to call it it was gone through again like I said all sorts of twists and turns over the years. But this this convention center part that was the real E3 that was the trade show

and that's where thousands of people would convene that's where you would see all sorts of hullabaloo and spectacle you would see celebrities walking through. Oh hey it's Shigeru Miyamoto over there. Oh Kanye West is is here touring the video games. Oh it's Kojima. Oh it's Jack Black etc. etc. You would run into all sorts of industry professionals. It wasn't that hard to get a ticket but you had to know someone a lot of people wound up starting blogs to get into E3. There was kind of it was infamously low standards the bar was infamously low to get an E3 badge right back in the day. If you ever went to the press room as I often did back then you might see some some people who weren't weren't the most professional let's leave it at that. Um and that was the real E3. And the real E3 was a lot of people waiting in line to check out demos, a lot of big flashy trailers, um booming noises, and a lot of behind-the-scenes stuff. So, that's where companies would show their stuff to retailers. That's where companies

like Nintendo would have kind of private press briefings. Occasionally, they'd announce games outside of their main live stream, they would announce them just to press and have like a special embargo or special presentation, stuff like that. Um and it was all very um frantic. It was It was a big spectacle is the best way to put it. Um a lot of stuff was going on. If you were watching from home, you might have seen streams from some of the big gaming sites where maybe they take a camera and walk you through the show floor. Maybe they have there kind of the giant bomb couch and you watch all the guests coming on and talking about it. Um whatever way you got to see it, you got to kind of experience at least part of it. But you weren't seeing the real E3. Again, the real E3 was this behind-closed-doors meetings. Um and so, even as companies like that Nintendo went to pre-recorded showcases like Nintendo Direct, they still had a major major part at E3. Um so, like Nintendo is a good example because they were one of the biggest supporters of

E3. They had a huge um booth at the show floor. They usually I wouldn't even describe it as a booth cuz it was a whole area. They would always have game demos there. Um one year when Breath of the Wild was coming out, they had an entire super expensive high-end uh Zelda recreation where they had like Bokoblins and like trapdoors and all sorts of crazy stuff that they built just for E3. Um so, I think that like this this misconception that Nintendo Direct killed E3 is is not really accurate. Um Nintendo was playing a pretty big role in E3 over the years despite that. Um uh in fact, it was PlayStation that was one of the first to pull out of E3. Xbox kind of pulled out. They started holding their own events at a neighboring venue, so they weren't at the LA Convention Center, which I'm sure rubbed the ESA the the E3 organizers the wrong way. They were still kind of part of it. Um PlayStation was the one that really started pulling out in like 2017, 2018-ish era.

So, how did E3 actually die? Well, um something happened over the last five, six, seven years which was really remarkable and happened extremely quickly and completely changed the course of the industry, which is that games went from physical to digital. Used to be that digital gaming was a pretty small part of the market. Um we had the Xbox 360 era really ushered in this idea that you could download and buy games, but it really for a while it was just smaller scale games, indies. Um XBLA was a big thing. Um maybe you'd download a couple of like eShop games on your 3DS, but for a long time most people were sticking with physical. And that changed in a big way about six or seven years ago. Um and we kind of drastically saw the market move. I remember um I was chatting with Phil Spencer once, former Xbox boss, and I was like, "Yeah, man,

like it really feels like um this was like 2021 or 2022." And I was like, "Yeah, it really feels like we're shifting towards digital." He was like, "Shifting towards digital? Like, we've been at digital. Like, it's like 80, 85, 90% of our sales now are digital." And that happened really quickly, that retail just went away. Um that physical just went away. And as a result of that, retail became less and less important. And so, what happened was around 2018, 2019, the ESA, the E3 organizers, started opening up to the public. Um and that was a way of kind of giving new relevance to E3 as this other integral part of E3 was starting to go away. And that didn't work out so well. 2019 the last E3 I remember man there are all these restaurants like in the LA live area and during E3 every year they're always packed to the brim. But I remember in 2019 just being stunned when I got to one of those Mexican restaurants nearby and it was half empty. I was like uh-oh this is not good. Um the show floor felt emptier

than ever. There were like open demo booths. I remember man you guys will really appreciate this one. E3 2019 was the the year that Silk Song was being demoed there. But this was before Silk Song fever had really taken over and so there was a demo of it at I believe it was at the Nintendo booth and nobody was there. I remember just being able to just hop on and play Silk Song which a few years later would never have happened. So E3 was very clearly on its way out and then COVID in 2020 just was kind of like like accelerated its demise essentially and E3 died from there. Um and like the [snorts] the retail component of that cannot be understated. I guess there's a world where maybe E3 could transform and evolve and live in some way without that real retail component but the fact is nobody needed it anymore because the game publishers did not need to show off and wine and dine GameStop and Target and Walmart because the idea

of physical placement being integral and needing to rely on those partners those retail partners was just irrelevant. It's not relevant anymore. These days you you can look at this in pretty public SEC filings from these game companies. They're all saying 80% 85% 90% of their sales are digital. There are a couple of exceptions. I mean I think Nintendo has been helping keep the physical market a lot alive. A couple of others, Square Enix, JRPGs I think have a bigger physical kind of fan base, but most people are buying games digitally. So, where does that leave us? Well, Summer Game Fest has come along and it is in some ways it's a little different but in many ways it's the same. The structure of Summer Game Fest over this last week was very similar to the structure of E3. There were a few press conferences. There's Keighley's keynote, there's the Xbox show, there's a PlayStation State

of Play, there was a Nintendo Direct, almost identical to E3. And then there was a physical component and that was much much smaller scale, it's called Play Days and it's essentially a place where journalists can go and play games, play demos and interview people. So, it's basically [clears throat] a smaller scale version of the E3 show floor without all the spectacle and celebrities and thousands of attendees. You don't need that stuff anymore. So, in in many ways it hasn't really changed. I think from the fan perspective viewing at home, it feels a little bit different because there's this just like disparate collection of press conferences that you see online. But I mean, the main ones are still the same. The only big difference is that now Keighley has a big one. That's kind of an all-purpose one that maybe some of the third-party publishers like Square Enix where 5 years ago, 7 10 years ago, maybe Square Enix would have had their own press conference to release to reveal Final Fantasy 7

Revelation. Now they can just do it at the Keighley one. But like from a fan perspective, it's really not that much different. From a media perspective, it's actually a little bit better in some ways. I do miss the spectacle of E3, but Summer Game Fest and Play Days is a much better place to actually have appointments and meet people and be able to get to things on time without having to schedule a 20-minute buffer for getting from one hall of the LA Convention Center to another. Um so yeah, so that's that's kind of the real reason that E3 died. It's not Nintendo Direct, it's not things going online, it's the fact that we do not need retail anymore and E3 was just not able to kind of adjust to make up for that. Um there are other factors, too. I mean, booths were very expensive. Um companies were not seeing the same kind of ROI that maybe they did in the past, but the main reason is no more need for retail, no more need for E3.

All right, my voice is shot, so I got to end this, but once again, I'll have a lot of Summer Game Fest coverage coming. I'll be talking about some of the games I played on Triple Click, and you can read a bunch of my stories, interviews from the show on Bloomberg in the coming days and weeks, so stay tuned for that, and I will see you all next time.