Two-sided gaming business opens its big E3 show in L.A.

E3.jpg They're expecting about 45,000 people - and more than 200 companies - at the Electronic Entertainment Expo, one of downtown's biggest shindigs and almost always a gamer's delight. Except maybe not this year, considering that the videogame business faces a kind of split personality. With the exception of blockbusters like Activision's "Call of Duty" franchise, game consoles are struggling (Agoura Hills-based THQ isn't even on the show floor this week). It's the digital space - much of it on Facebook - that seems to be thriving, at least in the number of players. Making money on those players is another thing. SF-based Zynga, which created FarmVille and other casual games for use on Facebook, and which went public late last year, is an example of the profitability puzzle. (I explored the videogame business in the December issue of Los Angeles magazine.) From InGame:

As [Wedbush videogames analyst Michael] Pachter points out, the video game industry is in an odd place at the moment. "We are in the unprecedented 6th and 7th year of the cycle," he says, explaining that the current generation Xbox 360, PlayStation 3 and Wii have grown into rather aged machines. That means game sales are declining as developers and publishers -- unwilling to take risks this late in the console life cycle -- scale back on the number of games they produce and cut back on the number of refreshing new intellectual properties they create. "The industry isn't that exciting because it's all sequels, no new IPs, no new consoles and fewer games," he says. "So E3 is, by definition, just not going to be as exciting or interesting as it's been in the past."


Mike Gallagher, CEO of the Entertainment Software Association (the industry organization responsible E3) -- sees things a little bit differently, to say the least. While some see a games industry in a lull, "I see is an industry in transition," he says. "What I see is an industry that is evolving. It is evolving on multiple platforms constantly. Right now you have the ability to have a game experience on your smartphone, on your handheld, on your tablet and you've got the ability to play on the consoles."

One subject that's bound to be talked about is the possibility that E3 might relocate next year. The problem centers on the proposed downtown football stadium and revamped convention center. Should the project proceed, construction is likely to make the area less than hospitable. From the LAT:

The Entertainment Software Assn. last year put the city on notice when it balked at renewing its contract to stage E3 at the Los Angeles Convention Center beyond 2012, citing uncertainties around the proposed remodel of the convention center to make way for Farmers Field. At the time, association officials expressed optimism that an agreement could be worked out because of the group's "strong, mutually productive relationship with Los Angeles." Now, however, the tone appears less congenial. "We're still in discussions with the city of Los Angeles," Gallagher said in an interview Sunday night, "but we have a number of issues that still need to be resolved. If we can't resolve them, we are preparing to go elsewhere."

That could just be a negotiating ploy, but there are plenty of other cities that would be happy to host the E3 event. L.A. has been home to the big show for 16 of 18 years, and it's a very big economic deal for downtown - $40 million in direct spending, according to one estimate.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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