So What's the Good News From E3?

While my last post highlighted the lameness that represents the Big Three's focus at E3, there is hope for the future of the industry. It's just not what's front and center at E3. The good news is about things that are happening off center stage, and the good news is not necessarily for all companies. Here's a few things that stood out for me.

EA is looking to double its revenue from digital downloads. Why is this good news, beyond the obvious help to EA's financials? Because it shows that EA understands where the growth in the industry is coming from, and intends to take advantage of it. Which improves the odds that EA will prosper, which is a good thing for their employees and potential future employees and contractors.

Another piece of good news: The total US electronic game market is over $15 billion dollars... now that NPD  is counting the nearly $5 billion spent on things like digital downloads, subscriptions, used games, and other such revenue. Note that this figure does not include hardware sales; hardware and software together totaled over $20 billion in 2009, and then when you add in the other $5 billion, you get a total of $25 billion. NPD is now counting all the stuff that's hard to count (though it would be nice to know their methodology), and that's important because it's all that hard-to-count stuff that's growing so rapidly. Social games, free-to-play games, DLC, ad-supported games, mobile games and the like are going to be the engines of growth for the game industry. Not $150+ hardware add-ons for existing consoles, or 3D displays that require new TVs costing thousands of dollars.

It's good news to see new game markets emerge where you don't have to have huge amounts of money to compete. Yes, the iPhone market is tough to succeed in... but you can succeed without much money, which is not true of the console market. Indie developers are back, baby. Digital distribution has changed the industry, as have new business models (in part based on digital distribution's lower costs). The next big wave will come when we see iPhone/Android like markets develop for home use on Apple TV?Google TV boxes. Yes, you can distribute games digitally through the existing online stores for all of the consoles (and the DS line and the PSP, too). But those channels still require a lot more hurdles, and therefore expense, than the iPhone/Android markets.

The future looks different, and it looks good for small developers. In fact, there's a tremendous opportunity arising for adventure game companies used to publishing on paper (books, card games, and board games). Electronic platforms with much lower development costs and greater reach are here or coming soon. So the wonderful designs that we've seen in the adventure game industry will finally have a chance to reach the broader market they deserve.

The good news is not for everybody, though. Companies that refuse to adapt to the changing environment will find themselves in trouble. Retail stores will have to find new ways to make money as digital distribution takes away customers, and used games become a shrinking market. Let's hope you're not one of those caught unprepared for these changes.