Where E3 is Headed

This year marked several significant changes for the Electronic Entertainment Expo (E3). The most obvious is that Activision Blizzard and Electronic Arts both chose to leave the show floor, just maintaining the usual second-floor conference rooms for meetings. Their games could be found on the show floor in Sony and Microsoft's booths, but the massive presence those two major publishers usually had at E3 was completely gone. EA instead hosted the EA Play events (next door to the convention center, and a simultaneous one in London) where they brought players together with creators and celebrities to play some of their upcoming games.

E3 reported it had 3.6% fewer attendees this year, around 50,000 in all. They staged an event called EA Live in the parking lot next to the convention, giving out 20,000 free tickets. Apparently, though, this was a big disappointment; it was an area about the size of two tennis courts, mostly selling merchandise and barely any games. Fans felt liked they'd been duped; they'd been led to believe this was like E3, and of course it was nothing like being inside the halls. While E3 seems to understand that going direct to consumers is the future, this was not the way to do it.

E3 now has all its major media events streamed, and Twitch has a studio on the show floor with continuous programming during show hours. Essentially, all you get from actually being at the show is the chance to go hands-on with games, and to have in-person meetings. As far as getting time with games, you will have some problems with that unless you are a VIP or a member of the media. The line to play the new Zelda game was reportedly as much as eight hours long... or the entire time the expo floor was open one day.

Business meetings are something that benefits from personal contact, so E3's value in that area isn't going to change. The other reasons for the show – generating media coverage, generating excitement and social media amongst fans – those can and are being done more effectively in other ways. E3's value is dropping, and that's clear by what Activision and EA have done. Essentially, those two companies said "we can take the resources we'd spend on E3 and get a better return spending it elsewhere." Other large companies will probably be making that calculation in the coming years. For smaller companies, E3 is a good place to be because of the sheer volume attention directed to the show, which can spill over onto smaller companies. However, that will be less and less true as larger companies depart – less attention to the show, less attention to smaller companies, less reason for them to appear.

There are also other places to get significant attention. Gamescom, with its 340,000 attendees, is already running a trade show during the same week as Gamescom that attracts almost as many people as E3. Other consumer shows like PAX and San Diego ComicCon and many smaller ones are also packed with consumers. That's not even considering streamers and YouTubers and other ways of connecting with an audience.

I predict E3 will continue to try out new tactics in order to remain relevant, but it will probably continue its decline as both console games and retail sales are no longer the core of the games industry. Moreover, there are better conventions for companies that want to maximize audience influence with consumers. E3 will probably continue to shrink in size and influence, though I think there's a reasonable chance that (at some point) the ESA will decide to make some radical change – possibly a reduction to a more business-oriented conference without the huge exhibit floor. Or the ESA may decide to go large and make it a huge consumer show... but that would definitely have to be at a different venue. I think all options are on the table, and it's hard to predict what might happen beyond the next couple of years where E3 has a contract for the LACC. What, if any, contract E3 signs next will be very telling about how they view the future.

Create Games For a Brand, Not a Platform

The electronic games industry has been focused on the technical challenge of making games work on a platform since its inception. Sure, there'd be an idea for what the game could be -- and then a seemingly endless struggle to bend the hardware to make it deliver your vision. Most of the industry's resources (in time and money) went to overcome the technical challenges in just making games work for each successive platform -- early consoles, early PCs, the NES, the new wave of consoles, more advanced PCs (now with graphics cards!), the Internet (and if you don't think dealing with multiplayer games was challenging from the start... you weren't there), mobile games on smartphones and tablets, and now the latest versions of consoles and PCs (which have become more closely aligned, thankfully) and the emerging VR platforms (mobile, console, and PC based).

Fortunately the tools to create games have advanced even faster than the hardware. There are now multiple choices for excellent tools like Unity, Unreal Engine 4, and many more services that take care of handling servers, payments, and all manner of fiddly pieces of software that developers used to have to write themselves. Or spend endless hours debugging platform makers' tools and early dev systems.

Now, unless you're pushing the hardware limits of a particular platform, more resource can be spent on design than was formerly the case. Heck, you don't even have to chase the best possible resolution for your artwork -- stylized art can be easier to produce and look very nice. Even a style as basic as Minecraft works just fine, thank you -- 100 million copies says artwork is not necessarily the only reason people will buy a game.

Now VR is sucking up a lot of time and energy among developers trying to figure out how to build great VR titles while the hardware is still in flux, and the tools are still being refined. Profits are years away, in all likelihood. Does that mean we shouldn't build VR titles? No, the effort has value in many ways -- and at some point VR will become a market where a developer can make a profit, and those who have labored in the trenches are going to be more likely to reap the early benefits of that.

Still, game developers should realize that the platform is not the most important thing any more -- your brand is. Game players are less platform-fanatic than they used to be, and with the incredible expansion of the game-playing audience through mobile devices all the most dedicated game players have at least two game-playing platforms: Their console or PC and their smartphone. Many have multiple game-playing devices. Do they only play games on one device. Nope, for the most part, they play on the device that makes the most sense at the moment. Hearthstone may be better on a PC, but when you're away from your PC it plays just fine on your phone.

The larger audience of game players cares more about playing their game than on what device it's on. Play Candy Crush on your phone while you're on the train, on your PC at work (during breaks, I hope!). Games should try to be on the platform where their players are likely to be found.

Besides, profits come from games that last for years -- and those are brands. Look at Call of Duty, for instance -- does it matter what console or PC you find it on? Not so much as the brand name does. Sure some game brands are tied to a platform, like League of Legends. But many of the games that earn a billion dollars or more a year are found on mobile -- which means, at minimum, Android and iOS, and probably a special version for the iPad, too. Most top console games these days are found on the PS4 and the Xbox One and on PC as well. Most of those top console brands also have mobile titles linked to the brand, even though the gameplay may be completely different. Heck, Fallout 4 had a top mobile title for months simply on the strength of its brand being applied to the smartphone game.

So, while you may spend a lot of time getting your game to work on given platform, if you want to make money in the long term with that effort you should be thinking about how you can extend that brand to as many platforms as you can, assuming it's successful on the first platform. Don't be thinking "I make (platform X) games;" instead be thinking "I make (specific genre) games" and try to figure out how you can get those games in front of all the players who'd be interested.

Brand first, platform second. That's how you should think about building and keeping an audience over time, which is ultimately how you make money with games.

PS4 'Neo' (PS4K) Confirmed; Scorpio Still Rumored

Sony has confirmed that they will be introducing a more powerful PS4 with 4K output, but the company will not be showing it at E3. They still aren't getting specific about the features, or when it will launch, other than to say it will have 4K output and all PS4 games will work with it -- and it will be more expensive than the PS4.

The main reason for the PS4K is rumored to be in order to make the PlayStation VR work better, and to provide 4K output to support Sony's 4K TV business (the console may have a 4K Blu-ray player, which would be a strong incentive to buy for 4K TV owners). Note that this doesn't mean games would be playable in 4K resolution; that requires very expensive levels of graphics hardware unlikely to be found in a console that would (probably) retail for $499 or less. Although I could see making some cut scenes or an intro video in 4K for a game... a pure marketing feature.

Rumor still suggests that Sony will introduce this new console this fall, in conjunction with the already announced launch of PlayStation VR in October. Normally you'd expect a fall device to be introduced at E3, but Sony may be thinking that the PS4 Neo would drown out all of the other things Sony wants to talk about at E3. That's certainly a valid concern. By confirming the device before E3, Sony is no doubt hoping that they can focus on new PS4 titles at the show, and perhaps generate some pre-E3 buzz greater than Microsoft.

Also, Sony is doubtless trying to keep current PS4 sales from slowing down too much with a new console on the horizon. SCE head Andrew House confirmed that the current PS4 would continue to be sold; they will have both consoles on the market for the foreseeable future, separated by price and capabilities. But both will be able to run all software for PS4. (House said making software work with the PS4K would be relatively easy, though one would suppose that varies depending on how much developers want to improve the game's look for the PS4K version.)

There are risks here, though. Now that the PS4K is real, journalists and social media may still focus on that rather than new PS4 titles. You can bet there will be questions about every upcoming Sony title like this: "What will this look like on PS4K?" Also, knowing that a PS4K is coming, some buyers may hold off picking up a PS4, though probably most of those who really care enough about horsepower to pay more for a more powerful console already have a PS4. GameStop will probably get a bunch of PS4s as trade-ins when the new PS4K comes out.

Perhaps the greater risk for Sony is that it gives Microsoft a chance to capture more E3 buzz by actually talking about upcoming hardware. Microsoft is probably going to introduce a smaller, cheaper Xbox One  -- that's a normal part of console evolution. Microsoft is also rumored to have a more powerful Xbox One in the works, codenamed 'Scorpio', that is rumored to be even more powerful than the PS4K.

Now, Microsoft may also want to avoid depressing Xbox One sales by announcing a more powerful console too far in advance. Rumors have suggested a 2017 introduction for the Xbox One Scorpio; touting it now would seems to hurt Xbox One sales, unless you offered some sort of upgrade plan. Which Microsoft could in fact do if they really wanted to; one of the big advantages Microsoft has over Sony is the immense amount of cash Microsoft has (over $100 billion at last count). Microsoft has been reluctant to use this weapon in the Xbox One fight up to now, but they could unleash it.

If Microsoft is really planning for a Scorpio launch in 2017, they'd be wise to keep its features unspoken for now. Let Sony and Nintendo reveal everything about their new consoles (PS4K and NX) by the end of this year, then Microsoft has a chance to tweak the Scorpio a bit to make it as competitive as possible. Yes, complicated changes would mean a delay, but simple things like choosing a higher clock speed for the GPU or CPU, or adding more RAM or higher-speed RAM could make a big difference in the specs without changing the timetable. That might increase the component costs for Microsoft, but they could certainly deal with a lower profit margin better than Sony or Nintendo could.

Of course, one of the big reasons to create a more powerful Xbox One is virtual reality (VR). Given that the Oculus Rift ships with an Xbox One controller, it's not difficult to imagine Microsoft would like to have an Xbox One Scorpio powerful enough that an Oculus Rift could plug into it. Or a HoloLens.

It will be interesting to see exactly what gets announced at E3 this year.