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I heard the rumors over the weekend and hoped that they were not true. But they were. “E3” the video game industry’s amazing annual trade show, is going to be scaled back starting next year. The big, beautiful, booming spectacle of hundreds of gaming companies coming together to show off their amazing new games, platforms and other inventions… is no more. It will be replaced by a smaller show at a smaller location with a smaller crowd.

As a gaming fanatic, it is sad news to be sure. I may be a 37-year-old father of two, but when I was walking the aisles of the “E3” show this May, it was a non-stop, “kid-in-the-world’s-greatest-(eye & ear)-candy-store” moment for me. (My complete review of this year’s show can be found here.

But, after the news set in–and after I had time to kill the pain by getting on XBOX Live and kicking a good friend’s butt in a heated match of “NCAA Football 2007”!–I started thinking more rationally about the economics of trade shows. Specifically, why do industries host trade shows at all? Is it really worth it for them?

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I’ve been out in Los Angeles this week attending “E3,” the video game industry’s annual trade show. It’s the first time I’ve been able to attend the show and I am finding it very interesting. Indeed, as I walk the halls of the L.A. convention center and chat with gaming companies and gamers themselves, I am struck by several things:

(1) This is one heck of an innovative industry. There are some remarkably creative minds working in the electronic gaming sector. As a life-long gamer who was part of the “Pong” and “Pac-Mac” generation, I am just flabbergasted by how much more highly developed games are today (in terms of graphics, narrative and gameplay) than they were 30 years ago when I first started gaming. There was a moment in my life when I thought that games just couldn’t get much more sophisticated than Activision’s “Pitfall” or Atari’s “Adventure.” What a fool I was! Some of the massive multi-player online roll-playing games (“MMORPGs”) I saw at the show were just jaw-dropping in terms of their graphical detail and narrative sophistication. And all of the new high-definition titles for the X-Box 360 and PlayStation 3 are nothing short of stunning. Old favorites of mine like “Madden” football and “Gran Turismo” are now rendered in ultra-crisp 1080p HD resolution. There are moments during those games when you really think you’re watching a live feed from a real football game or road race.

And even the games which featured a more simple premise were exciting. Consider “Table Tennis” by Rock Star Games. The same company that brought us the infamous “Grand Theft Auto” is now producing a decidedly less controversial title based on the classic game of Ping Pong! If you think it sounds silly, wait till you play it. It is addicting in a “Tetris-like” fashion. I hope they eventually make it for my PlayStation Portable!

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