Report from the “E3” (Video Game Industry) Trade Show

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!

Speaking of my PlayStation Portable… one of the coolest things I was able to do on the floor of the show was to directly upload games wirelessly onto my PSP from various Sony kiosks around the show. To demo new games, I just turned on my PSP’s wi-fi sharing system, got within 15 feet of one of the Sony kiosks, and then called up numerous “channels” of video game content. The games uploaded directly to my PSP and I was playing them within seconds. Very, very cool.

And Nintendo’s new “Wii” (pronounced “We”) console features the most innovate game controller ever. It’s a little wireless stick that you wave at the screen to move things around on the screen. You can use it to swing an imaginary golf club or baseball bat to hit balls on the screen. Or cast an imaginary fishing pole into the water. Just incredible.

I wish I could also mention all the cool computer and wireless hardware I saw at the show from other vendors, but it would take long. But what I took away from this show was that all this innovation in the electronic gaming sector is helping to drive still more innovation in other sectors ranging from computers, processors, video displays, wireless devices, and various other electronic or computer devices and accessories. It wasn’t surprising to me, therefore, when Electronic Software Association (ESA) President Doug Lowenstein noted in his “State of the Industry” opening address that a new study commissioned by the ESA reached similar conclusions. In “Video Games: Serious Business for America’s Economy,” economists Robert Crandall and Greg Sidak found that beyond the $10.3 billion in sales of video games in 2004, the video game industry stimulates an additional $7.7 billion in spending each year in the US, bringing the total economic impact of the game industry on the US economy alone to $18 billion. So this industry is now a major player in, and contributor to, our modern Digital Economy.

(2) The video game industry and Hollywood are rapidly converging. While I was walking through the aisles of the show, there were moments when I thought I was at a movie convention instead. These days, game and movie development are increasingly going hand-in-hand. Many movies and TV shows now become games (“Pirates of the Caribbean,” “Superman Returns,” “The DaVinci Code,” “24: The Game,” and yes, even “Desperate Housewives: The Game!”) and some games are turned into major motion pictures (“Tomb Raider,” “Doom,” “Resident Evil,” and “Silent Hill.”)

In some cases, games are being used as movie sequels to continue plot lines first developed in famous movies. “Scarface” and “The Godfather” were two prominent examples at this year’s show. Similarly, “The Matrix” and “Lord of the Rings” have spawned several game sequels. Likewise, “Stranglehold” is the video game sequel to director John Woo’s famous 1992 action movie “Hard-Boiled.” Actor Chow Yun Fat reprises his role from the movie in the video game. That’s another sign of convergence: Many major Hollywood actors are now routinely “starring” in video games. Vin Diesel stars in a new game called “The Wheelman,” and The Rock stars in “Spy Hunter.” And even Paris Hilton (if you can call her an “actress”) stars in a new video game. (I think I’ll pass on that one).

So, Hollywood and the video game industry are really coming together. So much so that there was even a workshop held during the show called “When Media Giants Muscle In: Why the Game Industry Should Care About the Acquisition Appetite of News Corp., Viacom, and Others.” (Seriously, I’m not making that title up). But I don’t think the industry has anything to fear from movie and media studios getting more involved in this industry. It will just mean even more capital will start flowing in their direction.

(3) The gaming industry cares as much about intellectual property law and enforcement as much as Hollywood. A lot of people like to demonize the music and movie industry for taking steps to better protect their copyrights. But it’s funny how no one ever talks about the importance of IP rights to the gaming industry. People certainly were talking about it at the show, however. In light of what I said above about the convergence of the movie and gaming sector, this really isn’t surprising. There’s an enormous amount of IP and licensing rights tied up in games today. Consequently, when hackers sell pirated games or “chip-mods” are made to consoles that allow pirated games to be played, it really can hurt game developers.

Todd Hollenshead, CEO and Co-Owner of id Software (makers of “Doom” and “Quake”) really drove that point home while speaking on a panel entitled “Game Piracy: Latest Strategies to Protect Your Product.” He noted that it was obviously impossible to stop all piracy (especially since many games are leaked by developers during production), but that catching the most egregious offenders was important to shore up the problem and send a message to others. But he and others noted that it’s really becoming an uphill battle because the cracking tools are growing more sophisticated, the hackers are getting more aggressive, and distribution systems and networks are growing faster and more ubiquitously available. Offshore piracy was also an issue that panelists said they are struggling to address.

I also chatted with developers and attorneys with Sony, Nintendo, Activision, and other game companies who talked about how they have used the DMCA on occasion to try to deter “chip-modding” (console hacking) and some other activities. During the panel discussion, I got up and asked the speakers if they planned on being more aggressive in their use of the DMCA but didn’t really get a clear answer. Some said they are already using it as needed, but others said even when they do use it do it doesn’t help as much as they wished. Sony, for example, recently won a $6 million civil judgment against a chip-modder, but because the guy has no real assets, there’s not really any way to enforce it effectively and recover damages.

Regardless, I think the video game sector is poised to become far more aggressive on the enforcement front to defend their copyrights. But it will be an uphill challenge. One possible solution that was discussed during the piracy panel was the idea of using more “CD key authentication / registration” techniques for consoles like users already do to register their legitimate copies of games and other software. But this would require that the consoles be connected to the Net, something that some gamers might not want to do.

(4) The debate over the impact of gaming on kids / society is only going to get more intense in coming years. I’ve been writing some papers this year about proposals to regulate video game content. There are dozens of measures pending at the federal, state and local level that would regulate the industry in one fashion or another.

The industry has won a string of solid First Amendment victories after challenging some of the major state and local enactments over the past five years. But that’s not going to stop legislators from proposing more regulations. That’s especially the case in light how much more life-like games are getting. I’m not going to get into all of this again right now, but there is no doubt in my mind that as gaming gets more and more like the “holideck” on Star Trek, legislators are really going to start turning up the regulatory heat. It’s certainly going to keep First Amendment advocates like me busy for years to come!

(5) Gamers are normal people (for the most part!). There are a lot of misperceptions out there about gamers. Most generalizations you hear are way off base. Indeed, gamers are now as diverse as the American population itself. Back when I starting gaming over 30 years ago, it was mostly the province of geeky white kids like me who had a great deal of familiarity with pocket protectors and 20-sided dice! (Yes, it’s true… I was Dungeons & Dragons nerd before I was an electronic gamer. I won’t reveal the name of my ranger character because it would qualify me for the Dork Hall of Fame.)

Today, by contrast, I see all races, sexes, ages and cultures represented in the gaming community. And the vast majority of gamers strike me as very level-headed, well-adjusted and quite productive members of society. As a first generation gamer who is raising a couple of third-generation gamers, I think video games are on their way to becoming almost as commonplace and widely accepted in our society as music and movies. It’s not just kid’s stuff anymore.

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