From the May 15, 1995 issue of Smart

Special Report: E3 Preview

By David English

Few trade shows have started as strong as Electronic Entertainment Expo. The show organizers estimate that more than 30,000 will attend E3 on May 11-13. Effectively replacing Summer CES as the main venue for buyers of interactive entertainment software, E3 sold out its massive exhibit space at the Los Angeles Convention Center four months ago. The E3 exhibit space will cover an area the size of 15 football fields, or 680,000 gross square feet.

Based on a poll of companies that account for nearly 70% of interactive entertainment industry revenues, the show organizers estimate that more than 1,300 new titles will be introduced at the show, with each exhibitor launching an average of eight titles. Among the companies polled, 93% said that the ability to generate high retailer attendance is the most important factor for E3's success. In addition, meeting with retailers was cited as the number one reason for exhibiting at E3. "The real key is the retailers," says Patrick Ferrell, co-producer of E3 and president of Infotainment World. "The focus and the mailings have been aimed predominately at the retailers, then the media, then the financial community."

CD-ROM is Hot
The poll also showed that 57% of the exhibiting companies view CD-ROM as the hottest new interactive category, followed by 32- and 64-bit video games at 29%. Even though the E3 exhibitors will show both computer- and console-based CD-ROM titles, computers currently dominate the CD-ROM platforms. According to SIMBA Information, PCs and Macs with CD-ROM drives made up 82% of the installed base of multimedia-equipped devices at the end of 1994, while 3DO, CD-i, SegaCD, Saturn and PlayStation combined made up only 18%.

The CD-ROM format has quickly become the format of choice for PC gamers. December 1994 marked the first month that more PC games shipped on CD-ROM than on disk. According to PC Data, 51% of the game units in December 1994 were on CD-ROM, compared to 13% in December 1993 and 3% in March 1993. Game dollar revenues for CD-ROM reached 61% in December 1994, compared with 15% in December 1993 and 3% in March 1993. With CD-ROM viewed in the industry as the hottest new technology, and PC and Mac computer games rapidly moving to CD-ROM, you can expect to see a large number of innovative games at E3 on both PC and Mac CD-ROM.

The Hollywood Connection
Despite the number of competing platforms at E3, the various platforms will be mixed together on the show floor—with the exception of the adult titles, which will have their own area. This mixing of machine formats reflects the growing trend in entertainment software for cross-platform titles. "Almost everyone is crossing over now," says Ferrell. "Not only to hedge their bets, but for other streams of revenue."

With budgets for major entertainment titles in the millions of dollars, software developers are also relying more on proven television, movie, and recording properties. Just as many big-budget motion pictures are sequels of past hits or use big-name stars to increase box office receipts, you can expect many of the big-budget CD-ROM titles to be spin-offs of successful products or feature well-known actors or personalities. Examples of these titles at E3 will be Multimedia Celebrity Poker from New World Computing, The Berenstain Bears Get in a Fight from Living Books, and Monty Python's More Naughty Bits from Philips Media Home and Family Entertainment.

You can also expect the major film studios to be an influential force at the show, as nearly every movie studio now has its own interactive division. Companies such as Time Warner, Sony, Viacom, Fox, and Turner own valuable content and are searching for ways to make it interactive. Examples of new products at E3 that fit into this camp will be Star Trek Interactive Encyclopedia from Simon and Schuster, Johnny Mnemonic from Sony Imagesoft, and Behind the Mask from New Line New Media.

On the other side of the coin, traditional PC game companies such as Sierra Online, Spectrum HoloByte, and Electronic Arts, are working to leverage their considerable interactive skills with stronger content—often in cooperation with the major studios—and more Hollywood-like production values. Examples of these titles at E3 will be Phantasmagoria from Sierra Online, Star Trek: The Next Generation "A Final Unity" from Spectrum HoloByte, and Schoolhouse Rock: Grammar from ABC/EA.

Sum of the Parts
Finally, look to E3 for signs of where digital entertainment will be heading for the rest of the decade. It's no accident that the major interactive-entertainment trade show has moved from Chicago to Los Angeles. Movies and computer games, audio CDs and CD-ROMs, and cable and the Internet are becoming increasingly interchangeable as Hollywood and Silicon Valley intermingle. And E3 will likely to be the most visible sign of this convergence—because Hollywood knows from experience that the big bucks are made on the entertainment side.

Birth of a Trade Show
How does a trade show come out of nowhere and draw more than 30,000 people? And what happened to Summer CES, the traditional preseason show for entertainment software?

In a way, you can blame Congress. When the U.S. Senate threatened to write laws that would censor the violence in video games, the Interactive Digital Software Association was formed to help the industry set up its own rating system. The group included such industry heavyweights as Nintendo, Sega, Sony, and Electronics Arts. And it was the IDSA that essentially pulled the plug on Summer CES.

According to Patrick Ferrell, co-producer of E3 and president of Infotainment World, the producers of E3 had reserved an early Spring date in Atlanta, thinking that's what the developers wanted. But in speaking with developers working on CD-ROM projects, the producers were told that the software companies needed more development time and preferred a later date for the show in May.

The EIA had announced plans to scrap Summer CES in favor of two separate shows. One of the shows, called CES Interactive, would be devoted to the fast growing interactive entertainment category and was also scheduled for May. With E3 and CES Interactive about to go head-to-head on the same weekend, the IDSA officially sanctioned E3. The EIA was forced to cancel this year's CES Interactive, and E3 had the category all to itself.

The Most Overheard Phrase at E3 Will Be...
If E3 is anything like Summer CES, you can be sure that a single phrase will continually echo throughout the convention halls: "It's shipping in October." No matter what state the program is in, vendors will tell you that it will be ready in October—because they know that's when you want it shipped to your store. It's not that they don't intend to have it ready by October, but if this year is like last year and the year before that, some of the October titles won't be ready until early December or even January of next year.

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