E3 originally started out an a convenient place for hundreds of video games companies to bring together hundreds/thousands of video game retailers, buyers, and the CE press to showcase what the next year would bring and most important of all – get them to sign a sales order.

In beginning, there were literally mom & pop operators (well, maybe two brothers) who set up a Costco table and try and get orders for their educational PC games (along with the “big” guys) – hoping to land an order for thousands of units – maybe from Borders or someone “huge” like that – and of course, retailers of all sizes were happy to be able to see it all in one place instead of having dozens of sales rep troop through trying to pitch them something based on a Powerpoint presentation on laptop.

But then like most industries, everything began to change. The indie video game stores gave way to the chains and then to just a few chains after they gobbled up everyone else … so instead of 20 major retailers and a hundreds/thousands of indie stores with their own buyers, it became just a handful of buyers who controlled 50-75% of the market. If you talk to the buyer(s) at Wal-mart, Amazon, TRU, Best Buy, Target, GameStop, some distributors and just a few others … you are pretty much done. Do you really need to spend $500,000 to $5 million for 4 days? The small indies left can just order from distributors.

On the other side, how many developer companies were there 10 years ago and how many today, from tens of thousands to a handful? From development costs in the thousands to $20 million? So, there was less competition to get heard – instead of 100 companies with messages & games to be heard & seen, now it’s 15 companies …

And of course, with the internet – console companies & major developers don’t really need the gaming press or partners to distribute CD’s or DVD’s – everything can be viewed or downloaded online at anytime of the year – or on the PC side where not only is it hard to get shelf space, no one really wanted a box anymore – as long as you have a demo and can sell & download online and customers can play immediately, why bother with shipping, returns, manufacturing when you could just concentrate on programming? You don’t need an E3 to generate attention and sales anymore.

And of course, even on the console side, you had minor players drop away or the realization that unless you could bring $20 billion to the table like MS, there was no way even a conglomerate like Philips could launch a new platform (CD-i). And once MS proved the XBox was here to stay – did they need to throw another $5-$15 million down the hole? The last years of E3 were just about – how big can you go? Of course, Nintendo, Sony & MS had to go huge and you want to look like a player, right? Not only was the floor space expensive but you had to do it right – like a Vegas Strip show – if you have cannons, we’ll have pirate ships firing cannons (they actually had to pass a noise ordinance for the show floor after the year someone set up a 50 foot wide by 75 feet high bank of speakers 🙂 … nothing succeeds like excess. 🙂

Suddenly in 2005, they looked around and realized – why exactly are we spending $10 million dollars EACH for 4 days to sell to maybe 20 buyers? Who the hell are the rest of the 70,000 people? Why are we giving away 10,000 t-shirts to our competitors or managers from GameStop & and Best Buy employees who planned their wedding & honeymoon at E3? How did we drink $40k worth of booze at Wolfgang’s?

As long as you didn’t have to plan, work, set up and manage the booth, it was great. It was loud, crazy, excessive and pure unalturated … it’s high school with video games & alcohol and free t-shirts … it was the world’s largest carnival and rush party … and there were booth babes.

Like many industries, once you have a massive consolidation of manufacturers, retailers and/or buyers, that trade show will start to wither … that’s why CES is in no danger yet – too many manufacturers, still hundreds of CE retailer chains and it’s Vegas baby …

This is from way back but you can check out the Tokyo Game Show (open to consumers) and the heady days of E3.

[youtube=http://www.youtube.com/watch?v=jHmg4hWLjKY]

[youtube=http://www.youtube.com/watch?v=RA80WEPQVcY]