Gamers should expect a subdued E3 this year, says Wharton professor

Since it launched in 1995, the Electronic Entertainment Expo (E3), an annual congregation of more than 60,000 video game developers, media, and fans, has served as a spectacle of an event that gives competing companies like Sony, Microsoft, and Nintendo a chance to size each other up heading into the big holiday rush.

It is, historically, full of announcements, surprises, and the occasional industry shake-up. 

There was the year Sega announced its Sega Saturn platform, and then released it the same day; the year Nintendo spun heads by introducing a dual-screened Game Boy successor and gutsy early adopter of touch screens, the Nintendo DS; and the year Microsoft infamously announced an always-online Xbox One, a feature later nixed after negative consumer reaction. 

But this year, says Wharton Associate Professor of Management Ethan Mollick, who studies entrepreneurship, innovation, and games, it might be worth tempering expectations, at least for people who love to play video games.

“It’s not clear there will be massive new announcements this year,” Mollick says. “The value of E3 has waxed and waned over the years, and it seems right now there’s not a big console launch, and most of the big games, like ‘Battlefield V’ and ‘Fallout 76,’ we already know about. There will be a couple surprises, but everyone has their own announcement schedule and conferences now, lowering the value of E3.”

Mollick suggests there are a few reasons for this. Prime among them is that video games from big-league publishers like Electronic Arts, Ubisoft, and Activision-Blizzard are increasingly more expensive and take longer to develop. As a result, there are, naturally, fewer giant games to announce.

What instead emerges is a pattern of stretching existing games by announcing new downloadable content and features. It’s an effort to “monetize more effectively,” he says, with companies becoming increasingly more willing to make money from cosmetic additions to games that don’t fundamentally alter the core game.

“It used to be something you’d laugh at,” Mollick says of charging money for, for example, an armored horse in a massively multiplayer online game. “Now, gamers have accepted cosmetics as being OK.” 

For companies like Blizzard, which have historically invested in sprawling expansion packs for its games that eat up time and development resources, he says it has become more efficient to patch games and rely on in-game content, as seen with games like “Overwatch.” 

What Mollick does expect to see at E3 2018, however, is plenty of news about lucrative free-to-play-model online games like “Fortnite”—which, in its increasingly ubiquitous nature, is quickly becoming the new “Minecraft.” He says the move toward the free-to-play model is largely because when those games do net a financial win, pointing to other games like “Clash of Clans,” “they generate substantial ongoing revenue.” 

Through a financial lens, the above reflects where the industry is headed right now.

“From a business school perspective, a lot of what is interesting are three ongoing changes to the business model of gaming: the rise of e-sports and general streaming with services like Twitch; the growth of multiplayer games like Fortnite; and the use of subscriptions and add-ons to generate additional revenue,” Mollick says. “From a company perspective, anything that can help you make money without a lot of development effort is going to be helpful–subscription services, loot boxes, and downloadable content are all proven ways to do so.”

Other trends to pay attention to, when E3 kicks off on June 9: large publishers adopting the “indie” model of developing small games with cult followings, like farming simulator “Stardew Valley”; continued signs of the extension of console life cycles, as PlayStation 4 and Xbox One enter their sixth holiday season on the market; and announcements about major game franchises that will continue to get regular updates, like “Call of Duty” and “Destiny.” 

As far as E3 surprises go, he says, it’s always worth looking to Nintendo.

“Nintendo seems to march to the beat of its own drum. The company veers from triumph to disaster on a regular basis over the years, and has a strategy that looks different from everyone else in the industry,” he says. “Nintendo is Nintendo.”