ESA president assesses the industry's future

Doug Lowenstein is the boss of E3, and he's watched the game industry grow from a ringside seat. Lowenstein is the president of the Entertainment Software Association, which organizes the show, and he has a unique perspective on the evolution of the game industry. Today, Lowenstein spoke about the changes he's seen since he organized the first E3 10 years ago, and he forecast the industry's path for the next 10 years. In a word, the last 10 years were all about growth, while Lowenstein feels the next 10 years will be shaped by the maturation of the game audience and the emergence of online and mobile gamers.

In the last decade, the industry has grown in leaps and bounds, not only in terms of annual sales but in its diversity as well. Ten years ago, the core gaming market comprised teenage boys. According to Lowenstein, the core market now is 18 to 35 year olds, and a full one-third of gamers are women. And with US hardware and software sales of $10 billion last year, gaming is the fastest growing entertainment medium in the world.

However, Lowenstein was quick to point out that the industry faces challenges too. Piracy, the threat of content regulation, the "dangers of sequelization," and ballooning game production budgets must be addressed. The ESA is working hard on the first two issues, cooperating with both the US and foreign governments to investigate and crack down on domestic and international software piracy, while also maintaining a close watch on legislative efforts to censor game content.

Lowenstein used the expression "dangers of sequelization" as a blanket term covering what some see as a lack of innovation in today's game industry. He pointed out that this criticism is somewhat unfair, asking "Why aren't the music and film industries criticized for sequels? Why is there a different standard for games?" But Lowenstein is confident that changing market demands will push game developers to address this issue. According to an ESA study, more than 50 percent of today's gamers expect to still be playing games 10 years from now. The average gamer in this market will be an older, very sophisticated consumer who has high standards and expectations--and may not be interested in the same products as when he or she was younger.

At the same time that the gaming audience matures, the rate of technological change will level off. In Lowenstein's words, "It will be hard to get more realistic, because photorealism will be the norm." As a result, game developers will no longer be able to lean on superior graphics to sell their games, so the focus will turn to the things that improve "quality of experience," like AI, GUI, sound, story, and gameplay. The end result will be "a market that favors developers willing to break out of the box and serve a diversity of interests."

Meanwhile, possible responses to rising game development costs, the last of Lowenstein's four challenges, included outsourcing and consolidation.

After discussing challenges, Lowenstein discussed opportunities for the next 10 years. He sees a market for advanced peripherals, including "more-sophisticated input devices than even cameras and microphones." Lowenstein believes that online games are on the brink of true mass-market acceptance and that online communities will be a key element of games in the next decade. Wireless could also see growth, provided that existing compatibility issues are addressed. Finally, Lowenstein sees huge opportunity in countries like Russia, China, Malaysia, and the Middle East, which are areas where pirated games are currently far more common than legitimate copies. If the ESA's current antipiracy efforts are successful, the game industry has "tremendous global growth in front of us."

In closing, Lowenstein summed up the last decade by using the words of his favorite band, the Grateful Dead, to reveal "What a long, strange trip it's been." He then parted the stage by encouraging attendees to "Keep on truckin.'"