GamesBeat: The State Of The Gaming Industry, Straight From The Head Of The ESA

While the games industry may look like it's getting smaller in some parts, it's actually growing according to Mike Gallagher, President of ESA.

Today at GamesBeat, many panels presented a variety of topics - from Asia's growing influence on the U.S. games industry, to a discussion with the President of S.O.E. about the future of monetization in gaming.

But the most important panel may have been the one with the fewest attendees. Today, Dean Takahashi, Lead Writer at GamesBeat, held a panel with Mike Gallagher, President of ESA (Entertainment Software Association), where he shared his thoughts on the state of the industry.

I'll be providing a summary of his comments below.

Violence In Video Games

The video game industry has the facts, and the law, on its side.

Two years ago, the ESA won a Supreme Court battle for the video games industry with a 7 to 2 majority ruling that video games are a part of free speech, protected under the First Amendment. As part of that, those who voted in the majority went through all of the research that had been compiled up to that point and came out ruling "...that there is no connection between fantasy violence in video games, or any other medium, and real world violence."

Science also backs it up - 97 medical professionals (health care professionals and psychologists) signed a brief stating there is no link between real world violence and video games, and gave their reasons why in a very clear and scientific way.

A few weeks ago, some of those same professionals, in addition to other medical professionals (totaling 200 people), sent a letter to the American Psychology Association, basically stating that if there is to be a discussion about the research, then it needs to be done in an objective, fact-based, peer-reviewed manner. The ESA agrees that it needs to be kept scientific and the politics need to be left out of it.

While GTA V may have made $1 billion in three days, that's not all there is to this industry.

While it's an amazing feat that GTA V made $1 billion in three days time, there are many other things the video game industry has to be proud of. Mr. Gallagher says it best himself:

"Where we sit as an industry culturally today, we can be proud about all of the content that we make. We are capable of making great content like Breaking Bad, or Dexter, or Homeland, or Game of Thrones, we can create those same experiences...as the cable television industry does and television provides.

We have the same latitude to produce that at the same time as we produce FIFA and Skylanders and Infinity and all of the great mobile games that we have that are so popular today on every device that we're carrying - we have the range to do all of that and it's remarkable, exciting and it's not a headache."

While some content may be violent, the ESA is vigilant when it comes to preventing it from getting into the hands of minors.

Every other year, the FTC (Federal Trade Commission) looks at media industries and checks whether they are doing a good job at informing parents about what is in a product (what's in the game/movie/song/book), and how those industries are enforcing their own rules.

As for the ESA, according to the FTC, 90% of parents are aware of the ESRB and 90% of those parents who know about it use the ESRB and find it effective. It is enforced 90% of the time at retail, which is a higher percentage than any other form of entertainment (ex: DVDs).

While retail games have the ESRB, there is a new rating system for mobile - iArc.

As the mobile industry keeps growing, mobile devices are increasingly being used by children. As a result, the ratings system and approach from content creators and publishers needs to be very responsible and robust. When it comes to mobile, the ESRB is pushing their new digital ratings system specifically for the mobile platform - iArc. It is free, simple to use, and available not just in the U.S., but in several markets around the world. 

The State of The Video Gaming Industry

It's better than you might think.

Numbers can say a lot, especially when it comes to sales figures. Mr. Gallagher gave many numbers during his discussion about the industry and why it is still healthy. But perhaps the biggest number he gave was 50 billion - the number of media impressions driven off last year’s E3 conference. Note, there are only 7 billion people in the world and only 2 billion of them have internet access. That is a lot of gaming coverage.

He expressed just how excited he was that many people were joining the industry with new ideas and strong skill sets. The video game industry is the only industry where it is available on every device with virtually every business model - from free, to a standard $60 disk, to a $200 VIP package, the video game industry can provide many different experiences. With so many different platforms, the only way for the video games industry is up and according to Mr. Gallagher, "it's a fantastic time to be in [the] industry."

The ESA does much more for the industry than it did just six years ago.

When Mr. Gallagher started his job six years ago he and the ESA mainly dealt with two things: defending the rights of content creators and anti-piracy. Today, there are many things they do for the video game industry, from immigration to e-commerce and taxation. He explains that the things they deal with, they do so in order to grow the industry and make it better as a whole.

The reason it looks like the industry isn't growing is because it needs to do a better job at measuring just how big it is.

The digital side is projected to be 53% of the revenue of the industry this year and it continues to grow. But, that 53% is poorly accounted for, leaving retail to be the majority of what is actually counted, which isn't the whole picture. According the Mr. Gallagher:

"On the retail side, we have known methods of counting that have been in decline for a couple of years now, and the combined aspect of not counting what's growing and over-counting what's not creates an image of the industry that's completely false. It creates an image of an industry that's in decline and we know that's not true. We know it's not true from the attendance here, we know it's not true from what happens at E3, we know it's not true in all the opportunity and aspects of positive growth that we see.

So, that story needs to be told. We need to have a way of rolling up and accounting for the size of our industry because the financial markets care, culture cares. Size matters and revenue is one measurement of that."

As the industry continues to grow, more things are going to be regulated - but content will never be one of them.

At the end of the discussion a member from the audience asked an interesting question about regulation:

"As you talk about representing the industry of gaming and the proliferation of in-app purchases and downloads, etc., do you see yourself or the industry becoming a regulated concept? There are people spending millions of dollars and that is not considered gambling. Your thoughts on that."

Mr. Gallagher responded that as the industry grows, it continues to encroach on other areas of the economy that are regulated. If a company is taking money from a customer online, then they will have to follow e-commerce regulations. If a game has a platform where it gathers information from consumers it must abide by privacy regulations.

If a company is marketing to children, or they expect that their product will be in the hands of children, then they must make sure they are very compliant with the rules the FTC has imposed, because companies are basically presumed guilty until proven innocent - that's how serious and strict the policies are and understandably so.

But one thing that will never be regulated is the content. Mr. Gallagher is confident in this.

"The content aspect, what it is that you create, how you entertain, is not going to be regulated. We've drawn that line and we feel confident about that."

Featured Correspondent

Published Oct. 30th 2013

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