As E3 kicks off, video game industry is facing growing pains

Swinging from circus romp to buttoned-down boring, the annual video game confab known as E3 kicks off today in downtown Los Angeles like an overgrown teenager grappling with an identity crisis and longing for the world to take it seriously.

Now in its 14th year, an undercurrent of factionalism has cast a shadow over what should be the $40-billion industry's biggest event, a chance to showcase hundreds of games -- some of which have the potential to make more money than many Hollywood movies.

This year, Activision Blizzard Inc. pulled out of both the show and the trade group that runs it, the Entertainment Software Assn., saying it wanted to review its strategy. Two other companies, George Lucas' game studio, LucasArts, and Id Software also dropped out of the association, though they are still participating in the E3 event.

The defections came at an awkward time for the industry, which continues to face a number of policy challenges, including questions about the sale of violent content to minors, efforts by some states to levy special taxes on games and a lingering impression among some that games are a frivolous, even harmful distraction.

But the departure of these companies has threatened to dilute the collective influence of the entire industry, its members said. And that has other gaming leaders worried.

"It's more important than ever for the industry to be able to speak with a clear voice on those issues," said Graham Hopper, chairman of the Entertainment Software Assn., which puts on the E3 Media & Business Summit.

Over the years, more negative attention at state and local levels has surrounded online and console games, leading to a "smorgasbord of legislation and regulations" that make it more difficult for the industry to operate, said Hopper, who also is senior vice president at Disney Interactive Studios, Walt Disney Co.'s game business.

"The game industry is emerging as an important cultural voice in the entertainment world," he said.

E3 has become the industry's best shot at impressing the world with its size and scope. Like the industry itself, the convention grew quickly -- each year becoming louder and glitzier. Television crews worldwide came to gawk at the orcs, elves and busty models in elaborate fantasy costumes. In 2006, the event reached 60,000 attendees.

Last year, members of the Entertainment Software Assn. voted to change the format, turning E3 into a quiet, invite-only event for 5,000 media, analysts and retailers.