MEC E3 2016 KEY TRENDS & TAKEAWAYS

The 22nd annual Electronic Entertainment Expo (known as E3) hosted over 200 announcements and reveals, with more than 2,000 projects currently in progress displayed on the show floor. Keynotes included Electronic Arts, Bethesda, Microsoft, Ubisoft and Sony.

E3 is the world’s premier trade show for video, computer and mobile games. Held annually in Los Angeles at the L.A. Convention Center, E3 offers the interactive entertainment industry three days of jam-packed action. It is designed for the leading and emerging companies within the gaming and related products space to showcase new technologies, game-changing products and connect with both current and potential partners.

This year the must-see gaming event took to live streaming their three day experience on both Twitch (an online platform for watching video gamers play games) and YouTube (who has also made significant investments in gamers and gaming culture).

The event also saw some interesting shifts with major companies opting out of booths for more interesting plays, like Electronic Arts hosting their own event the same week focusing on the E3 livestream, and Activision partnering with Sony for the launch of Call of Duty Infinite Warfare. These moves hint at a shifting industry and forces us to look at the evolving ways content (including gaming content) is developed, distributed and engaged with.

DID YOU KNOW?

155 million Americans play video games

80% of American households own a gaming device

*Entertainment Software Association, 2016

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MEC E32016

KEY TRENDS & WHY THEY MATTER TO YOU

HARDWARE: THE FUTURE OF

ENTERTAINMENT

Historically, much of the gaming industry has been based on the quality of the games (e.g. the story, the playing options, the optics) more so than their consoles. While major players like Microsoft, Sony and Nintendo have spent years vying for console dominance, the emergence of newer technologies like Wi-Fi and smartphones drove the impetus for hardware to be more flexible in the quest for living room dominance.

The announcement of Project Scorpio has changed the console landscape for good—gone is the day you could not buy your way into better console performance and had to hope the game developers invested in their content quality. Now, players who spend more will get higher resolution and better specs, leading to advantages in multiplayer games. Additionally, with eSports becoming more prevalent, this can make the gap between casual and professional gamers even larger.

While Project Scorpio is not available until the end of next year, Microsoft is confident that it will win the competition for the most powerful hardware. That power is one of the things that was repeatedly mentioned during the presentation even though we were only shown a few details. So now Sony knows what is coming and it is very possible it may change some aspects of the upcoming PS4 Neo. This is exactly why announcing before the show was such a strong move by Sony, and hints at the next chapter of the hardware competition.

If Project Scorpion can live up to its promise, it will open new doors for developers and gamers with 4x faster processing than the current Xbox, 4K capable and fully VR.

EXAMPLES OF HARDWARE: THE

FUTURE OF ENTERTAINMENT

Microsoft’s smaller, cheaper XboxOne Slim (Xbox One S) starts at $299and costs up to $400 for a 2-terabytehard drive. It supports 4K video and is40% smaller than the original XboxOne, and also comes with a newcontroller and vertical stand thatremoves the need for a bulky powercable (which means it will fit in yourmedia center more easily). Giventhey announced this alongsideProject Scorpion, we assume thisdevice is targeting later adopterswho need a final push to invest in aconsole.

Microsoft’s Project Scorpioconsole will be able to rungames at 4K resolution as wellas power VR experiences. With anew GPU and CPU with 6teraflops of processing power, itpromises to be the fastestconsole available.

Sony shared no details on but didbring up Neo, a new version of itsPlayStation4 hardware that will workwith 4K TVs and run virtual reality,thanks to more powerful graphics.While Sony’s press conferencefocused on the games, thisinnovation makes sense given Sonyis the U.S. market leader and wantedto focus on their core fans (and thegames that excite them).

Sony did take the opportunity to showoff a brand new gun peripheral to usewith PS Virtual Reality, called the PS VRAim Controller, it is an evolution of theold PlayStation Move Sharpshooterand allows for direct 1-to-1 tracking,which means that you can aim ingames just as you would in real life.

VIRTUAL REALITY: COMING

TO LIFE

It should come as no surprise that virtual reality (VR) was one of the hottest topics at E3 this year. The number of VR exhibitors has doubled since last year's expo, and headsets (e.g. Oculus VR’s Oculus Rift and Sony’s Morpheus) have continued to draw interest of both the gaming and entertainment industries. There were plenty of VR games teased, with publishers like EA, Ubisoft and Bethesda showcasing VR titles for PlayStation VR, Oculus Rift and HTC Vive. While some of these titles are a part of existing franchises, many of them are getting reworked editions and modes for VR gameplay.

We saw plenty of announcements when it came to VR game-playing opportunities, as well as scaling when it comes to device prices, offering consumers more options for their investment. For example, Sony’s PlayStation VR is priced at $399, which is more reasonable compared to the price points of Oculus Rift ($599) and HTC Vive ($799).

Consoles like Project Scorpio have the potential to unlock the power and opportunities of VR for a massive audience, going beyond the standard head-based devices to offer an easy to use, plug-and-play experience to help scale VR in ways previously unavailable. More important than the devices and headgear is that there is now a commitment to bring VR gaming to consumers, providing them with a reason to invest in the latest headsets. Sony has promised 50 VR games before the end of the year which is an incentive that could help bring virtual reality into homes.

While cost has been prohibitive to many gamers, as new products - including Fallout 4 (Bethesda), Star Trek (Ubisoft) and Star War’s Battlefront (Electronic Arts) - enter the VR space, it may help drive consumer’s to invest in the headsets.

Sony announced theirPlayStation VR, the$399 headset, willlaunch on October 13th

2016. There will be 50games (e.g. Arkham VR,Final Fantasy XV,Resident Evil 7) availablebetween the platform'slaunch and the end of2016.

Project Scorpio is actually an Xbox One that isbuilt with the hardware capabilities to supporthigh-end VR (although Microsoft did notspecify which VR headset it would use). WhileMicrosoft claimed it does not have a partnerset, they hinted at the possibilities in thefuture. They noted that, “you can imagine atthe price point of Scorpio, which we have notactually said, but think about consoles andwhere they live in terms of price point —having something at six teraflops that will getmillions of people buying is very attractive tosome of the VR companies that are out therealready, and we have architected it such thatsomething will be able to plug right in andwork.” Tempting!

Oculus still has notannounced when itsTouch motion controllerswill ship, but didannounce that, when itdoes, there will be 30+ fullVR games that will havesupport for Touch.More details are expectedto come Fall 2016.

EXAMPLES OF VIRTUAL

REALITY: COMING TO LIFE

Ubisoft introduced StarTrek: Bridge Crew in VR.

EA’s Star Wars Battlefront X-Wing VR Mission will be a VR game.

CONSUMERS: COMMANDING

YOUR ATTENTION

We have become a culture where consumer-generated content provides endless opportunities for consumers to tell stories on their own or alongside brands. This year, the gaming community embraced the same culture, recognizing the power of the fan and making them a major part of E3.

In past years, fan participation has not been an option with E3 being a trade show (unlike consumer-focused conventions like Comic-Con) with access limited to exhibitors and press with credentials. While platforms like Twitch and YouTube offer streaming coverage of many of E3’s hottest events, access to E3 has been limited. However, this year we saw publishers and even E3 hosting fan demos. E3 further embraced consumers by hosting a free parallel show, "E3 Live," offering 20,000 gamers an experience designed for them, featuring demo stations, game developer sightings, contests, dance competitions and live music. Meanwhile, publishers like EA, known for their FIFA and Madden games, hosted public events, featuring athletes such as NFL’s Marshawn Lynch.

Some companies have recognized the need to address consumers directly for a while. For example, Nintendo does not hold an E3 press conference anymore, rather they speak to fans directly via its Nintendo Direct webcasts. Nintendo did, however, focus their entire booth to the new Legend of Zelda: Breath of the Wild which garnered consumer praise.

As brands look to determine the impact of a floor booth as opposed to just being around the event, one can assume that there will continue to be upheaval on the floor of E3 and the surrounding LA Live event space.

EXAMPLES OF CONSUMERS:

COMMANDING YOUR

ATTENTION

Microsoft's Xbox Design Labis an online program that letsusers design their owncontroller by customizing thecolor of just about every part,from the front and backpanels to the shouldertriggers and D-pad. There arearound eight million possiblecolor combinations, as well asthe opportunity to engravethe front with custom text.

Ubisoft announcedthat as part ofUbisoft's 30thanniversarycelebration, thecompany is givingaway a free PC gameeach month for therest of the year toconsumers. June'sfree game is Prince ofPersia: The Sands ofTime, and a newgame will beannounced everymonth until 2017.

Nintendo did not let E3 pass withoutannouncing a slew of new Amiibo's,Nintendo character toys, thatinteract with multiple games on theWii U and 3DS—including SuperMario figures- Daisy, Waluigi, andBoo- as well as three new ZeldaAmiibo. When The Legend of Zelda:Breath of the Wild is released nextyear, it will be sold alongside theArcher Link, Rider Link, andGuardian Amiibo figures, whichNintendo claims are the mostdetailed toys to date.

Sony announced during E3 thatconsumers will be able to play atcertain stores starting on June 17th.The headset will be usable at morethan 30 GameStop and Best Buystores and will be available to try atmore than 300 locations nationwide.Consumers will be able to playPlayStation VR Worlds, Eve: Valkyrie,Headmaster, Battlezone andSuperhypercube. The list will expandbefore the PS VR officially launcheson October 13.

The ability to be connected at any time from any location is increasingly important for consumers. Additionally, consumers often fail to distinguish between screens as they can access their content on whichever screen is most easily accessible. Gamers have the same demand, wanting uninterrupted access to the games they love no matter what device or platform they are using.

Companies, like Microsoft, made announcements that hinted at the ideal future; one that unites all of the gaming ecosystems. For example, Microsoft’s Xbox Play Anywhere lets consumers buy participating cross-platform games once and own them on both Xbox One and Windows 10, bridging the gap between console and PC gamers, while Microsoft’s "Clubs" are groups of Xbox Live friends that are both on and off Xbox One.

The option to save and transfer data between devices like consoles and desktops introduces opportunities for expanding and creating new ecosystems for publishers and experiences for consumers.

New technologies give games the opportunity to move beyond the console, shifting seamlessly across screens and even into the real world, allowing game developers and brands the chance to test and find new ways to bring games to life, literally and figuratively. The result has the potential to unlock new consumer interactivity and behaviors when it comes to how, when, where and why people play games.

GAME PLAY: WITHOUT

BOUNDARIES

Microsoft’s Xbox Play Anywherelets consumers buy participating cross-platform games once and own them on bothXbox One and Windows 10. For example, ifyou buy a game on Xbox One, it will appear inyour Windows 10 library, and vice versa. Savedgames, achievements and other details willcarry over between the two versions, allowingyou to pick up gameplay oneither platform. Microsoft is also putting alarger effort behind releasing its own gameson both platforms—the launch line-upfeatures some of Xbox One's biggestupcoming games.

Microsoft’s "Clubs" aregroups of Xbox Livefriends both on and offXbox One. Instead offorming new parties ateach game session,a “club" is a voice and textchatroom users can join orleave at any time. The textchat is accessible on PCand the Xbox Live mobileapps, moving theconversation beyond theconsole.

EXAMPLES OF GAME PLAY:

WITHOUT BOUNDARIES

Nintendo’s Pokémon Go Plus wearableis an accessory to its Pokémon Gomobile app game that lets you catchpocket monsters using yoursmartphone in the real world. Turningplayers into Pokémon trainers, thewearable alerts players when they arenear a PokéStop via vibrations andcolors. It is an innovative step inbringing the real world into thegaming world (and vice versa).

THANK YOU TO ALL OF OUR MEC@E3 2016 CONTRIBUTORS!

For questions, please contact:

Whitney Fishman Zember

whitney.fishman@mecglobal.com