Data & Dimensions | Ep. 7 - Even The Pope Plays Video Games

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Neil Barbour   00:00:00

Welcome to Data & Dimensions, a podcast at the intersection of Entertainment, industry and interactivity. I'm Neil Barbour, analyst with S&P Global Market Intelligence, Kagan. And with me today is Stan Pierre-Louis, President and CEO of the Entertainment Software Association. Stan, welcome to the show.

Stanley Pierre-Louis   00:00:21

Thanks. It's great to be here with you. I've enjoyed your analysis and interviews. They've been really insightful about our industry. So it's a privilege to appear on this platform.

Neil Barbour   00:00:30

Great. Thanks for the kind words. So the ESA is a trade association for the video game industry, and it ran the vaunted Electronic Entertainment Expo, also known as E3 from 1995 until the pandemic forced its closure. But the ESA is back with a new kind of show named iicon, or the Interactive Innovation Conference, which will be held for the first time, April 27 through 29 in Las Vegas. Stan, why don't you tell us the story or tell us about the journey from E3 to iicon?

Stanley Pierre-Louis   00:01:00

Sure. Well, as many people may know, the ESA Entertainment Software Association serves as the voice and advocate for the U.S. video game industry. That means we work to promote and protect the dynamic marketplace for video games and to enhance public trust in our industry. A large part of our work involves outreach to policymakers and to the media to ensure that they understand the ways our industry benefits consumers, society and the economy. But we also serve as a convener for our industry. E3 was a great example of ESA bringing the industry together along with other key stakeholders. E3 was initially envisioned as a means to bring retailers and other business partners together for marketing and sales as well as to showcase upcoming games and products through media. And it evolved over the years to include consumers which actually added a lot of energy to the show floor. But over time, online marketing and digital distribution directly to consumers diminished the need to construct an annual show floor. And COVID made that reality really stark. And it also made it clear that it was the right time to pivot to something different. We really didn't know what would come next, but we knew that we didn't want to replicate the other great shows in today's marketplace. We also knew that our role as the industry trade association gave us a unique ability to bring the industry together as a whole. And that's where iicon comes in. iicon is a completely distinct show from E3 with a different purpose and audience. It's really designed to be a global hub for change makers across sectors where creativity, technology and culture really intersect with business, education, health care and more. And it's an event that's future-focused, built to adapt to the evolving needs of industries worldwide. So it will be truly a global hub for thought leaders from various sectors.

Neil Barbour   00:03:07

Right. I mean you kind of touched on it that E3's image was connecting fans with the content. Initially, it was targeted toward retailers. But by the time it got to 2018, 2019, it was sort of -- not to be overly enthusiastic, but a "celebration of games" where the people who love games would go and see them. And maybe the press was the mediary, but that was kind of the image that E3 got to over time. If you were to look back, let's say, you run iicon for 5 years and you look back -- what do you hope the elevator pitch there will be? What's the paragraph that you want iicon to be known for?

Stanley Pierre-Louis   00:03:43

Well, our industry is the leading entertainment sector in terms of audience and revenue. And that's because of the compelling experiences we create through our games, our devices and our experiences. But we impact so many other sectors and in so many ways, that's underappreciated. Video games and interactive entertainment technology spur growth and innovation in a variety of sectors. So iicon will showcase that impact by bringing together leaders from those sectors in one place to talk about the impact that interactive entertainment has on their sectors. There are going to be numerous events for -- there are currently numerous events right now for video game industry folks to talk to each other and to do -- and they do a great job of bringing the industry together for professional development. Think of shows like DICE or GDC. And then there are events where companies can showcase products for consumers, think PAX and Gamescom. But what hasn't existed until now is a chance for other industries to come together and learn from the game industry, what we've done and what we've been successful at doing with our business leaders and communities and to have takeaways for their industry. So it's a place for business leaders, whether they're CEOs, Chief Revenue Officers, Chief Marketing Officers and other executives to explore growth opportunities within the largest entertainment industry in the world.

Neil Barbour   00:05:10

So looking down the agenda, I see big names, Take-Two's Strauss Zelnick, Mortal Kombat creator Ed Boon, Ed Woo from Scopely. Tell me about building this roster and centering these voices.

Stanley Pierre-Louis   00:05:22

We had a lot of fun thinking about the ways to highlight the impact of our industry across sectors. We know that our industry leaders are among the most successful and respected and most sought after in the business world. So we knew we wanted to feature several of them. But we also know that video game technology has influenced finance, health care, education and entertainment, among other sectors. That meant finding the right voices to make the case. Mortal Kombat is a great example of this. Since being introduced to the world back in 1992, Mortal Kombat has been one of the leading intellectual properties in the video game world. So transforming those characters into film was a daunting task early on and then again in 2021. And with the sequel coming out this May, just about a week after iicon, it makes the timing of this panel all the more exciting. So I think this is the type of thing that helps bring to life the point that video game IPs are having tremendous success at the box office. on cable and through streaming services, think Sonic, Super Mario Brothers Movie, Fallout and -- the -- last of Us. So we really want to -- we want to be able to showcase how all of these various opportunities exist from the video game world. And whether you're talking about film and television or finance, it's a great place to convene these types of people. And so that's what you'll see represented on stage and in the breakout sessions.

Neil Barbour   00:06:55

So it sounds like you're thinking of games as moving into the broader media culture and that sort of being a virtuous cycle for both gaming and other related media. Is that kind of the main takeaway you hope people get from iicon?

Stanley Pierre-Louis   00:07:12

Certainly, looking at how video game IPs have launched into other media is a terrific jumping off point for iicon. But we also plan to look beyond media. There's an opportunity at iicon for executives to tap into the potential of the video game industry's culture, IP technologies and the ability to grow an audience. I mean, ultimately, it will be a space to engage with leaders across industries to promote ideas, build partnerships, share information on how best to reach customers and to generate new business opportunities. So ultimately, it's really a forum for leaders of various industries to come together and not only learn from one another, but to develop opportunities for each other.

Neil Barbour   00:08:00

So it seems like the growth opportunity in games, at least from maybe a total addressable market standpoint has seemed to level off over the past few years. We tend to tell clients that it's the result of a pull forward of demand combined with rising prices, maybe a little economic uncertainty baked in there. We've talked to others like Matthew Ball, who seem to think it's an attention economy issue. How does the ESA look at the state of the industry?

Stanley Pierre-Louis   00:08:25

Every year, ESA conducts a survey to understand more about consumer demographics, attitudes and behaviors surrounding games. We publish it. It's available on our website. It's called the essential facts about the U.S. video game industry. This past year, we found that nearly 2/3 of Americans, about 205 million Americans play video games on a regular basis, weekly in a sense is how we look at it. And in terms of demographics, it really is a broad representation of Americans. It's roughly an even split between men and women. And if you look at the other demographics, they generally mirror U.S. demographics. We also found that Americans continue to play games as they age. Nearly half of boomers, for example, play and some 36% of players 80 and older play every week. And so you're seeing that games not only are exciting for people, they also have a tail. And then we also learned, I think it was this past year that Pope Leo, the 14th plays Wordle and Words with Friends with his brother every day. So just -- it talks about the reach of games, but also the fact that as people focus on what they might view as core games, PC and console, there are a host of other games, particularly mobile games that bring people together. And those games often aren't nestled within a video game company. We've got a panel at iicon, for example, that features the Head of Games for Amazon, Yahoo! -- and -- the New York Times. And that shows how games are helping not only expand their reach and audience for those games, but also how they're creating revenue opportunities for companies that are leveraging games for their stability. And that just shows the power of games.

Neil Barbour   00:10:23

Right. So in those surveys, the ESA talks about games having a really wide diverse reach among young and old across genders and socioeconomic backgrounds. But it seems like when I look at the biggest grossing games, I see a lot of the same titles. I see Battlefield, Call of Duty, Madden, Obviously, there are opportunities in mobile and there's a wide array of games and some don't rise to top it. Are these mega publishers and developers struggling to connect fully with that wider audience?

Stanley Pierre-Louis   00:10:52

What we're finding is that there is a game for everyone. Yes, there are top-selling games that dominate the news. But the truth is 2025 represented the second highest ever revenue year for the U.S. video game industry at $60.7 billion. The only one higher was during COVID where there was a spike in play and purchase. So there is still a lot of interest in games. It is also the fact that those games involve PC, console and mobile. And when you take all those 3 things together, you see that there are a lot of really well-performing games at every level. and that different audiences might like different kinds of games. If you're sitting in your doctor's office, you're going to want a quick hit on a smaller, easier to play game as opposed to sitting in your living room with the full console or PC experience. We're also finding that people like to play for a variety of reasons. Number one reason across any survey you do around games, that's about fun. But then you start finding that people think it's relaxing or it gives them mental stimulation, it relieves stress. And there are a number of studies done by academics talking about how games help kids learn hard and soft skills. It inspires them to want to become engineers. And in fact, girls who play video games are 3x as likely to matriculate through college with a STEM degree. And then it also has these soft skills of teaching adaptability and resilience and problem solving. It's one of the few things you can do and fail and be rewarded by trying again and not be blamed for it, right? And so this is a great tool for people learning problem solving and how to build resilience. So overall, what we're seeing is a lot of people having a lot of fun playing different kinds of games, even if there are some that dominate the titles of the sales chart, there are so many other games that meet their audiences where they are.

Neil Barbour   00:12:50

So sports is such a core part of the U.S. media landscape. We have survey results, 74% of respondents to our Consumer Insight survey say they watch sports. Obviously, there are huge sports video games out on the market, but is there more work to be done to bridge those two worlds?

Stanley Pierre-Louis   00:13:05

Our industry has had a successful relationship with the sports world. The leading sports in the U.S. and around the world find tremendous value in creating licensing relationships with the video game industry. Baseball, basketball, football, golf, hockey, racing and soccer are featured in some of the world's most successful games. And the sports leagues find these relationships beneficial beyond revenue. And that's because sports games help fans engage even more deeply with the sport and to stay connected with that sport during the off-season. There have been reports as well that professional athletes entering their professional leagues come in better prepared because they've either understood games better through video game play or understood playbooks and studied playbooks through games. And so that's been an interesting development. And I think beyond professionals, we found in our survey this past year that video games influence real-life sports performance. 56% of adult players who play real-life sports play a video game version of that sport. And 87% of them believe it improves their real-life performance. And we find that exciting. And that's part of why we've also included sports as part of the iicon list of sectors. We're excited that the NBA, the MLB and even the WWE will be on stage and others will be announced soon.

Neil Barbour   00:14:41

Yeah, that's such a good point. Whenever you boot up Madden, right, you go into the campaign or what have you, the first -- one of the first things that happens is you get to talk to the coaches, right? And they tell you what the playbook looks like and why they're running it and when to run it. So it really does sort of bring you up to speed on how to play the sport in ways that would be harder to grasp maybe just by even watching the sport.

Stanley Pierre-Louis   00:15:05

Yes, yes.

Neil Barbour   00:15:06

There's another big panel on the iicon agenda about esports, which I think you might say has had an issue finding a big market in the U.S. I think there have been a lot of success stories maybe in South Korea and in parts of Europe. But what are your members saying about the potential there and how they would unlock it?

Stanley Pierre-Louis   00:15:24

It's interesting. Every company has a different take on how esports can add value to what they do. Obviously, esports are played on games that our members largely make. But some have been involved in leagues, some have sponsored leagues and some run leagues. I'd say over the past 20 years, we've seen esports grow from a small niche hobby to a massive billion-dollar ecosystem. There are professional leagues and collegiate teams and even high school teams that are out there and they're creating great opportunities for people to engage in esports in some way. The 2022 World Championship for League of Legends, one of the biggest esports games created by Riot Games, reached more than 5 million concurrent views, which is enormous when you think about the NBA Finals and Major League Baseball. -- outside of the Super Bowl and the World Cup, these are numbers that rival the NBA Finals, Major League post-season play and the Stanley Cup Finals for the NHL. So we're seeing a lot of growth along various sectors for eSports. at iicon, we are going to have a panel in esports and one will be on the conversation between -- I think it's the Head of Business Development and esports Partnerships at Riot with the Vice President of Global sponsorships at Mastercard, which will give attendees this opportunity to see how an esports partnership makes sense for certain brands and why a major financial brand would want to engage in esports at such a high level. So iicon is a great opportunity for people to see how eSports is not only enhancing gameplay but creating business opportunities that enrich both the industry and their business partners.

Neil Barbour   00:17:15

Yes. It used to be the conversation was how does esports get on traditional broadcast or cable TV and find an audience there and pull that over to video games. But I do feel like that's not really the conversation anymore now that streaming has taken precedence and these audiences can be found on these levels. Is the conversation now more about finding the right brand partnerships to better monetize the content?

Stanley Pierre-Louis   00:17:40

I think that's part of it. The esports market in the U.S. has been very different than in the EU or in Asia, for example, because some of those regions of the world provide sponsorship by nation, right? They subsidize sports to some extent. The U.S. has been different. And so it's been about creating business opportunities that make sense for each side. There are some companies that are more endemic to creating events and others are more focused on game development or publishing. So I think it's really finding the right opportunities with the right companies. We're also seeing that esports grabs so many eyeballs that the sponsorship opportunities are limitless. But again, it's got to be with the right partners, and it's got to be endemic to that audience because the video game audience is very excited but focused on what makes it so unique. And so it's not mass marketing. It's about how do you target the audience that understands gameplay and appreciate gameplay being played at such a high level.

Neil Barbour   00:18:41

I also think sort of abstractly that it would be interesting to harness the excitement around the college level. I know there have been like sort of starts and stops to organize maybe Intuit NCAA framework, giving these teams so that they're playing more consistently and playing more games that people want to have eyeballs on. But I don't know exactly how that you get from A to B there. So what games have you been playing lately? What has you excited right now in the industry?

Stanley Pierre-Louis   00:19:13

I love sports games. I also love games that let me get in and out, right, because life is such a time crunch that being able to get into a racing game or a sports game where I know it's timed works. Every once in a while, I would try an open world or try to get into a game with a longer lifespan. But between travel and responsibilities, it's hard to do that. But if I could get in a Streetfighter or a Mad or a Forza or any of these games, I just love being able to try things out, try new games and see how I stack up. I'm not a great gamer, but I'm a dedicated and and resilient gamer.

Neil Barbour   00:20:03

All right. I feel the same way. So will you be making time for Grand Theft Auto VI in the fall?

Stanley Pierre-Louis   00:20:09

I'm looking forward to it.

Neil Barbour   00:20:10

Well, Stanley, that's all the questions I had. I want to thank you for your time, and good luck with the conference.

Stanley Pierre-Louis   00:20:15

Thank you so much.