Does E3 Amount to a Video Game Upfront?

As they do every year, tens of thousands have converged on Los Angeles for the biggest video game conference in the world: the Electronic Entertainment Expo, commonly known as E3.

The crowd is mostly developers, hardcore gamers and press, all clamoring for a taste of the next generation of consoles and titles. But largely unobserved on the show floor is a new and growing contingent that’s not interested in buying or reviewing games, but rather wants to climb right through the screen and become a part of the action.

Brands and their agencies are all over E3 this year, and they’ve booked wall-to-wall meetings with ad sales execs at the game studios and with the in-game ad firms that represent their games.

“I’ve got meetings every hour, which is great,” said Brandon Berger, OgilvyOne’s senior strategist for digital innovation. “We’re starting the process now, because 2007 is right around the corner. I need to be aware of all the hot titles that are coming out and where studios are putting their money so I can know where we need to be.”

The brand/publisher meetings at the show range from informal networking lunches to private peeks at upcoming games.

These sessions tend to focus on in-game product placement, rather than the dynamic billboard-style ad placements that have gained so much attention recently. These deeper brand integrations remain the holy grail of in-game marketing, since they engage the players directly in the experience of the game, rather than trying to distract them from it.

“Not everybody talks to the studios,” said Berger. “I like to work with the studios because I think it’s the best way to get things done. You can just buy impressions and call it a day. If you’re sponsoring a video game, what’s the character going to do outside the game? You’re going to bring them into your marketing. You have to think of it in a holistic way.”

Since storyline integrations take time and finesse, the atmosphere at the E3 meetings tends to be process-oriented.

“To execute integrated storyline deals takes a considerable amount of creative thinking and proposal generation,” said Jonathan Epstein, a board member with Double Fusion, which represents inventory for several videogame publishers. “The purpose of those meetings is less to close a deal… than to [discover] opportunities and find the threads that we should follow up on.”

But he added, “If someone wanted to option the rights for a discussion, that’s a deal that we would do and conceivably could do at this show.”

Sarah McIlroy, director of in-game advertising and promotions for Midway Games, has about 20 meetings lined up for E3.

“What I want to do with the partners is walk them through the product lineup,” she said. “Most of these partners are under NDA already, so we can talk about future opportunities [in games] coming out in Fall 2007 and some in 2008.”

How many brands will be represented at the show? It depends on who you ask.

“Last year’s E3 you saw a few brands,” said Justin Townsend, CEO of in-game ad firm IGA Worldwide. “This time around there’s a load more brands there. There’s a huge increase in the number of them that just want to get a load of the space.”

Given the nature of the show, where many new titles are unveiled and reviewed by the press at once, it seems likely that on-site competition between brands will heat up as it becomes suddenly clear which games are going to be hottest this holiday season and in 2007.

In theory, that dynamic could give rise to a bidding model similar to television’s upfront, particularly as the press coverage amplifies the buzz around some titles and not around others.

“E3 is a magnifying glass through the press to the rest of the gaming market,” said Double Fusion’s Epstein. “The enthusiast press captures the segment that’s really important to drive the buzz around games. Because of the amount of editorial activity… it does start to emerge [what games] you want to be watching for.”

However, he said there’s no race to pin down product placements right there at the show.

“Not all brands come to E3. Right now it doesn’t represent an upfront. It’s sort of a preview of the following season. It’s very possible that next year it will be different.”

Or maybe not. Some say the amount of time and finesse required for brand integrations with game storylines rules out the hyper-competitive bidding model that characterizes the TV upfront.

Dario Raciti, OMD’s group director and gaming leader, says there will be instances of advertiser competition within a specific category: “Wherever there’s a limited number of opportunities, there’s always going to be a race,” he said. “Video games are a little different. Your brand really needs to be relevant to the game and vice versa.”

But he adds the space is still small, so there’s a spirit of camaraderie among the ad execs who have experience with it. He estimates you can count the number of media agencies that employ dedicated gaming specialists on one hand, or maybe one hand and one finger. They include Denuo’s Play, OgilvyOne, OMD and a few others.

“There aren’t that many people on the agency side who do this,” Raciti said. “We are trying to help each other and make sure this develops into something viable for the advertiser.”

Ashley Swartz, proprietress of in-game product placement firm Eiko Media (acquired this week by Double Fusion), voiced a similar sentiment.

“The video game industry is still a pretty small industry,” she said. “If you’ve been in it a few years, you know the key players. There’s a lot of camaraderie. I don’t know if an [open bidding] format like the upfront would be welcome.”

Part of Swartz’ agenda while in Los Angeles is to oversee the final stages of her client Daimler Chrysler’s integration of Dodge vehicles with Ubisoft’s “Ghost Recon: Advanced Warfighter.” As part of the game tie-in, the automaker will give away a car and cash prizes to gamers who take part in a bracket-style contest at the show.

“We have executives coming in from DaimlerChrysler,” she said. “We’re going to have photo ops. It’s lovely to see that a brand’s involvement in a new channel can have such a positive experience for gamers.”

Long and short: It’s clear speaking to advertisers with a presence at E3 that the show is not the equivalent of the TV upfront yet, but it’s just as clear that this is the likely place for such a model to emerge.