The video games industry gathered in Los Angeles this week for the 25th annual Electronic Entertainment Expo (E3), where arguably the biggest announcements of the year take place.  Well, at least parts of the industry gathered, as Sony and its PlayStation brand declined to attend this year.  Despite this absence, E3 2019 featured several breakout subjects of conversation, even if it held few surprises.

The core topics from the show were similar to those I wrote about last year.  Future consoles, streaming, subscriptions, and, of course, upcoming games.

This year’s show continued to reflect an industry undergoing expansion, both in terms of how people can play and, perhaps more importantly, how they can pay to do so.  While we received more concrete details in some areas, others remain opaque.

As next-generation consoles, streaming and subscriptions generated great interest and excitement both in press events and on the show floor, Nintendo backed up its current position as the market leader with a targeted blast of upcoming content that will likely solidify it for at least the next 18 months, if not longer.

Here are my key takeaways from E3 2019:

  • Next-Generation Xbox Has Strong Introduction – Microsoft revealed its next generation console, codenamed Xbox Project Scarlett, expected to release in Holiday of 2020 along with the latest iteration of the Halo franchise, Halo
    , and the return of Master Chief, the character that helped make the launch of the original Xbox console such a hit.  Advanced technologies, support from Project xCloud (detailed below), and the expansion of the Xbox Game Pass subscription offering made the entire presentation a success with industry and many consumers.

  • Streaming Stutters – While some details were released, I left the show with far more questions than I’d like around the business models for both announced services as they enter the market currently occupied by Sony’s PlayStation Now and Nvidia’s GeForce Now.

    • Google Stadia – I expected far greater detail around the upcoming streaming services than was on display at the show.  Google announced its Stadia product with a $129 Stadia Founder’s Edition, along with incomplete detail on its pricing and subscription offerings around content. The announced exclusive content for the service, which has proven to be crucial for successful launches in the console space, was limited and relatively small in scale compared with traditional console launches.  Google Stadia has support from some third-party publishers, while many questions remain about how the service will work when released to the market, if there is enough content to fuel adoption, and if consumers will be able to navigate what could be a confusing offering.  Google Stadia will launch in November.  I have conservative expectations for Google Stadia at launch, and do not expect it to have a significant impact to the market in 2019.

    • Microsoft Project xCloud – No pricing or business model details were shared regarding xCloud at E3.  Entering public trails in October, Project xCloud promises to allow xCloud users access to owned or subscribed content that can also be played on Xbox consoles.  As opposed to Google Stadia, which looks to establish a new platform which would require users to build new libraries, xCloud will allow people access to the libraries they may have built over years and is a complementary service to the Xbox ecosystem.  While I do not anticipate significant market impact from the release of xCloud to testing this holiday, it may have significant impact to sales of Xbox hardware as well as subscriptions to the Xbox Game Pass service in future years.

  • Subscription Expansion – Microsoft unveiled its Xbox Game Pass Ultimate subscription, which allows subscribers access to a wide variety of content across Xbox and PC, along with announcing that many games will launch on the Xbox Game Pass service (while also being made available for traditional sale).   Ubisoft also announced its UPLAY+ service, a PC subscription service for the Ubisoft catalog launching in September 2019.  Subscription spending has been a significant growth area in total market spending over the past handful of quarters, and I expect this growth to continue and likely accelerate in the coming months and years.

  • Nintendo Quietly Winning – Nintendo Switch is the best-selling hardware platform of 2019 in the U.S., and is the only platform showing growth in the year.  Nintendo spent its E3 highlighting the games that will continue to drive continued growth throughout 2019 and into 2020, including Pokémon Sword, Pokémon Shield, Luigi’s Mansion 3 and Animal Crossing: New Horizons, among many other titles showcased in the company’s latest Nintendo Direct presentation.  Nintendo Switch is the most important piece of Video Game hardware in the market right now.  I expect Nintendo Switch sales to continue at a strong pace, Pokémon Sword and Pokémon
    to drive both significant software and hardware sales volume, and Nintendo to finish as the year’s best-selling software publisher.

Finally, what E3 summary would be complete without some predictions on 2019’s best-selling titles?  In the U.S. market, I anticipate The NPD Group to report that Call of Duty: Modern Warfare will rank as the best-selling title of the year.  NBA 2K20 and Madden NFL 20 should rank 2nd and 3rd, with Borderlands 3 and Star Wars: Jedi Fallen Order rounding out the top 5. 

Other titles in my top 10 predictions include Mortal Kombat 11, Tom Clancy’s Ghost Recon
, Death Stranding, Kingdom Hearts III, and Super Mario Maker 2.

While this slate of titles will likely fail to match the overall sales volume of the 2018 slate, which included Rockstar’s Red Dead Redemption 2, it is one of the stronger transition year slates we’ve seen.  There are a number of titles that could sneak into the list, including Obsidian Entertainment’s The Outer Worlds, but if there weren’t the possibility of big sales surprises it wouldn’t be the Video Games market.

E3 2019, much as the show the year before, contained promises of multiple potential futures of the video game industry.  New consoles, new services like streaming, and expanded subscription offerings are just some of the ways the industry will continue to raise the market tide. 

Ultimately, however, it’s about the games.  And while many companies focused primarily on those potential futures this E3, companies like Nintendo showed that focusing more on the now is a great strategy for a current market leader.