ESA fees jumped 1,600% from '06-'08

Trade group's financials reveal massive dues increase during two years of downsized E3; ESRB shows 50 percent spike in ratings fees.

Gaming in the United States has grown to become a $22 billion industry at retail in 2008. Watching over the interests of the publishers involved in that industry is the Entertainment Software Association, the trade group that organizes the Entertainment Software Ratings Board and the annual Electronic Entertainment Expo.

If publishers were upset about the soaring cost of the old E3, they probably weren't thrilled with hikes in ESA membership dues.

Earlier this month, the ESA made its annual accounting to the Internal Revenue Service and in the process provided insight into some of the changes necessitated by recent format switches of E3 and general growth in the gaming industry. For the year ended March 31, 2008, the ESA reported more than $28.21 million in income-producing activities, down from $29.02 million from the previous year.

While the total dollar amount funding the organization didn't change much year-to-year, the sources of that income fluctuated wildly. For the previous year, the ESA derived most of its income--some $18.46 million--from E3 2006, the last of the large-scale trade shows put on by the organization before a radical overhaul. After E3 was moved to nearby Santa Monica for 2007 and downsized from more than 60,000 attendees to roughly 5,000, its contribution to the ESA kitty shrank to a relatively paltry $3.49 million.

When the ESA first announced the plans for a smaller E3, it said the resulting revenue shortfall would be made up for partly by a hike in the organization's membership fees. Those fees were clearly reflected in the ESA's filing, as membership dues for the year of the Santa Monica E3 (April 1, 2007 - March 31, 2008) were $17.41 million, up nearly 300 percent from the prior year's total of $4.47 million. The year before that, the ESA's total income from membership dues was just over $1 million, making for a two-year, 1,600 percent surge in fees. After the hike in fees, the ESA saw its member ranks thinned by the departures of Activision, LucasArts, id Software, Crave, and NCsoft.

The ESA's other lines of income were similarly in flux for the year. Fees paid out to the ESA's Entertainment Software Rating Board were up to $5.18 million, a jump of 48 percent over the prior year's $3.5 million. An ESRB representative told GameSpot the increase in ratings fees was due partly to the Board receiving more submissions from publishers and partly due to an "adjusted fee structure to more fully cover ESRB costs and make accommodations for lower budget games." The ESA also continued to rake in money from states who tried to defend unconstitutional gaming legislation, as the ESA chalked up another $501,000 to its growing record of "litigation recovery."

Expenses showed a bit of volatility as well. The ESA paid out $5.4 million in event-cancellation feeswhen it decided to move E3 to Santa Monica, and more than $323,000 for the year it decided to move the show back to the Los Angeles Convention Center. Political contributions were also up leading in to the 2008 elections, with the ESA reporting $338,000 for the year, up from about $102,000 for the year before.

[UPDATE]: When asked if the return to a larger E3 meant that membership fees would be decreasing, ESA CEO Michael Gallagher told GameSpot, "The positive restructuring of the E3 Expo allowed us to revisit the ESA's dues structure. It is our hope that this new model will make the ESA an attractive and accessible option for small and mid-sized publishers so we can more fully represent our industry's diversity."

[CORRECTION]: This article originally reported that the ESA membership fees income increased 1,700 percent over a two-year span. The fees were actually 1,700 percent of their previous level, making for an increase of 1,600 percent. A similar miswording was made in referencing the single-year increase in dues, which were actually up 300 percent, not 400 percent of their previous level. GameSpot regrets the error.

26 Comments

  • goldeneye_basic

    Posted Mar 3, 2009 10:27 pm PT

    raptures330, you are correct, I misread that the dues were $17 million per developer. I still disagree with your position on the Super Bowl advertising though. Yes, having a trade show strictly for industry members, including the news media may help spread the word on most of the new games coming out, but the gaming media is going to write about those games regardless of a trade show. If there was no E3, then game journalists would just have to do more work researching new games. Gamers are the only ones going gaming websites and watching tv shows like XPlay to learn about new games anyway. So, E3 really is pointless to anybody that can't get in to it. However, advertising during the last Superbowl would have reached over 95 million people in the US alone. That is far more people than visitors to gaming websites. Now obviously every game can not be shown during 3 minutes or less of ad time, but the major developers can show off their main titles during that time.

    goldeney_basic: "Developers can just put on their own trade show."
    raptures330: "Tell that to upstarts like Bonfire and Robot."

    Well, Activision and Lucas Arts could organize a trade show and invite small companies like Bonfire and Robot to attend. Then they could charge say $20 admission plus make money from concessions. The ESA should realize this and not think they are the only game in town for trade shows.

    By the way, if you are Mr. Sinclair, then I apologize for taking a shot at your math. My comments were just nitpicking and the math errors did not really change the main story. I just went about it that way because I am tired of journalists that do manipulate facts in their articles to go along with their personal agenda (such as political articles). So I figured it is easy to take a shot at the author.

  • trust2112

    Posted Feb 25, 2009 10:42 am PT

    The ESA must have borrowed from the same book as RIAA and MPAA. How to run off your breadwinners and alienate your clients. What a bunch of morons and retards! I hope they go down in a big swirly mess, just like the toilet bowl from which they climbed from. Again, like the RIAA, they wouldn't know a good product if a developer smacked them in the face with one.

  • thekodaman

    Posted Feb 25, 2009 10:30 am PT

    The ESA has become like the Zimbabwe of gaming then has it? That's quite a rate hike.

  • onthe_dl

    Posted Feb 25, 2009 10:12 am PT

    you know we are in recession right?

  • Amir29

    Posted Feb 25, 2009 10:00 am PT

    Nappan has said it best

  • nappan

    Posted Feb 25, 2009 9:03 am PT

    The game industry should dissolve the ESA and reform in a more sensible fashion.

  • raptures330

    Posted Feb 25, 2009 8:58 am PT

    APFlopsy - reading comprehension ftl. edited. you are correct. I read donations somewhere.

    TheKungFu - So what if it is the most watched tv show? (I beg to differ... American Football isn't very popular outside the US, but thats another discussion). The most time they could get would be 3 minutes. Just 3 minutes. Those $17M come from many developers and publishers and are used to fund the next E3 and other things they do. So, even if it is the most watched event it still makes no sense to have 3 minutes of international view (most compromised of Americans living in or outside the US) compared to a couple of days where people from the media can spend the time they want on all the different developers. These people write articles on pages where their target market visit and get more than 1 second to see what is going on with each game. So I insist, Superbowl Ad (is less than) E3.

  • Hvac0120

    Posted Feb 25, 2009 8:42 am PT

    The Game Industry cannot afford to be members of this association with those types of fees. As a consumer, I cannot say what all the ESA actually does for the industry other than what is mentioned in articles like these. Obviously fees go up more, the more companies that drop their memberships.

    If the ESA cannot get their ducks in a row with their finances, it will be the end of that group and the end of E3.
    _

  • TheKungFu

    Posted Feb 25, 2009 7:26 am PT

    raptures330: "Yes, because 3 minutes of airtime during a sporting event (that most gamers just love), which is mostly watched by Americans, is much better than a couple of days of international coverage."

    Rapture, you obviously have no idea whatsoever how massive the Super Bowl is. It's consistently the most watched show in the *world* every year. Yes, the world. Why do you think ad time for the Super Bowl is so expensive? Why do you think it's such a big deal? Super Bowl = instant global exposure and recognition. Period.

  • APflopsy

    Posted Feb 25, 2009 6:34 am PT

    No rapture, litigation recovery is not a donation from a state, it IS a refund. It is the recovery of attorneys' fees which have already been paid out to cover the cost of the litigation, and because the ESA's attorneys won the cases, the fees they are paid are recovered from the defendant. It's breaking even.

  • raptures330

    Posted Feb 25, 2009 5:54 am PT

    Just thought I would point something out since you took time to point stuff out too.
    Goldeneye:
    That $17M is from all the members put together, not a single publisher or developer. Income does not equal profit. *Edited due to failure of reading comprehension. Thanks APFlopsy*

    "Developers can just put on their own trade show"
    Tell that to upstarts like Bonfire and Robot. "Why bother paying $17M when you can make money showing off your upcoming games?"
    What exactly is E3? Oh right, its a place to show off upcoming games... "That money would be better spent buying up a bunch of ad time for the Super Bowl."
    Yes, because 3 minutes of airtime during a sporting event (that most gamers just love), which is mostly watched by Americans, is much better than a couple of days of international coverage. Those 3 minutes will cover all the members too of course, so they can be 1 second screenshots of all the best upcoming games.

    Public admissions do make sense. We are suckers for that sort of stuff...
    How much should admissions be? Apparently posters dont have to think things through before posting them. (poke)

    So the math is wrong... go wild on my punctuation and grammar.

  • Ripper_TV

    Posted Feb 25, 2009 4:44 am PT

    goldeneye_basic you got the point. GS, please, revise.
    Every bureaucratic organisation like ESA ends up being greedy.

  • goldeneye_basic

    Posted Feb 25, 2009 1:19 am PT

    Well, apparently video game journalists don't have to take math to get where they are. A change from $4.47 million to $17.41 million is an increase of 300 percent not 400 percent. An increase of 100% = $8.94M, 200% = $13.41M, 300% = $17.88. The same goes for the headline. The increase was 1600% not 1700%. At least Brendan Sinclair got the 48% correct. Also, the ESA is not really raking in money by recovering litigation fees. The best it can do is break even on that. None of that is profit.

    Anyway, it looks like the ESA may very well put itself out of business. $17M is outrageous. That money would be better spent buying up a bunch of ad time for the Super Bowl. Developers could put together their own trade show. They could also open their doors to the general public and make quite a bit of money from admissions. Why bother paying $17M when you can make money showing off your upcoming games?

  • firehawk998

    Posted Feb 25, 2009 12:01 am PT

    It is much cheaper for a gaming company to hold thier own conference in a hotel auditorium like Macworld than E3. Economys tanking and this is decisions the idiots at ESA made.

  • Lucidmike78

    Posted Feb 24, 2009 11:51 pm PT

    Its time for the big boys, Sony, Microsoft, and Nintendo to step up and form a non-profit committee of publicly elected individuals to replace ESA's board and operations. It will be cost effective, and maybe, just maybe they will be a little bit more open to the idea of not being so closed off to the people who make their business possible, the consumers.

  • Lucidmike78

    Posted Feb 24, 2009 11:46 pm PT

    It all makes total sense now. The people at ESA are completely insane. Charge millions of dollars for publicity, then lock the door to the public.

    Screw the loyal companies that are still willing to come by jacking up fees to insane amounts.

    Charge a lot more for offering a less. At this rate, they will be trying to charge Sony, Microsoft, and Nintendo $100 million each for the next E3 that will be held at a swap meet. Oh, and of course, that day will be the only day out of the year that the swap meet will be closed off to the public.

  • Zaatin

    Posted Feb 24, 2009 9:47 pm PT

    Lol the only reason I even watched last year was hoping for info on FF's release and maybe some new games, at least we saw some new games but I am stilling waiting for the release dates, I suppose TGS would be a better bet for that anymore >.

  • Tylendal

    Posted Feb 24, 2009 9:37 pm PT

    Companies always seem to forget that their customers (in this case, the game companies) can always take their business elsewhere.

  • 008Zulu

    Posted Feb 24, 2009 8:48 pm PT

    For a company meant to bring the very latest and greatest to our attention they sure are behind with the times for overcharging, better late then never i suppose.

  • zintarr

    Posted Feb 24, 2009 8:07 pm PT

    Screw the ESA. It is this sort of filthy greed that has destroyed the economy of the USA.

  • quietguy

    Posted Feb 24, 2009 5:49 pm PT

    Now that we're 10 years out ahead with a full fledging industry, what is the point of ESA these day?

    Sure they may represent the game industry on an interim/political basis with emphasis on self-regulation by it's ESRB standard; but really, what is the point of ESA other than existing as a black hole for game publishers?

  • lamprey263

    Posted Feb 24, 2009 5:38 pm PT

    these groups see the video game market growing and they want a bigger cut, though the ESRB hasn't done anything do deserve increasing their rates and but at least the ESA has done some good, they've been quite a force to be reckoned with with regards to battling ant-gaming legislation, though they've done a terrible job setting up E3 in recent years, it'd be interesting if someone reported on how the ESA is justifying their fees

  • negativeions

    Posted Feb 24, 2009 4:18 pm PT

    It seems the ESA bow down to the slightest whinings of EA and other ballwashers like rats. E3 didn't need such drastic changes. Just some. It's ok. PAX has replaced E3 for the better.

  • Inconnux

    Posted Feb 24, 2009 3:09 pm PT

    E3 lost all relevance years ago

  • k0r3aN_pR1d3

    Posted Feb 24, 2009 2:52 pm PT

    Heck, if I owned a gaming company, I would have scrammed out of there fast. It would probably be cheaper to host a small private event than pay for those suckers.

  • SHARPSHOOTER25

    Posted Feb 24, 2009 2:39 pm PT

    Thats incredible. Seventeen million for companies just to attend a trade show for publicity? Pretty much shuts down all new developers that are not associated with EA...

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