05/08/2015 05:54 pm ET Updated May 08, 2016

A View From The Top: The L.A. Games Conference

By Noah J. Nelson (@noahjnelson)

Industry events are strange beast no matter which industry is involved. Industry events in Los Angeles are doubly so. When the industry in question is the video game industry as it stands in L.A. pretty much all bets are off.

This week I attended Digital Media Wire's L.A. Games Conference. A gathering of industry insiders, developers, Financiers, and press. There is in the glitz and glamour of E3 -- their are no game demos just chats with executives, Analysts and their ilk. While there's nothing"sexy" about this type of event one can get a real handle I'm what the industries consensus is going to look like for the next six months.

Spoiler alert: if you consider yourself a core gamer you're probably not going to like where the endless quest for cash is leading the bulk of the industry.

As an industry event the L.A. games conference is chiefly concerned with issues of revolving around the monetization and distribution of video games. This is nuts and bolts stuff that would put most consumers right to sleep. But in that sleep what dreams might come, Dreams of a future of games that looks nothing like the industry of old.

To cut a long metaphor short: the winner of the current console generation isn't Sony's Playstation--it's the global mobile market. The explosive expansion of the Chinese mobile market means that the real money in the next decade in gaming is going to be made there. At least if the western-born executive from China's Internet powerhouse Tencent is to be believed.

Dan Brody, the executive in question, was there to remind the gaming industry professionals in the room that China has more Internet users than the United States has people. On top of that China isn't remotely done getting its citizens wired. China also has the second largest number of millionaires in the world and given how many people are there (1.355 billion) it's easy to believe that it will one day dwarf the number of millionaires in America.

Given the hit-driven nature of the entertainment business there's a good chance that we'll see more consideration of what works in the Chinese market from the big game publishers. This is something we've already seen from the movie studios--just think back to last year's Transformers sequel, or Iron Man 3's bonus scenes for the Chinese market.

Now just because the industry as a whole has yuan signs in their eyes doesn't mean that suddenly we're going to see Activision and EA pump out nothing but Match-3 cellphone games until the sky falls. That's not how the execs and analysts at LAGC 2015 were talking.

Instead they've doubled down on the traditional entertainment industry mindset. AAA game franchises like Call of Duty are thought of as blockbuster films while mobile powerhouses--Candy Crush Saga, for instance--are viewed as television. Big studios have both kinds of properties in their intellectual property stables, and that's a safe way for financiers to park their money.

Which begs the question: what's the Netflix of gaming? I don't mean a service like Playstation Now--formerly known as Gaikai--that streams content over the net. That still seems to be more of a non-starter than anything else. No, I'm talking about who is going to come along and offer up exciting content on mobile platforms (the TV of gaming) that rivals the buzz of the blockbusters.

The indie scene is answering some of the demand in the PC market--which is stronger than it has been in years thanks to Steam. I wouldn't be too shocked if the shrinking price gap between a decent PC and the current consoles doesn't have something to do with that renaissance too. (High end gaming rigs on the other hand.)

While there's room in the market for someone to come along and lure casual gamers into something more substantial--if not as life involving as a League of Legends, a Call of Duty, or a Halo--the hunger for something brand new amongst core gamers is palpable. Which is where virtual reality and augmented reality come into the equation.

During the opening panel moderator Eric Goldberg, Managing Director of Crossover Technologies, stated that VR wouldn't be viable for two to five years. This healthy skepticism flies in the face of both the press enthusiasm that has emerged VR and the hardware timelines of Oculus and HTC/Valve's Vive. The later is scheduled to hit this Fall and on the very day of the LAGC Oculus set a target of the first quarter for 2016 for the Oculus.

Let's consider Goldberg's statement as an assessment of the maturity of the VR platforms. It will likely take a few years before that market shakes out... but with so many players jumping into the VR and AR space right now I'm starting to get that queasy feeling I get when I see someone overplay their hand. Not Goldberg, but the emerging immersive computing industry.

While VR and AR are fundamentally different plays than 3D TV, it looks like there is going to be a similar barrier to entry for consumers to get into that market. The VR/AR hardware is going to clock in at prices in the hundreds of dollars. Add in the cost of the PC rig or the game console that will be required to generate the images and you're starting to look at a serious investment.

The only sane path for the industry at this point is to court the hardcore and mid-core market. This is good news for those early adopters who are always looking for the next great interactive experience. What I wonder is if that will be enough for the big dogs who have entered in to the hardware race-Facebook, HTC, Microsoft, Samsung, Google, Sony--or if the massive profits being made in mobile will just make VR and AR look like hobby businesses with a poor return on investment.

Don't get me wrong: this is my nightmare scenario.

When that hardware starts hitting at the end of this year it will take some seriously compelling software to build the market out beyond the lunatics like me who have been saving their pennies for the past three years. That, and maybe some crazy subsidies by the platform holders to get this gear into the mass market's hands.

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