The Entertainment Software Association has confirmed reports that its Electronic Entertainment Expo will be undergoing big changes for next year. According to the trade group, the convention will be "evolving into a more intimate event focused on targeted, personalized meetings and activities."

"It is no longer necessary or efficient to have a single industry 'mega-show,'" said ESA president Doug Lowenstein in a statement. "By refocusing on a highly targeted event, we think we can do a better job serving our members and the industry as a whole, and our members are energized about creating this new E3."

Prefacing its statements with the caveat "as currently envisioned," the ESA said E3 2007 will still be held in Los Angeles, but won't have the "large trade-show environment" of previous years. The city has previously estimated that the show brings in about $20 million in direct spending by the 60,000-plus attendees and exhibitors.

Sources have revealed to GameSpot that several publishers--including Sony, Microsoft, Electronic Arts, and THQ--were among those pushing hardest for changes to the event. The companies' motives were monetary in origin--floor space alone costs exhibitors over $12 million, and that number doesn't include the cost of building out large-scale, elaborate booths or on-site marketing campaigns within the Los Angeles Convention Center. In addition, an estimated additional $50 to $70 million is spent on city services such as hotels, entertainment, and transportation, a vast portion of that coming from exhibitor employees.

Additional sources have informed GameSpot of how the ESA will recoup the massive amount of income it will lose from the fees it charges to E3 exhibitors and on-site marketers. According to several sources, a number of major publishers have agreed to pay the ESA as much as $5 million each to make up for lost revenues.

GameSpot has also learned that senior ESA staff met with officials from the City of Los Angeles this morning to discuss the impact that having a scaled-down event will have on the metropolis. Attorney Daniel Offner of Offner and Anderson, PC, a law firm that represents numerous E3 exhibitors past and present, thinks the city is likely to respond negatively to a smaller show. "I'd be surprised if the city took this lying down," Offner told GameSpot. "I'm sure the city will take a close look at their [contractual] rights and try and protect them."

One group that will clearly suffer from a downsized E3 is Los Angeles taxi drivers. "The youngsters spend a lot of money, and they don't stay in one space," said Nettabai Ahmed, president of Los Angeles' Independent Taxi. "For taxis, it was really a good convention for us...A regular convention boosts the drivers' income by about 25 to 30 percent. But E3, it goes up to 50 percent boost in their income."

Ahmed estimated that each of the city's 4,000 to 5,000 taxi drivers takes in an extra $500 to $700 during the expo. That's not only the largest bump in income the drivers' get each year, Ahmed said, but the largest they've received in decades, bested only by the 1994 World Cup and the 1984 Olympics.

So what will the new E3 look like? The ESA isn't saying...yet. "The new E3Expo will take shape over the next several months," said Lowenstein. "[It] remains an important event for the industry, and we want to keep that sense of excitement and interest, ensuring that the human and financial resources crucial to its success can be deployed productively to create an exciting new format to meet the needs of the industry. The new event ensures that there will be an effective and more efficient way for companies to get information to media, consumers, and others."

[UPDATE 3] Since this article went to press, Lowenstein has revealed E3 will be moved to July, renamed, and severely reduced in size.