Next-Gen.Biz says their “well placed” sources have informed them that the Electronic Entertainment Expo (E3 Expo), in its present form, has been cancelled. According to these sources, the large exhibitors have agreed that the costs of the event don’t justify the returns gained from it, and that the money would be better spent on more focused company events that highlight their products alone. They say it was decided that without the major players, there would be no point in continuing, and that ESA president will likely announce the news in the next few days (possibly Monday). Next-Gen also says it’s likely that they will plan a smaller event around the same time (possibly still called E3), but that it will be a mere shadow of its former self.

Ars Technica, on the other hand, is reporting that the E3 Expo will not be cancelled, but will be downsized in 2007 and made more of a “closed door” event. Their sources tell them that the two main reasons for this change are cost and access. They say that media access is a problem at the show, but a more likely reason for the downsizing is complaints from smaller industry exhibitors that the show is too focused on Microsoft, Nintendo, and Sony. Ars Technica also says the official announcement will likely be made tomorrow.

Since E3’s creation as a small, media/industry focused event, it has become an absolute behemoth with a huge number of attendees, flashing lights everywhere, flat-panel TVs lining every wall, and sound blasting all around. The massiveness of the expo has made it difficult in recent years for media to meet with exhibitors and gain vital information. Basically, the only way to get key information at E3 is to schedule an appointment with an exhibitor, otherwise, you’re forced to try out demos and ask questions to members of the floor staff, who are instructed by the companies to not reveal too much information. This is likely a big reason for any changes that occur.

We wouldn’t want to jump to any conclusions as to which report is more correct, so more information will come when an official announcement is made by ESA. The consensus, however, does seem to be that changes are afoot.