E3 may pull the plug on Los Angeles

The video game industry has held its annual trade show in its backyard of Los Angeles for 17 of the past 19 years. But the president of the Entertainment Software Association, which organizes the annual event, says E3 may pull up stakes.

"E3 is a world class show that deserves a world class venue," said Michael Gallagher at a media dinner Sunday night. "The Los Angeles Convention Center is no longer a top-tier property."

Gamers participate in a video game at the E3 Electronic Entertainment Expo in Los Angeles, June 12, 2013.
Patrick T. Fallon | Bloomberg | Getty Images

This is the second time in recent history that the ESA has considered moving E3 away from LA. In 2012, Gallagher announced the show would move if issues around the construction of the proposed Farmers Field and rebuilt convention center were not resolved. The city and the ESA ultimately reached a three-year deal, keeping the show in downtown LA for three more years. That agreement expires in 2015.

Given the time it takes to organize E3, Gallagher said the ESA will need to make a selection on where to hold the 2016 show soon.

Read MoreWill Amazon be the next giant in gaming?

"The time to make this decision is relatively short," he said. "We'll consider all cities that can improve the experience."

Gallagher did not name other cities the organization was considering, but indicated the group was in talks with two venues in the greater LA area (presumably the LA Convention Center and Anaheim's Convention Center). Industry insiders familiar with the ESA's plans noted that Chicago very nearly won E3 in the last round of negotiations. San Francisco, New York and New Orleans were among the other candidates.

Among the group's concerns are the spread out floor plan of the LA convention center, which requires show attendees to walk long distances between appointments, and housing issues. Finding a room during E3 is always a challenge, and while construction is underway on one new large-scale hotel, the ESA would like to see more.

Read MoreShould you really blame Verizon if Netflix starts buffering?

In addition, the age of the facility is a concern, says Gallagher. Of the center's West Hall, he noted "that's a challenging place to put on an engaging experience."

E3 has left LA once before, in 1997 and 1998, when the show was held in Atlanta. The travel expenses for publishers, which are largely based in the Los Angeles and San Francisco areas, were considerable, though, which led to its return to California.

Two years ago, plans called for the LA convention center to be remodeled as a sports and event stadium was built adjacent to the site. The building of the stadium (and remodeling of the convention center) are all contingent on an NFL team relocating to LA, something that appears unlikely now.

"This is a very important period we're in," said Gallagher. "We're open minded. The Los Angeles Convention Center could be a world class venue, but with other venues, we have that right now."

— By CNBC's Chris Morris