NEW YORK, May 27 /PRNewswire/ -- Unrelenting progress in processing power, network bandwidth and storage capacity will enable the electronic game industry to become greater than five times more pervasive by 2010, with the installed base of electronic game devices (excluding PCs) growing from 415 million to 2.6 billion. "Moore's Law and Electronic Games," a new global report by Deloitte & Touche's Technology, Media and Telecommunications (TMT) Group and Deloitte Research, focuses on the industries -- outside of the electronic game and related industries -- that will be impacted by technological advances based on Moore's Law, as well as the positive and negative disruptions that the advancements will create. Moore's Law states that the transistor density of a silicon chip will double every two years. "As technology continues to improve, new opportunities will arise for industries outside of the traditional electronic game arena, such as movie studios, record companies, advertisers, mobile phone producers, communications operators, toy manufacturers and electronics manufacturers," said Scott Singer, Managing Director of Deloitte's Media and Entertainment Corporate Finance Group. "As a matter of fact, the number and range of platforms on which paid-for electronic games can exist will expand significantly and will include mobile phones, MP3 players, PDAs, set-top boxes, children's toys and even exercise machines. The installed base of devices will escalate from 415 million in 2004 to 2.6 billion in 2010." Moore's Law implies that there will be an eight-fold increase in processing power and memory capacity between now and 2010, greatly impacting the disruptiveness of the electronic game industry. It is expected that 450 million homes worldwide will have broadband connections by 2010, with one billion individuals having access to multimedia mobile phones that could support game downloads and some form of mobile game playing. Storage capacity will likely increase to 1,000 gigabytes of disk storage in a typical home PC by 2010, enabling games to be longer and more complex with enhanced visual detail, sound effects and music. These technological advances will create new revenue opportunities for sectors related to electronic games and will expand audience reach beyond the traditional electronic game markets. * Advertising. Game publishers looking to recoup their spiraling development costs are more and more receptive to product advertising in games. In-game advertising is expected to become increasingly popular, particularly as technology improvements and shifting demographics make in-game product ads more appealing. * Wireless communications. Mobile operators will be the predominant channel for selling and distributing phone-based games, with only a small number sold in retail stores. More advanced networks prevalent by 2010 will provide higher transfer rates, enabling downloaded games to be more complex and sophisticated. * Entertainment. Electronic games represent an important new merchandising category, with cross-licensing between movies and electronic games providing a major source of revenue for movie studios. Music companies will recognize revenue opportunities, as music in electronic games becomes a more essential part of the game experience. Video games have inspired entire lines of toys and action figures, allowing toy manufacturers to capitalize on cross-licensing opportunities. "Electronic games has been the fastest growing sub-sector of the media industry over the past five years," said Singer. "In the U.S., sales of video games and related technology surpassed box office receipts in 2001. This growth means additional opportunities for industries typically not associated with electronic games, providing the opportunity to create a new revenue stream." Additional key findings from Deloitte's "Moore's Law and Electronic Games" report include: * Game publishers - Game publishers will have more platforms to leverage, including on-line play and mobile phones, but will also face escalating production costs as demand for more sophisticated games increases. Steep entry costs may drive smaller publishers out of the market. * Advertisers - Embedded advertising in games provides advertisers a new opportunity to reach an expanding market with attractive demographics. Aggregating eyeball hours for a game that sells three to five million copies implies at least 50 million hours of viewing time. The Sims Online game already includes an interactive advertising element. * Fixed-line operators - Fixed-line telecommunications operators will benefit from the increasing popularity of multi-layer online games and downloadable add-ons, leading to increasing subscriber revenues. * Mobile operators - With an equal ratio of females to males owning mobile phones, the expansion of games to mobile phones will likely increase the participation level of women to electronic games. However, bandwidth may be insufficient to support the growth until 3G networks are more widely available around 2010. * Music industry - The music industry will continue to benefit from the growth of electronic games. Titles like Grand Theft Auto: Vice City use music to enhance the game's appeal, and seven audio CDs from the game are sold separately. Music and licensing revenues will become a factor in mobile and handheld games. * Toy manufacturers - Electronic games have historically competed with traditional toy manufacturers in the youth market. Technological advances will create new opportunities to improve existing toys with electronic feature add-ons as well as for cross-licensing opportunities. * Home console - Home console manufacturers will have to make increasingly large investments to build the next-generation video game console that will occupy the dominant position in the digital living room of the future. The report was researched and written by Deloitte's Telecommunications, Media and Technology (TMT) Group and Deloitte Research. Input was provided by clients, leading industry and financial analysts, and the 5,000 strong global Deloitte TMT team. The report is available at www.deloitte.com. 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