Contact: Jo Ouvry
Deloitte
Public Relations
+44 (0) 20 7303 0587

At the start of the Game Developers Conference 2006 in San Jose this week, Deloitte predicts that by 2010 over 80 million adults will be regular video game players, with pervasive use in western countries and increasing penetration levels in developing countries. However given the games sector’s over-cyclical nature, there is no room for complacency.

Ed Shedd, head of media at Deloitte, comments:

"2006 is going to be one of the strongest yet for the video game market, boosted by the launch of two new consoles in 2005 and another in 2006. The new consoles have unprecedented processing power for their size and price, and are expected to drive global game sales to $23 billion in 2006. Sales growth should also be driven by continued tie-ins between films and games – with multiple games platforms providing effective cross-marketing for selected blockbuster movies.

"However companies shouldn't dwell too long on their success, and would be wise to focus their attention on building a foundation for future growth. Games for the new consoles are likely be significantly more sophisticated, and will cost significantly more to develop. License costs for the most popular media brands, from sports to movies, are also expected to remain high. Video games may also become a victim of their own success: the more compelling and pervasive video games become, the greater the chance of backlash from concerned parents, politicians and spouses.

"The industry should strive to broaden its appeal, both demographically and geographically. Young males are the life-blood of today’s video games market, and many game titles and related products are heavily targeted at a male audience. Yet the female population also has a strong appetite for games, as demonstrated by the spectacular success of crossover games such as The Sims. Manufacturers and games publishers should invest in creating products and services specifically designed for a female audience, and industry groups should measure progress by tracking the extent to which females purchase consoles and game titles.

"Electronic games revenues are dominated by North America, Europe and Japan, which currently account for 90 percent of global sales. The billions of people in the rest of the world have less disposable income for games and such, but that discretionary income is rising steadily in certain regions. The industry’s challenge is to offer video games in an affordable format, with culturally appropriate content.

"Electronic games are becoming increasingly pervasive in our culture, raising the prospects of an anti-gaming backlash. As children spend more time playing video games, parents tend to spend more time thinking about taking the games away. Indeed there have already been a few alarming cases of fatal addiction to video games. The games sector needs to be aware of public concerns and respond accordingly. On-screen timers and automated shut-off (with time-limits set by parents) could be easily incorporated into games, addressing the issue before it becomes a real problem.

"Companies should also explore ways to extend the revenue potential of a game beyond the initial purchase. Next generation consoles all have built-in broadband access that could be used to sell a diverse range of digital content, from new game levels and character upgrades to cheat codes and multi-player tournaments. The network connection could also be used to pipe in localized and even personalized advertising.

"Finally, as console-based development costs rise (seemingly without limit), some publishers may want to consider changing platforms. Handheld games typically cost less to develop and publish. Similarly, mobile games are generally very simple and thus relatively inexpensive. Electronic toys are another potential platform, with the falling cost of technology making it possible to build electronic games into almost every toy. Indeed one of the best selling toys during the 2004 holiday season was a digital spinning top that featured four built-in games."

- ENDS -

Notes to editors

TMT predictions report for 2006 The predictions reports analyse 30 key trends in the converging and fragmenting TMT sectors, explaining the huge impacts of digitisation, regulation and changing business dynamics. Increasing customer power and the need for organisations to adapt are shaping the TMT sector, changing existing business models and re-routing revenue streams. Learn more and download our three reports in full, TMT Trends: Predictions 2006.

For more information about the conference:  www.gdconf.com

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.