President's Message

May 17, 2006

Electronic Entertainment: A Niche Industry?

Regardless of where in the world you live, most people recognize that Los Angeles is a large urban sprawl. With a population of over 20 million, you would think that major conventions would have a negligible impact on the city itself. However, each year when E3 descends down on L.A., the citizens of L.A. stop and take notice. Mainstream newspapers, television, and billboards all focus on the plethora of major announcements that game companies are issuing at E3 and everyone from hotel staff to sales associates at remote stores eagerly ask about the "big gaming show". In fact, finding a hotel within the greater L.A area is a near impossibility during the week of E3 and many attendees commute 30-40 miles each day from their hotel to the L.A. convention centre. Yes, E3 is big, without a doubt.

The sheer magnitude of E3 is a simple testament to the overall size of the electronic entertainment industry. Why is it then that so many people continue to tell me that their "kid plays video games" or that they think video games are for 12 year olds! Developers are not investing multi millions of dollars to create games for tweens. In fact, blockbuster game development budgets are targeted squarely at the professional audience with over 43% of all gamers ranging in age from 18 to 49. The electronic entertainment industry also generates more revenue than the Hollywood Box office, at over billion in the U.S. alone, with a global revenue forecast of billion by 2008.

Here are some interesting facts that most people might find surprising:

• Electronic Arts (the largest video game publisher in the world) is the fourth largest software company in the world, by market capitalization, after Microsoft, Oracle, and SAP.
• Electronic Arts' The Sims franchise has sold over 60 million units; The Sims franchise alone is valued at over 1 billion dollars.
• In 2005, over 228 million units of video games were sold in the United States.
• Sony has sold over 100 million units of the PlayStation 2 globally.

From a desktop perspective, video gaming is attributed to one of the top three reasons why consumers adopt a new desktop. Studies have shown that gaming comprises 18% of all desktop usage while surfing the Internet accounts for 35.5%. That being said, it remains unclear as to what percentage of web related usage is associated with playing on-line games. Thus, if one third of all web surfing, conservatively, was to play on-line video games, gaming becomes the number one application for overall desktop usage.

TransGaming's role is to deploy content across multiple platforms. As part of our portability expertise on many platforms, we have been bringing games to Linux and Mac, two extremely under served markets currently. In fact, Linux users have been quite vocal about their desire for games (or the ability to play games) on Linux. With TransGaming's Cedega, they have access to top Windows titles that will simply run out of the box. Mac users, on the other hand, have been getting access to a subset of top tier titles many months after the initial Windows release and, in some cases, pay more for this content. The problem of accessibility, however, doesn't end there. With the next generation of consoles now starting to enter the market, even the largest game developers and publishers are contending with the deployment of content across multiple platforms simultaneously. Costs are certainly escalating and the pressure to release more complex titles sooner is also increasing. Again, TransGaming is working to ease the migration of content across major platforms and, where content is virtually non-existent such as on Linux, provide solutions that bridge this gap.

Indeed, the games industry is massive. Whether you play blockbuster titles like Battlefield, The Sims, Half-Life 2 or casual games such as Marble Blast or even MineSweeper, you are a gamer. Electronic entertainment continues to be the fastest growing sector of the software space and major dollars are being invested and generated from this industry. The industry is definitely not aiming for the average 12 year old. So, the next time someone comments on the gaming industry simply being a niche industry, I'm just going to point them to this column and reserve any further color commentary.

Regards,

Vikas Gupta
CEO & President