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 The availability, at low cost, of microprocessors and a wide range of special LSI circuits will encourage growing complexity of electronic games. The first generation of games was typified by the ping-pong game, permitting only a single format of play and not providing adjustability for different skill levels. The second generation of games, now phasing into production, provides adjustment of games parameters. Some of these permit reprogramming to play different games. This evolution toward greater adjustability and greater programmable variety within a single unit will continue over the next four years. The stand alone home games units increasingly will incorporate other functions in addition to games and basic television viewing, including computation and data processing. Most electronic games to date have been electronic versions of popular sports, card games and similar well established concepts. Future electronic games increasingly will introduce unique concepts that will stand or fall on their success in appealing to the imagination and interest of consumers. Consumers will become more sophisticated in their use of games, and will create markets for more difficult games based on unique concepts.

The distribution channels most appropriate for electronic games vary widely, depending on the type of game. Coin operated games typically are owned or rented in quantities of dozens to hundreds, by operators who place and service them. This distribution typically is direct from the manufacturer to the operator. These channels are dominated by the old line established electromechanical game producers, and very difficult for newcomers to penetrate. Home games, conversely, move through traditional appliance channels to consumers: major department stores, discount houses and specialty stores. The share of games which move direct from the manufacturer to the consumer will increase drastically by 1980, based on catalog order firms and direct mail promotion. Small, new competitors in electronic games will find the establishment of suitable distribution to be among their biggest problems.

Integrated circuits, in 1976, constituted 47 percent of all component value in electronic game production, as outlined in Figure 4. This includes special LSI game chips, microprocessors, memory and logic devices and other ICs. Passive components such as resistors, capacitors, printed wiring, connectors and cable held the next largest share, 22 percent or $28.3 million. The IC share will drop to 34 percent by 1980, although their total value will expand from $58.4 million to $93.5 million over the forecast period. The display share will grow rapidly, from 6 percent to 16 percent, as home games increasingly are built as stand alone units.

Enclosures represent a significant share of component value, 13 percent in 1976. Coin operated games typically use rugged, wood cabinets costing from $75 to several hundred dollars. Home stand alone games also will use relatively expensive cabinets.