Video games market falls back on speed

Nintendo’s rivals are preparing for its latest market onslaught, the much-delayed N64. Can it revive the ailing sector?

Sega’s decision to develop games on the Internet (MW August 30), is yet another jolt in its rollercoaster European diversification programme.

This year the Japanese giant has launched Sega Channel (a cable games station), Segaworld (a theme park), and a new PC games line. It has also acquired a pub and club gaming company, JPM group. These moves have all been done in the shadow of the expected launch of Nintendo 64 (N64) next year.

Some observers say diversification shows prudent business sense. Others believe the company is no longer confident of its core business.

Sega marketing director Andy Mee says: “I prefer to see this as expansion rather than diversification. This market will grow in the future and whichever way it moves, we aim to be the chief content provider. One day we aim to be an electronic alternative to Disney.”

Mee adds that the company is not expecting to retreat from the console market. He says: “There will always be teenagers who want to go up to their own room and play games in their own space.”

The global computer games sector has declined over the past four years. The UK software and hardware market was worth 614m in 1992 and this year it is projected to make 338m, according to research group Mintel. Everyone in the industry realises the heyday of individual game’s success, as with Sega’s Sonic the Hedgehog and Nintendo’s Super Mario, is over.

This year Sony and Sega have re-adjusted their marketing activities for the promised arrival of N64. This machine has nearly twice the graphics capability and speed of the 32-bit Saturn and PlayStation consoles. At the start of the year both machines sold for 299, now, after two price cuts, they retail for 199.

The division of Sony that handles the PlayStation – Sony Computer Entertainment Europe – reveals its plans this week. But according to insiders, there will be a further commitment to the technology rather than diversification. Since the machine launched in the UK last September, Sony claims to have spent 18m marketing it across Europe. Industry insiders believe it will increase its spend over Christmas and for the next 12 months.

Sony will more than double its pan-European spend from 18m to 40m for the coming year. A press and TV campaign will break at the end of September through agency Simons Palmer Clemmow Johnson and will feature comic testimonies of people who have had their lives changed by playing PlayStation.

The series of new ads will follow the pattern set by the summer campaign which was dark, featured jump cut editing and was aimed at a slightly older market.

The target market for Sony PlayStation is 12 to 30-year-olds, while both the other Japanese companies aim their machines at eight to 15-year-olds.

But the key player in all of this is Nintendo’s new machine whose graphics and speed have specialist magazine reviewers reaching for superlatives. The company is keeping its European plans for N64 under wraps until the ECTS computer games conference in London, on September 8 to 10.

In the US, Nintendo has earmarked about 40m to market the machine, which will launch at the end of September.

In the UK it is a moot point whether the much-delayed machine will launch before Christmas. Nintendo spent only 1m on advertising in the year to March 1996, but in the early Nineties this figure was as high as 10m.

A spokesman for THE Games – which handles UK sales and marketing for Nintendo – says the ads, produced by agency Leo Burnett, “will be light and fun and aimed at our key younger market”.

The spokesman adds: “Nintendo is not looking to diversify, it has always been about gaming. Sega is diluting its brand and many people now say it will pull out of the hardware market altogether within a year. Nintendo, on the other hand, staked a lot of money on this in terms of research and development, and it is paying off.”

N64 debuted in the all-important Japanese market in June and the company claims sales of 1 million already.

Most observers think N64 has what it takes to revive the console market. But there is an increasing body of opinion that believes this will be the last chance for the console market to shine before the home PC catches up with its more advanced console graphics.

However, defenders of the console say the manufacturers have the ability to constantly advance console graphics capabilities, which makes its format attractive.

Within the next two months the industry will know if sales look like remaining flat or whether the industry can hope to come anywhere near the halcyon days of the Super Mario and Sonic the Hedgehog binges.

AdValue, page 38

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