Sega plots attack on games giants

As Sega was unveiling a &£50m European ad campaign for its new Dreamcast computer games console last week, rival Sony was preparing to open a chain of PlayStation pubs in the UK.

Sega is pinning its hopes for the future on the success of the powerful 128-bit, Internet compatible machine, with which it aims to topple Sony’s PlayStation from its market-leading position.

Meanwhile, Sony is hoping to extend its lead in the market with a chain of themed pubs run by brewers Scottish Courage. This would increase its appeal among older game players, widening the gap with Sega, which is seen as appealing more to children than young adults.

Yet the overwhelming failure of Sega’s Saturn system – which Dreamcast effectively replaces – will cast a long shadow across the much-heralded launch on September 23.

Saturn’s 1995 launch backfired due to flawed market research and the success of the 32-bit PlayStation, which has managed to build an impressive following. Last Christmas, PlayStation outsold Saturn by nine to one.

Sega says it has learned its lesson from Saturn, and will not make the same mistakes with Dreamcast. While this may be the case, the company cannot predict the outcome of a sales war involving Dreamcast and two new mega consoles.

No one outside Sony Computer Entertainment (SCE) knows what its PlayStation 2 is like, other than it will also be a 128-bit machine. Previews have been well-received by developers and gamers.

Another big advantage SCE has is that PlayStation 2 is “backwards compatible”. Developers will still be able to sell the back-catalogue of games produced for the current PlayStation console.

The availability of software is what sells consoles. Very few software publishers are writing for Dreamcast, and there are only a few games mooted in time for the launch.

More worrying for Sega is the late entry into the console race of Nintendo’s 256-bit Dolphin. With Dolphin’s global launch expected to be Christmas next year (the same as for PlayStation 2), Nintendo says the graphics will equal or exceed anything PlayStation 2 has previewed.

It will house the most powerful processor chip of any home video system, called the Gecko, developed by IBM for Nintendo. It will come with a Digital Versatile Disk (DVD) drive, and a modem. Nintendo also has an impressive array of software developers under its belt.

Nintendo spokeswoman Shelly Friend says: “We are in a strong position because Dreamcast will do well in the run- up to Christmas, but it will fall away after that. It will never go mainstream and will always be just a gaming purists’ console – if it survives at all.”

Julian Morse, an IT analyst with Beeson Gregory who covers the computer games industry, says: “Initial sales of Dreamcast will be good. Retailers are saying they will probably sell whole allocations up to Christmas.

“But in the long run Dreamcast will be an also-ran. Sega has a problem in that it has always been strong in the arcade market, but this is in decline because of the success of home consoles. At present Sega’s shares in Japan are at an all-time low. The company won’t go bust if Dreamcast flops, but it may be forced to concentrate on software development – perhaps even making games for PlayStation 2.”

Tokyo-based Sega has witnessed a decline in sales in recent years. In 1996, its gross worldwide turnover was $3.5bn (&£2.3bn), falling to $2.5bn (&£1.65) last year. The company admits it is paying the price for overloading the market early on.

Sega missed its sales target of 1 million units after it launched Dreamcast in Japan last year, selling 900,000. This was put down to production difficulties. Sega is also aiming for 1 million units across Europe in the first year.

Morse says there is industry speculation that Sony is planning to slash the price of its current PlayStation console from &£99 to &£69 to heavily undercut the &£199 Dreamcast when it is launched. This may do something to assuage the Office of Fair Trading, which is considering investigating retailers of computer games for alleged price-fixing.

PlayStation sales have slowed over the past three months, from 10,000 units a week in January to 7,000 units a week at present, so it has little to lose with this spoiler tactic.

David Wellsman, marketing director at Sony Computer Entertainment, says: “We welcome Sega back into the market. If it can raise gaming awareness with its Dreamcast campaign, all the better.”

Sega Europe chief executive Jean-Francois Cecillon says Dreamcast will establish Sega as one of the top players. “You don’t need to be 23 and male to enjoy Dreamcast. We will make gaming a truly mass-market experience.

“It’s a different climate now to when Saturn was launched. It is not the same games, not the same market, not the same marketers and not the same budget. There is also the online capability.

“If I believed the analysts, then I would be buying Sony and Nintendo shares. But I am buying Sega shares. I also believe there is space for three players in the market.”

Cecillon adds Dreamcast is already developed, whereas PlayStation 2 and Dolphin are “just theory”. “I don’t believe they’ll be ready by Christmas 2000,” he says. “By that time we will have sold 1.5 million units, and have more than 100 games. We will have a great advantage.”

There is little doubt the demographics of computer gaming are changing. The stereotypical image of the spotty teenager locked in his bedroom playing games has almost been killed off, even though it has an element of truth about it.

The average age of a PlayStation user is now 28. Every Premiership football club has a game zone, as do many night-clubs.

Sega has signed sponsorship deals with football clubs Arsenal, Sampdoria in Italy and Saint-Etienne in France, to increase brand awareness.

And Sony’s deal with Scottish Courage to roll out PlayStation-themed pubs demonstrates its mainstream ambitions. It is also attemp ting to attract more women to the sector.

Proof that gaming has become a mainstream leisure activity can be seen with games software sales higher than video rentals.

Hasbro Interactive, the toy manufacturer’s software arm, is relaunching the Atari range of computer games, which achieved popularity in the late Seventies and early Eighties.

Games like Pong, Centipede and Missile Command are aimed at eight- to 15-year-olds, but will also appeal to older lapsed gamers who fancy a nostalgia trip. This is a similar tactic to getting pub-goers and clubbers into home gaming.

If Dreamcast fails, experts predict Sega may be forced to pull out of the console wars altogether and focus on software, although Dreamcast 2 has already been mooted.

This new launch of so much hardware will have the software companies rubbing their hands, although they will have to contend with rising development costs due to advancing technology.

But with such a bewildering choice, and more impressive consoles just around the corner, the average gamer may end up spending a fortune on consoles and games which become obsolete in months.