Video Games Showdown: Will Sega Zap Nintendo?
More competitors drawn into hunt for a piece of $15 billion market
THE holiday video game release of Nintendo's ``Donkey Kong Country'' doesn't get the same media hype as ``Star Trek Generations'' from Paramount Pictures. But maybe it should.
At $15 billion, game revenues exceeded last year's cinema box office take. And in the next few weeks of holiday gift buying, gamemakers will make about two-thirds of their annual sales.
Still, there's a question mark hanging over this crucial sales period: Will Christmas customers go for current games and machines, or will they sit on the sidelines, waiting for a new generation of game hardware due out next year? The dominant industry players, Sega Enterprises Ltd. and Nintendo Company, plus a newcomer, Sony Corporation, are all planning to debut new machines in 1995.
Indeed, beyond the battle for holiday sales, the arrival of new technology and new players puts the electronic game industry at a critical juncture.
There are at least two high-stakes battles shaping up:
* A face-off between the big Japanese gamemakers. Nintendo and Sega together control almost the entire market. A few years ago Nintendo had a near monopoly. Today Sega has 54 percent of the market to Nintendo's roughly 46 percent. Now Sony plans to join the fray.
* A flanking move by new companies. The dominant industry strategy is to sell hardware designed specifically for games, priced at $100 and up. Nintendo, with its US subsidiary headquartered in Redmond, Wash., says 40 percent of American homes have at least one of its games. But nipping at the heels of Nintendo and Sega are games for personal computers and other versatile machines with fast-falling prices.
As the industry becomes more crowded, each competitor is doing its best not to get zapped from the playing field.
Nintendo. Its big holiday hit is Donkey Kong Country, an update of a popular 1981 arcade game. Dealers have already ordered 2.6 million copies of this game, which involves the adventures of an animated gorilla.
``Unfortunately it's only one hit,'' says analyst Walter Miao of Link Resources, a New York-based market research firm.
Analysts say Nintendo got complacent with its once 90-percent market share, but is finally pursuing alliances with companies such as computermaker Silicon Graphics Inc. in Mountain View, Calif., to turn itself around.
Nintendo is pinning big hopes on the release of more-advanced 64-bit hardware called Ultra 64 late next year.
Sega. Nintendo's arch-rival has a new product called 32X that allows owners of Sega's 16-bit Genesis game to use the faster 32-bit speed.
Sega officials say demand for the 32X machine is about three times higher than anticipated.
The company has its own hit game titles for this season, including Virtua Racing Deluxe, a simulated race car game.
Sega, taking a broader strategy than Nintendo, is moving beyond video games. The company just launched a toy division, and is rolling out mini-theme parks, with ``virtual reality'' experiences. Also, in a joint venture with Time Warner and Tele-Communications Inc. called the Sega Channel, it is distributing games over cable TV.
Sony. With its marketing might, ``Sony presents a real challenge to both Nintendo and Sega,'' Mr. Miao says. Indeed, the race could become Sega versus Sony with Nintendo struggling to catch up. But Sony has yet to come out with its product, and the two current leaders have a huge base of existing customers.
PC-based compact disc games. Personal computers, with costs falling fast, may challenge the current leaders, too. But Miao says that too often CD-ROM games result in ``all sorts of error messages.'' And the computer's architecture is optimized for purposes other than gaming.
Some popular PC-based games are slower-paced and more cerebral than most of the action-oriented Sega and Nintendo games. Myst, for example, is a self-paced exploration of an island fantasy world.
3DO and Philips. The Dutch consumer-electronics giant Philips and start-up 3DO Company of San Mateo, Calif., have their own CD-ROM players, which they tout as more-complete home-entertainment systems (including movies) than the Sega and Nintendo hardware.
But 3DO sales of have been relatively slow, Miao says, hampered by the high price (intially $699, now $399) and not enough game titles have come out yet.