Sega: Done with Dreamcast - News - Business

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This story was printed from ZDNet Australia.
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Sega: Done with Dreamcast

By Dan Costa, PC Magazine
February 05, 2001
URL: http://www.zdnet.com.au/news/business/soa/Sega-Done-with-Dreamcast/0,139023166,120152895,00.htm

Sega will continue to be a player in the games market but is throwing in the towel in the gaming console battle.

Trailing a distant third behind Sony and Nintendo, Sega has stopped making the Dreamcast gaming console and will refashion itself as a platform-agnostic game developer. Sega has made deals to bring its games to Palm handhelds, set-top boxes, and even rival consoles by the end of the year.

Titles won't go away
"Ultimately, we expect to supply games for all platforms," says Peter Moore, president and COO, Sega of America. The first Sega games available for Sony PlayStation 2 will arrive in late summer, and will include Virtua Fighter 4, the Space Channel 5 series, and the Sakura Wars series. Sega will also port Sonic the Hedgehog, ChuChu Rocket!, and Puyo Puyo to Nintendo's Game Boy Advance. Sega is in negotiations to bring titles to Nintendo's Gamecube and Microsoft's upcoming Xbox

The impending release of Microsoft's Xbox played a major role in Sega's scuttling of the Dreamcast. "Sega has been the number three video game console supplier and has been hemorrhaging money since the introduction of the Dreamcast in 1999," according to Brian O'Rourke, senior analyst, Converging Markets & Technologies at Cahners In-Stat Group. "The prospect of becoming the number-four supplier must have been a major factor behind its current change of strategy."

Sega plans to move beyond the console market and create new gaming platforms. The company signed a deal with Palm to bring both online and offline games to Palm handheld organisers by the end of the year. Sega will also port its games to select Motorola cell phones. "We will be bringing a number of Java-based games to Motorola's phones in the next year," says Moore.

On another front, Sega agreed to deliver Dreamcast chip technology to Pace Micro Technology, a set-top box manufacturer, that will enable cable subscribers to play Dreamcast games. In the coming months, there may be more of this kind of console/set-top convergence, according to O'Rourke.

"If Sega, Sony, and Nintendo could find a way to rid themselves of hardware manufacturing while maintaining software revenue and royalty streams, they would do it," O'Rourke says. "Set-top box/video game console convergence would be an excellent way to accomplish this."

Consoles on the cheap
Dreamcast consoles will be sold for a reduced price of US$99 while Sega's worldwide inventory, approximately 2 million units, lasts. Sega will also launch 30 new titles for the Dreamcast in the next year.

Sega's Moore says that becoming a software vendor was the only move available in an industry in which businesses typically lose between $50 and $200 on every console sale. "They always say you make money on the blades," Moore says. "Our games are the sharpest blades we have."