Sega bets big on Dreamcast

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13 October 2000 03:00 PM
Tags: sega, dreamcast
On the same day its parent company's stock was downgraded to near-junk status, Sega of America announced it had kicked off its own US$100 million marketing campaign.

"Sega's launch will be the biggest video game launch yet," said Bernie Stolar, president and chief operating officer of Sega of America.

The marketing onslaught includes more than 110 TV commercials per week on channels including MTV, and a focus on pre-order sales, which already top 100,000.

"We expect to reach 200,000 by our (September) launch," Stolar said.

Sega's biggest bet is a two-month rental preview of the Dreamcast system.

On Tuesday, the game console maker announced a deal with Hollywood Entertainment, the owner of the Hollywood Video rental chain. To prime the buyers' market, 1,000 Hollywood Video stores will begin renting Dreamcast systems on July 15, almost two months before the official launch date.

Eric Lampel of NPD Group thinks the pre-launch rental strategy makes sense. "It will create word of mouth, and if (Dreamcast) lives up to players expectations, it will create demand," he said.

That's good news for Sega, which needs a Western makeover, after being pummeled in Japan for poor sales of its next-generation game console.

Sega slammed in Japan
According to a Bloomberg News report, Sega of America's parent company, Sega Enterprises, lost 11 percent of its stock value in the Japanese market on Tuesday after Japan's Rating and Investment Information Inc. cut Sega's long-term debt three full notches from "A-" status to "BBB-.". That puts the stock on the edge of "junk" status ranking.

The report blames lackluster sales of Sega's Dreamcast system and its software as the reason for the downgrade. Other analysts have also predicted doom and gloom for the struggling game hardware company.

Yet, while Japanese Dreamcast sales have struggled to hit 1 million six months after Sega's original target date, the United States is a different market, NPD's Lampel said.

Roll 'em
Sega of America will eventually make more than 10,000 systems available, said Jeffrey Yapp, president of Hollywood Entertainment.

The roll-out, however, will be gradual. At first, only a single game -- Sonic Adventure -- will ship. Every two weeks, another game will hit the shelves; first will be Capcom's PowerSton, followed by Midway's Ready 2 Rumble and Sega's football title.

At its Sept. 9 launch, Sega of America hopes to have 16 titles available and 200,000 pre-ordered devices. "That's a great size at launch," Lampel said. "A wide variety of titles always helps; they are hitting most of the genres."

Compared to Nintendo Ltd.'s N64 launch in 1996, that's glowing praise. The Nintendo platform wallowed at eight games for its first Christmas season. Sega hopes to have between 30 and 40 this year.

Nintendo turned itself around. Sega is hoping it can do the same.

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