Nintendo, Sony and Sega fight it out at gaming expo

June 01, 1998|By Julia Angwin | Julia Angwin,SAN FRANCISCO CHRONICLE

ATLANTA - It's a make-or-break year for Nintendo, Sony and Sega.

Nintendo of America is hoping its Nintendo 64 gaming device will finally beat the Sony PlayStation. Even though Nintendo 64 was the Tickle Me Elmo of Christmas '96, it has remained stuck in second place. And No. 3 Sega is trying to leapfrog both of them with a new video game player due out next year.

As the big three fought it out at the Electronic Entertainment Expo in Atlanta last week, personal computer and online games were being left in the dust by their video game cousins.

The simpler and cheaper video game players cost about $150 and connect to a TV. By comparison, even with the new wave of cheaper PCs, it costs about $1,500 to outfit a computer with multimedia and sound features for gaming.

"Right now it's a Sony vs. Nintendo market," said Bill Zinsmeister, senior research analyst at International Data Corp. in Framingham, Mass. "In terms of software, the [video] console market is nearly double the PC game market."

Nintendo was not the only company that had a lot to prove at the E3 Expo, where 440 game-software companies hawked their wares to retailers that are stocking their shelves for the Christmas season.

The stakes are high: Game-related sales were about $5.7 billion last year, according to the Interactive Digital Software Association.

One underdog that hopes to capture a piece of that pie is Sega of America, whose Saturn gaming device is in third place behind Nintendo and Sony. Sega said it will spend $100 million to promote its new 128-bit gaming system, which promises to go beyond the Nintendo 64-bit technology next year.

Sega claims its Dreamcast gaming system will run three-dimensional applications four times faster than a Pentium II and have graphics 10 times faster than Nintendo 64. It will cost $250 and arrive in U.S. stores in fall 1999. A plug-in Dreamcast memory card has a screen and controls, allowing players to use it as a stand-alone gaming device.

But analysts say Sega may have a hard time luring software developers to write games for Dreamcast - because many of them lost money writing games for Sega's failed Saturn machine.

Nintendo of America has a similar credibility problem. Last year at E3, the electronics giant demonstrated a lot of Nintendo 64 games that never showed up on store shelves, contributing to Nintendo's poor showing.

Nintendo is promising to launch many of those titles this year, including the much-anticipated "Legend of Zelda" and a game that was heavily hyped at E3 last year called "Banjo-Kazooie."

Nintendo officials say they didn't launch the games because they wanted to make sure they were high-quality.

"It frustrates gamers, but it's our policy not to release software titles until they're as good as they should be," said George Harrison, vice president of marketing at Nintendo of America.

Since last year, Nintendo has also cut the prices of its games from about $70 apiece to about $50. Sony games usually cost $30 to $50 each.

PC game-makers are also hoping that software sales will propel growth in their industry. This year, PC games made up 57 percent of the 1,600 games being shown at E3.

"On a PC, you have so many more games to choose from," said George T. Chronis, news editor at PC Games magazine in San Francisco.

This is ironic because PC games sell far fewer copies. A hit computer game will sell half a million copies, compared with a top-selling video game that can sell 2 million to 3 million copies.

It's also bad news for PC game companies that have had to pour $1 million to $2 million into developing games that won't sell that many copies.

Last year, Internet gaming was being touted as the killer application that would propel sales of PC games. But the furor wasn't borne out by the numbers - IDC estimates online games raked in only $124 million last year.

"I think you're starting to see the hype has quieted down," said David Cole, senior analyst at DFC Intelligence, a market research firm in San Diego.

Some are hoping that video games and computer games eventually will merge.

For example, the new Sega machine will run on Microsoft Windows CE, which means software for it could also run on hand-held palm-size PCs that use the same operating system software.

And Los Altos-based VM Labs, led by some of the developers of the old Atari Jaguar system, is building a computer chip that will let DVD (digital versatile disc) video players hooked to TVs work as computer gaming systems, Internet surfing devices and even videophones.

"Convergence is happening," said Chronis of PC Games magazine, "But exactly the scope and breadth of it is hard to say yet."

Pub Date: 6/01/98

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