Video Game Wars Not Just on Screen




LOS ANGELES -- The Big Three video game makers are spending an amount equal to Grenada's gross domestic product in a high-stakes battle for supremacy of the fickle $6.3 billion video game business.


The unprecedented marketing push is being fueled by Sega of America's introduction Thursday of its much-anticipated Dreamcast, the most powerful video game console ever. Sega plans to spend $100-million promoting the machine, which analysts say represents the troubled company's last chance to succeed in the U.S. market.


To counter Sega's advertising blitz, Sony Computer Entertainment America and Nintendo of America each plan to spend $150 million on television, print and radio ads.


"During the holiday season this year, you won't be able to watch a TV show without seeing these ads," said David Cole, an analyst at DFC Intelligence, a San Diego market-research firm.


Enormous advertising budgets aren't unusual for companies trying to get the word out about a new game machine, but they are unheard of as a means to boost sales for video game consoles that have been on the market for years.


"Clearly, $150 million is our biggest push ever behind the platform," said Andrew House, vice president of marketing for Sony Computer Entertainment America, which introduced PlayStation, the leadingsystem, in 1995. Nintendo 64, the second best-selling machine, came out in 1996.


So far, the biggest weapons in the video game wars have been discounts. Sony and Nintendo dropped the price of their machines to $99 last month in an effort to lure sales away from Dreamcast, priced at $199. Sega countered by slashing $100 from the price of Dreamcast for buyers who trade in PlayStations or Nintendo 64s.


Game makers say the tactics are bearing results. Sega has pre-sold 300,000 machines. And Sony says sales of PlayStation systems have nearly tripled since it slashed its price.


At stake in this marketing battle is control of the nation's video game industry. Sony currently dominates the market, with a 61 percent share. Nintendo holds about 38 percent and Sega about 1 percent.


For Sega, the window of opportunity is a small one. Next year, Nintendo and Sony plan to launch 128-bit machines as powerful as Dreamcast.


Fortunately for Sega, the odds are not as long as they appear. Unlike toothpaste or other products that change very little over time, the first few months after a video game machine is introduced can make or break the product, and the firm that makes it.


"Other brands are in constant maintenance mode, fighting for half a point of market share," said Peter Moore, senior vice president of Sega of America. In the video game industry, "you're able with the right product to gobble up huge amounts of market share overnight."


He knows. Sega dominated the U.S. video game market in the early 1990s with its Genesis console.


But it lost customers in 1995 when it launched its next generation system, Saturn, which was viewed as inferior to Sony's PlayStation - which had a better slate of games. Nintendo sealed Sega's fate with its Nintendo 64.