Faster 32- and 64-bit hardware systems are ready to push aside the standard 16-bit Genesis from Sega of America and Super NES from Nintendo of America-the two systems that have dominated the market.
Now a third platform producer, Sony Corp., may turn the market into a horse race. Its games division, Sony Computer Entertainment of America, unveiled the 32-bit PlayStation to an expectant audience at the Electronic Entertainment Expo in May.
PlayStation will challenge Sega's new 32-bit Saturn and Nintendo's forthcoming 64-bit Ultra 64. Atari and 3DO are sitting on the sidelines with 32-bit systems that have shown only moderate success.
A bit is the basic unit of measurement for digital information. The size of a system's central processor determines its capacity and speed.
All this high-tech action at yearend should revive sales in the videogame market, according to Jefferies & Co. Industry hardware unit sales in 1995 are expected to slip 16.5% below '94 levels, while dollar sales will plunge 34% to $2.1 billion retail. Industry software shipments will decline 24% in units and 30% in dollars to $2.4 billion wholesale in 1995. (Heavy discounting precludes collecting software dollars at retail.)
Sega first jumped into the bit-enhancement race last November with an upgrade kit, easing Genesis owners into the next generation of hardware. The kit transformed the 16-bit Genesis to a 32-bit Genesis 32X system that required new 32X software cartridges.
Sega's Saturn, a CD-ROM system, "debuted" nationwide on the "Saturnday" before Labor Day, with an introductory ad budget estimated at $50 million. Sega may need to patch relations with many of its loyal retailers, however; it froze many out of pre-launch shipments. Preferred retailers like Toys R Us and Babbage's Software have been selling Saturn since early summer.
Sony's PlayStation debuted the following week and is winning the price-points game. The PlayStation goes for $299 vs. $399 for Saturn. Nintendo's Ultra 64 will low-ball both at $250 when it enters the market next spring.
Sony predicts PlayStation will be the top-selling platform within a year, big thinking for a company that has never marketed a video-game machine and has no runaway titles from its software division, Sony Imagesoft.
Sony has "good hardware and software and this is Sony, so they should have big marketing bucks," says Wes Nehei, executive editor of videogaming magazine GamePro.
Nintendo is making consumers wait until next year for the much-ballyhooed Ultra 64. It had planned a launch this fall, but the delay might be a smart move. Bigger doesn't mean better unless software can translate the technology into fun, and it has been speculated that Nintendo held off its introduction to get its software lined up.
3DO, too, is working with third-party hardware and software manufacturers to introduce an M2 accelerator that would "upgrade" its 32-bit system to 64.
Nintendo has no plans of slowing down in the meantime. It is spending $80 million promoting new products and line extensions in the market. It introduced Play It Loud Game Boy in May, shipped Virtual Boy in August and plans to keep the 16-bit Super NES fresh with more smash software like Donkey Kong Country, which moved 6.1 million units the last 45 days of '94.
Sampling is the most powerful marketing tool in the industry. Nintendo is hoping renters will try and then buy its 32-bit Virtual Boy, a new hand-held system that's the first mainstream product to approach 3D/virtual reality. The company has teamed up with Blockbuster Video to rent the 3D system with two games for $9.95. Trial users will receive a $10-off coupon to purchase the $179.95 system.
Sega hitched a ride on the Lollapalooza concert tour this past summer, placing vans equipped with the Saturn and new software for the 16-bit Genesis for a "test drive" in parking lots, beaches and college campuses.
Sega Channel debuted on cable last December, opening new doors for game trial. The joint venture of Sega, Time Warner and Tele-Communications Inc. allows subscribers to download games to Genesis systems with a special adapter. The channel offers abridged versions of soon-to-be released games.
Videogame marketers also are trying to capture their young, elusive, high-techies via online services. Sega hit CompuServe and the World Wide Web in November. Nintendo debuted on America Online and World Wide Web.
Airlines may be the next venue for game trial. Singapore Airlines has a system from Matsushita Avionics Systems Co. up and running with Nintendo software.
The future will be a technological challenge for videogame marketers. Sega has inked a deal with Toshiba to use its DVD optical disc in future videogame systems. The disc can store up to 18 gigabytes of audio and visual information, or 28 times the capacity of a conventional CD. Toshiba is using the technology for a movie disc player in mid-1996.
"It will offer a richer environment," says Sam Goldberg, VP-marketing at Acclaim Entertainment, a third-party software developer (Mortal Kombat II).
In the wave of new technologies, some predict an industry shakeout. One system may strengthen its hold, but Mr. Goldberg doesn't see a universal platform emerging.
"I don't see that happening," he says. "They all offer their own performance strengths in a gameplay standpoint."