Dreamcast bolsters Sega rebound

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Badly bruised by marketing missteps a year ago, Sega of America had everything to lose when it launched its Dreamcast videogame system last September. Once kingpin of the category, Sega had to earn back the trust of retailers, game developers and, most importantly, hard-core gamers.

As Sega barrels ahead with plans for the fall launch of the Dreamcast Network, which it bills as the first online multiplayer videogame system, the company appears poised to broaden its base.

As of Feb. 25, Sega had sold 1.8 million Dreamcast units in the U.S. and 4.5 million worldwide, achieving $360 million in U.S. hardware sales. The company projects U.S. unit sales will reach 2 million by March 31, the end of its fiscal year.

JOINS FROM REEBOK

Peter Moore, 44, Sega's senior VP-marketing, is largely responsible for getting company sales back on track. He joined Sega last spring after heading up marketing for Reebok International's global soccer and rugby division.

"When I came on board, we really needed to reconnect with the hard-core gamer," Mr. Moore says. "The Sega Saturn launch had disenfranchised many people. The platform was launched in a pretty sloppy manner at the wrong time, in the wrong manner, and fell flat on its face."

Marketing and sales strategies were not well communicated, says Mr. Moore, and some retailers, such as KB Toys, didn't sell the units.

Sega needed to do more than save face.

"This is a company with a 45-year heritage in gaming, and the brand had atrophied," says Mr. Moore about the company's Japan-based parent Sega Enterprises. "We needed to return to our brand soul. Sega is gaming."

The company returned to its roots, trying to recreate itself as a haven for passionate gamers, or "warriors," as Mr. Moore calls them -- a disproportionately male group aged 12 to 24.

The return meant evangelizing in a high-profile $100 million multimedia campaign via FCB Worldwide, San Francisco, proudly flagging Sega's attributes as a defiant, unexpected and irreverent brand under the tagline, "It's thinking."

The theme was about "rebuilding bridges that were burned to our core constituents," says Mr. Moore. "It was a tip of the hat to gamers and [asking for] forgiveness for Saturn."

BEVY OF TACTICS

Sega deployed a bevy of guerrilla and viral marketing tactics in the process -- wild postings, product placements, a 39-city "Dreamcast Mobile Assault Tour," alternative music tour sponsorships, MTV "Video Music Awards" tie-in and excitement-building promotion on a slew of fan Web sites, in Sega's magazine and at retail events.

To implement these tactics, Sega hired Triple Dot Communications, Boston, which specializes in underground viral marketing campaigns. Triple Dot deployed street teams to Chicago, Los Angeles, New York and San Francisco neighborhoods for three weeks. On basketball courts, in front of 7-Eleven's -- wherever kids gather, the teams talked with them about gaming and distributed baseball caps, postcards, T-shirts and stickers with the Sega swirl on them.

"[These teams] became our street evangelists. [Their efforts] built buzz at the grass roots," says Mr. Moore, who adds that kids liked that they had input on a product targeted to them.

In a similar venture, a Sega team spent several months driving an 18-wheeler across the country in the "Mobile Assault Tour." In addition to scheduled appearances, if the team saw a parking lot full of kids, it would pull up in the truck, which held 16 playable Dreamcast systems, to get their opinions.

"The timing was good of Sega's [Dreamcast] introduction," says Matt Gravett, videogame research analyst for PC Data. "The current generation of systems was nearing the end of its lifespan. . . .Gamers were looking for the next thing, and I think Sega was primed and ready to jump on that."

SHARE ZOOMS

As of December, NPD Group estimated that Sega held a 15.6% unit share of the videogame hardware market, compared to less than 1% in 1998. That's quite a comeback, especially considering it was battling back in the face of tough competition from Sony Computer Entertainment's PlayStation and Nintendo of America's N64, the market leaders.

"I think we built an incredible amount of momentum during the pre-sell period and made consumers think that [the launch on 9/9/99] was a milestone in entertainment history. Even people who weren't gamers knew about us," Mr. Moore says.

Although most of Sega's marketing tactics are geared to diehard gamers, one way the company piqued the interest of non-gamers was by sponsoring "The Family Values Tour," an alternative music event, last year. Concertgoers could play games on the new console set up in a special gaming arena. One winner was pulled on stage a few minutes before each showtime to play the game "Ready to Rumble" with Fred Durst, lead singer of Limp Bizkit, exposing thousands of non-gamers to Dreamcast. More music sponsorships are planned.

MUSIC COMING

Besides the marketing momentum, Sega seems to be innovating in the product arena, as well.

For example, it recently unveiled a new digital camera for Dreamcast called the Dreameye. Sega also plans to offer more peripherals, such as an MP3 player for gamers to download music tracks through the Dreamcast console.

A Sega partnership with MP3.com extends beyond banner ads to cross-promotions and other tie-ins. Sega also is incorporating new technology into games, including voice recognition.

In a move that illustrates just how integral gaming is becoming in the realm of downtime and leisure, Sega's forthcoming Dreamcast Network will enable online, multiplayer gaming via a content partnership with Excite@Home and AT&T WorldNet Services.

The existing console launched last year includes a built-in 56K modem to facilitate online gameplay. About 1 million gamers already communicate with one another over the network. Sega recently launched e-mail-based games and online parlor/puzzle-based games such as "Chu Chu Rocket." By September, Sega will host 3D multiplayer games and launch its new online gaming portal offering not only games, new player communities, e-commerce and game previews as well.

MUSHROOMING NET

Mr. Moore expects the network to grow to 6 million users by 2001, with 200 game titles ready before Christmas.

"We are focused on building a gaming network via the Internet," he says. He maintains that gaming, once thought the province of the loner, is becoming more social. Online play is driving the trend, as is music.

The MP3.com partnership is ideal in positioning Dreamcast as the ultimate social instrument, Mr. Moore notes, claiming with a little music and a little game play, people quickly have a party.

Look for Sega to pull out all the stops again as it ramps up the Dreamcast Network in a projected $150 million campaign expected to hit its stride this fall.

"The game is firmly in our court," says Mr. Moore. "It's ours to lose, but Sega is taking gamers where gaming is going."

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