VIDEO GIANTS WAGE MARKETING KOMBAT;SONY ENTERS THE FRAY WITH RIVALS SEGA, NINTENDO

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LONDON-If the world of business was a video arcade, they might call this game Marketing Kombat. But the upcoming battles between the videogame giants of the world promise to be even more brutal than the rowdiest shoot-'em-down cartridge ever shoved into a Nintendo console.

Sony is getting into the home console videogame business at a time when the two major videogame companies-Sega and Nintendo-are rolling out a new generation of more expensive consoles aimed at older, more affluent customers.

The new consoles will have more power and better graphics than many home computers and price tags to match, costing upwards of $400 per console in Europe, with a single piece of software costing nearly as much as the current-technology, 16-bit, tape-cartridge consoles such as Super Nintendo.

Sony's PlayStation, already selling well in Japan and scheduled to be introduced in Europe and the U.S. in September, uses 32-bit technology and will cost $300 in the U.S. and about $480 in Europe, where taxes are higher and retailers get bigger margins. The games software is in a proprietary CD format and will cost $61 to $70 per game in Europe. More than 400 software houses are working to create software for the new Sony format.

"It will be the best-supported launch of a hardware platform, in terms of software, that the industry has ever seen," said Simon Jobling, Sony's head of marketing, U.K.

Nintendo's new Ultra 64 console has been beset by delays and won't be out until April 1996. With a price tag of $250 in the U.S. and about $400 in Europe, it may be the cheapest of the three machines but it will have the most expensive software in Europe at up to $96 a game.

The Ultra 64 may be the most technologically advanced of the three machines, because it uses 64-bit technology, which could provide more realistic on-screen images. Unlike its competitors, Nintendo is sticking with the cartridge game format, although Ultra may have a CD option.

Sega's new 32-bit machine, Saturn, went on sale in the U.S. in May and is due out this month in Europe. Saturn, which like PlayStation uses its own proprietary CD software format, can also be used to display photo discs from Kodak and movies on CD. But it is the most expensive. In the U.S., it sells for $400, while in Europe it is expected to be sold with one piece of software included for about $638. Software will cost about $70 per CD in Europe.

The videogame industry desperately needs a new generation of machines to get customers back into the stores. The industry has become a victim of its own success. European consumers eagerly snapped up the consoles earlier this decade, leaving the industry with high penetration levels of what is an increasingly outdated technology-in other words, nowhere to go.

In Britain, for example, where there are 6 million households with children in the traditional teen game-playing age bracket, 3 million videogame consoles have been sold in the last four years, taking the business from ground zero to a penetration of 50%, said Stuart Dinsey, editor of Computer Trade Weekly, a British magazine that follows the industry.

There are signs that nearly everyone who wants a videogame console has one, or perhaps consumers are getting weary of the games' run-and-jump routines.

"The games companies feel that videogaming has lost its cool," Mr. Dinsey said. "And being cool is the key to mass market success because you suck in the trendies and that pulls in the mass market consumer."

All three companies are looking for fresh marketing angles. Nintendo, which spends about $30 million on advertising in Europe, isn't saying how it will introduce Ultra next year, but speculation is that the company may replace incumbent agency J. Walter Thompson Co.

Nintendo may pay a heavy price for being late with Ultra, as Sony and Sega take center stage with dueling pan-European media blitzes this fall.

That battle has already started. Both Sega, which uses McCann-Erickson London, and Sony, handled by Simons, Palmer, Denton, Clemmow & Johnson of London, are eager to have their new consoles perceived as an essential piece of gear for hip young adults, and they are desperately trying to out-cool each other in London.

PlayStation has been hosting trendster parties and working at getting itself written about in young men's magazines such as Vox, Select, Empire and Loaded. One such magazine, The Face, recently ran a guide to U.K. pubs sponsored by PlayStation.

Sega has been passing out Saturn-logo postcards at London nightspots and placing spoof personal ads in some of the same magazines Sony is using. A teaser campaign of press and poster ads for Saturn that broke in mid-June in magazines such as Select and Q doesn't mention Sega or Saturn. Instead, the spots use the Saturn "orb" logo and in-your-face headlines such as "Slim chance fat boy" and "Aural sex." Saturn software's advertising tagline will be "The game is never over."

A cinema ad for Saturn set to debut with "Die Hard With a Vengeance" in August has plenty of "sex and cars in it, which are the two major pastimes of most of the guys we spoke to," said Barry Jafrato, Sega's European marketing director.

By linking their product images with beer, babes, fast cars and sex, both Sony and Sega are aiming at an older consumer. Mark Dibsdall, European account director for McCann, said, "We are aiming at the 18-25 category, and we are hoping that the 14-to-18-year-olds will aspire to understand that category."

The details of Sony's upcoming TV, cinema and print campaign for PlayStation are a closely guarded secret, but with a European launch budget of $48 million and the creative muscle of Simons, Palmer, fireworks are expected. There are already rumors that some of Simons, Palmer's PlayStation ads may be too risque to air. Ogilvy & Mather is handling media buying.

Sega and Nintendo hope to benefit from brand loyalty, but Paul Simons, chairman of Simons, Palmer, sees an advantage in being a new entrant as videogames move upmarket. "The potential from Sony's point of view is much bigger," Mr. Simons said. "The Sony brand has a huge amount of value with people of all ages and classes. Sega and Nintendo don't. They are adolescent brands."

McCann has less money to work with than Sony. Sega's total pan-European adspend this year is $50 million, $22 million of which is being spent on Saturn. "We are not looking to slug it out pound for pound on TV," Mr. Dibsdall said. "We must be far more innovative."

The $1.5 billion European videogame industry is dominated by Sega and Nintendo. Sega's market share is about 53%; Nintendo's is 43%. Still, Mr. Jobling of Sony predicts that PlayStation will have 35% of the market for new-generation consoles by the end of next year.

A triumph such as that for Sony could devastate either Nintendo or Sega, leaving the industry once again with two main players.

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