Sega powers up to battle surging Sony

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Sega of America will try to zap itself back into young video-gamers' sights by Christmas with a $60 million marketing campaign from new agency Ingalls Moranville, San Francisco, but it may be too little too late.


A $10 million TV and print effort kicked off the campaign last week for NiGHTs, the software title Sega hopes will jump-start sales of its languishing 32-bit Sega Saturn machine. Sega will follow it with a total brand effort centered on its popular Sonic the Hedgehog character hawking games on multiple platforms, including Sega Saturn.

But analysts are highly concerned about Sega's future following devastating events of the past year, when Sega fell from No. 1 in the $6 billion videogame industry to No. 2, where it now trails Sony Computer Entertainment's 32-bit Sony PlayStation.


Sony first entered the videogame market last fall and quickly became the hit of the holiday season, capitalizing on the appetite of young, mostly male videogamers for new concepts.

Now even Sony Computer Entertainment is running scared, say industry observers, on the latest news that Nintendo of America may drop the entry price of its long-awaited 64-bit videogame machine, billed as the fastest videogame player on earth, to $199 when it debuts next month.


Introducing their 32-bit machines at $299 last year, both Sega and Sony dropped prices to $199 as recently as March, and both are losing millions on hardware sales to hook consumers on the lucrative software titles that are not interchangeable among systems.

``This could be the end of the line for Sega as a hardware manufacturer, after they squandered their momentum over the last year and failed to appreciate some of the competitive moves of rivals,'' said Sean McGowan, a toy analyst with Gerard Klauer Mattison.

One major risk Nintendo runs is that it will only have a dozen games out for the Nintendo 64 by Christmas. Sega hopes to exploit that weakness by heavily advertising the 300-some games it will have out for Sega Saturn.

``We expect to be No. 1 in market share by Jan. 1, and we're doing it by driving a wedge between Sony and Nintendo with early advertising taking advantage of the breadth of our brand and the popularity of Sonic,'' said Ted Hoff, who joined Sega last March from Atari Corp. He was appointed exec VP-sales and marketing last month.


Sega will launch six electronic entertainment titles this fall using Sonic, including its Sonic CD for Sega Saturn. Promotional plans include tie-ins with Fox Kids Network, Coca-Cola Co.'s Cherry Coke, Toys "R" Us, Best Buy and Kraft Foods' Tang.

Sega also will revive the ``Sega Scream'' in its advertising this fall.

Sony will have close to 200 titles for Sony PlayStation by Christmas; TBWA Chiat/Day, Venice, Calif., will do TV and print ads in an estimated $50 million effort breaking next month or in October.

Nintendo 64 debuts Sept. 30 backed by a $50 million-to-$60 million marketing campaign from Leo Burnett USA, Chicago; a major promotional campaign supports the launch with tie-ins from Blockbuster Entertainment and cable TV network Nickelodeon.

But analysts are worried about Sega's future. ``The videogame industry is so fickle that overnight a brand can acquire the perception that it's not hip. It happened to Nintendo when Sega passed it, and now it seems to be happening to Sega,'' Mr. McGowan said.

Copyright August 1996 Crain Communications Inc.

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