Sega, Sony, Nintendo Got Game

By KAREN KAPLAN

Dec. 23, 1999 12 AM PT

TIMES STAFF WRITER

Sega, Sony and Nintendo expect to sell a whopping 3.7 million video game players in the last few weeks of the holiday season, capping a likely record year for the booming $7-billion video game industry.

By the time all Christmas presents are opened, roughly one-third of all American homes will own a video game system.

Long-struggling Sega fueled this shopping frenzy with the September introduction of its Dreamcast system, which sells for $199 and features a 128-bit processor that offers graphics as fast as Pentium-powered computers. Dreamcast blew by company and analysts’ forecasts of 1 million in U.S. sales, and Sega now expects to sell 1.6 million Dreamcast players this year, the company said.

Video game market leaders Sony and Nintendo responded by slashing prices on their older systems--PlayStation and Nintendo 64--and have sold even more units in the holiday shopping season than Sega.

This surge is due to the growing popularity of video games beyond the industry’s traditional customer base of teenage boys. Video games are now increasingly popular with young adults, thirtysomethings, women and young children.

“The breadth and depth of the market has gone much broader,” said Jeremy Schwartz, senior analyst for games and interactive entertainment at Forrester Research in Cambridge, Mass.

Not surprisingly, five of the top-selling video games this season are based on Pokemon, the pocket monster obsession shared by children and preteens. Gamers have bought nearly 9.7 million Pokemon video games in the first 11 months of the year, according to PC Data. (Four of the five Pokemon games are for Nintendo’s hand-held Game Boy system, and the other runs on Nintendo 64.)

Video games based on basketball, wrestling and skateboarding are also current bestsellers, along with action-adventure games such as “Resident Evil 3: Nemesis,” in which members of an elite police unit battle flesh-eating zombies.

The 10 best-selling video console games combined sold 7.9 million units from January through November, PC Data said.

Lower prices for games and consoles are spreading interest in video games among a wider audience, said David Cole, president of DFC Intelligence, a San Diego market research firm. Although video console sales determine market share, it’s the video games that actually bring in the most profits, he said.

“The sale of the hardware is a break-even proposition at best. But the [console makers] charge a licensing fee for every game that’s sold. That’s where they really make their money,” Cole said.

Sony, Nintendo and Sega typically ring up more than one-third of their yearly sales during the holiday shopping season.

Sega expects to sell about 600,000 Dreamcast consoles in the U.S. during December, said Chris Gilbert, senior vice president of sales for Sega of America in San Francisco. Sega originally expected to sell 1 million Dreamcasts this year, but it sold nearly half a million units on its September launch day and hit the 1 million mark before Thanksgiving.

Sega has a lot riding on Dreamcast. Its video game market share slipped to 1% after its failed Saturn system, which the company discontinued two years ago.

By year’s end, Sega will have quadruped its U.S. market share, according to company estimates. Next year Sega expects to sell 4 million additional Dreamcast units. If so, it would give Sega an installed base beefy enough to hold its own against new systems coming from Sony and Nintendo, Gilbert said.

“The success of Dreamcast is extremely important to the company,” Gilbert said. Sega needs “as strong an installed base as possible” to entice video game publishers to produce more Dreamcast games and peripherals, such as controllers that can accommodate four players at once, he said.

But Sony and Nintendo are trying hard to hold on to their leading market share. Although their consoles are considerably slower than Dreamcast, each boasts much larger game libraries. And to compete with Dreamcast, both companies slashed prices of their older systems to $99 and watched sales soar.

Sony has sold 1.6 million units of its 4-year-old PlayStation in North America in the last four weeks, bringing the total number of PlayStations here to 25 million, said Jack Tretton, vice president of sales for Sony Computer Entertainment of America in Foster City.

The introduction of Sega’s Dreamcast actually helped PlayStation, Tretton said: “Anything that generates interest in video games and drives people to the stores is good for us.”

Nintendo, meanwhile, sold 1.5 million of its 3-year-old Nintendo 64 systems in the U.S. this month, raising the number of its consoles here to 13 million, said George Harrison, vice president of marketing for Nintendo of America in Redmond, Wash.

Analysts say the real battle will begin next fall, when Sony’s next-generation PlayStation 2 comes on the market, followed by Nintendo’s Dolphin system.

“Sales reach a new peak with each new generation, and I fully expect we’ll achieve a new sales peak with these new platforms,” said Dale Ford, a Dataquest analyst.

Times staff writer Karen Kaplan can be reached at karen.kaplan@latimes

.com.

* TOP VIDEO GAMES

Nine games, one system make up best of 1999. C6

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Video Blockbusters

The video game industry could be on its way to a record year. The top three console makers--Sony, Nintendo and Sega--expect to sell 3.7 million consoles this holiday season. Long-struggling Sega is back on the map, thanks to the recent introduction of its state-of-the-art Dreamcast system. Sony and Nintendo are expected to release improved systems next year to compete with Dreamcast.

Sega, Sony, Nintendo Got Game

More to Read

More From the Los Angeles Times

Most Read in Business