Sega’s share price has fallen following the announcement of further operating losses.
Sega’s Dreamcast games console beat the other new generation consoles to market. But its sales this year have been disappointing, as software support has been limited and many gamers have decided to wait for Sony, Nintendo and Microsoft’s offerings. Because of this, the firm has not met its initial forecast of Y1.5 billion profits, instead making a loss of Y22.1 billion.
In the run-up to Christmas, things should get better for Sega. Although Sony has now officially launched its PS2 in Japan and America, manufacturing problems mean that it cannot supply enough units to meet demand. In addition, the range of Dreamcast games available has finally improved – top-rated titles like Half Life and Quake III Arena are now available on the platform. The firm has also launched a cheap deal where a Dreamcast and DVD player are available together for a competitive price, which should help compete with the DVD-enabled PS2. But next year, things will get worse again. Sega has had trouble enough selling Dreamcasts without significant competition; 2001 will see the launch of Nintendo’s GameCube and Microsoft’s X-Box, as well as wider PS2 availability.
What can Sega do to survive? Its main advantage is its strength in Internet gaming. The Dreamcast is the only Internet-enabled console currently available, and despite delays in launch and a short-term lack of enabled games, Sega’s Internet gaming service has 400,000 registered users in Europe. The firm also allows cross-platform gaming, letting PC users and Dreamcast users battle each other over the net in games such as Quake III. A further boon to Sega in this area is the confusion surrounding other companies’ online gaming strategies. Sony and Microsoft intended to wait until broadband access became available before launching online services – but slow broadband uptake in Europe seems to have led them to rethink their strategy. Now, they are significantly behind Sega.
Sega’s future is unlikely to be in hardware. Its consoles in recent years have failed to lead the market or bring in substantial revenues. But it excels at creating quality content and adapting for the New Economy. The Dreamcast may well be Sega’s last console – but Sonic the Hedgehog will live on, online.
