Sega will stop making its Dreamcast console and license the technology to iTV firm Pace.
Japanese computer game firm Sega today announced that it will stop manufacturing its Dreamcast console, instead concentrating on supplying its game content to other firms and licensing out the Dreamcast’s technology. The first such deal is with UK-based iTV set-top box firm Pace, which has a strong presence in the market and wants to maintain an element of industry leadership. Pace’s new box will have Dreamcast games on demand on a pay-per-play model combined with personal video recorder functionality.
However, Pace will face some challenges in making its strategy succeed. A set-top box with a console built in will be more expensive than other consoles and boxes. Especially since set-top boxes are predominantly given away free with digital television packages, it is not clear that consumers will want to pay for the two combined. Such a complex, high-end set-top box is unlikely to be fully subsidized by broadcasters.
Worse, although it will still be marketed until late this year, the Dreamcast is now doomed. Developers are focusing on the PlayStation 2 and X-Box and the resulting lack of exciting new games will quickly reduce enthusiasm for the Dreamcast part of the set-top box. While digital TV providers may believe they can offer interesting game content to subscribers, they are inexperienced in this market and their efforts will be risky. These problems will get worse over time, since set-top boxes have a lifespan of many years whereas the Dreamcast will be obsolete within months. Effectively, incorporating Dreamcast technology will shorten the new box’s lifespan compared with a normal set-top box.
Sega are the real winners. The Dreamcast is dead, but the rest of its range is successful. This Pace deal has allowed Sega to start to remove itself from the console market, focusing on developing software for the PlayStation 2 and Game Boy Advanced. And if the set-top box combo does sell well it could develop a new audience for Dreamcast, allowing Sega to license games and technology to other players in the industry.
