Sega has formed a joint venture with Access to develop gaming infrastructure for iTV devices.
Games company Sega today announced that it will develop games infrastructure software for Internet appliances, such as interactive TV (iTV) set-top boxes. It has formed a joint venture with Access, which develops iTV software, to develop a platform for manufacturers to incorporate into their devices.
It is clear why Sega is doing this. Sales of its Dreamcast console have been disappointing and are expected to get worse as PS2s become available in volume and as Microsoft launches its X-Box console next year. As a result, Sega’s hardware operations are unprofitable. The company needs new ways to leverage its games and technology development expertise – one way of doing this is by developing software for other technologies. Creating both a platform to run games on iTV devices and the games to run on that platform could be a way of doing this. And there is certainly potential in the set-top box market – it could well end up as the largest platform for casual gaming.
However, there are various problems that Sega could run into. One is that its products have normally been aimed at more traditional gamers – young males who spend a great deal of time playing games. Whilst the company has been able to bring out new games aimed at different markets, casual gaming is a long way from being its core strength.
But perhaps more important is that the company is committing initial capital of just $500,000: not enough to fund a major effort to capture this potentially very large market. The lack of funding is symptomatic of Sega’s major problem. It desperately needs to restructure and move away from its core market. But it has not yet decided where it will go or even whether it will abandon hardware or not.
Along with online gaming portals and developing software for other platforms, iTV is an area in which Sega has the resource base to do well. However, it needs to decide where it will concentrate its resources, based on where it ultimately wants to be.
