THE CUTTING EDGE / PERSONAL TECHNOLOGY : Game Makers Unleash Sales Firepower : Advertising & Marketing: Sega, Sony and Nintendo will spend a combined $400 million to compete this fall.
The big three video game makers are spending an amount about equal to Grenada’s gross domestic product in their battle for supremacy over the fickle $6.3-billion video game business.
The unprecedented marketing push is being fueled by Sega of America’s introduction today of its much-anticipated Dreamcast, the most powerful video game console ever. Sega plans to spend $100 million promoting the machine, which analysts say represents the troubled company’s last chance to succeed in the U.S. market.
To counter Sega’s advertising blitz, Sony Computer Entertainment America and Nintendo of America each plan to spend $150 million on a torrent of television, print and radio ads. This $400-million marketing juggernaut (Grenada’s GDP was $300 million in 1996) virtually guarantees that no parent will be safe from video game mania this fall.
“During the holiday season this year, you won’t be able to watch a TV show without seeing these ads,” said David Cole, an analyst at DFC Intelligence, a San Diego market research firm.
Enormous advertising efforts aren’t unusual for companies trying to get the word out about a new game machine, but they are unheard of as a means of boosting sales for video game consoles that have been on the market for years.
“Clearly, $150 million is our biggest push ever behind the platform,” said Andrew House, vice president of marketing for Sony Computer Entertainment America, which introduced PlayStation, the leading system, in 1995. Nintendo 64, the second-best-selling machine, came out in 1996.
So far, the biggest weapons in the video game wars have been discounts. Sony and Nintendo dropped the price of their machines to $99 last month in an effort to lure sales away from Dreamcast, priced at $199. Sega countered by slashing $100 from the price of Dreamcast for buyers who trade in PlayStations or Nintendo 64s. Sony and Nintendo also discounted their best-selling games to boost software sales.
Game makers say that the tactics are bringing results. Sega has pre-sold 300,000 machines, while Sony says sales of PlayStation systems have nearly tripled since it slashed its price.
And that is only the beginning. Besides a massive ad blitz, game makers are sending squads of teens to clubs and shopping malls to create a buzz about their systems. And they are setting up game players where teens congregate to hook them on the consoles.
At stake is control of the nation’s video game industry. Sony currently dominates the market with a 61% share; Nintendo holds about 38% and Sega’s share has withered to 1%. Many analysts say there is room only for two competitors in the industry, which is drawing new interest from adults.
For Sega, the window of opportunity is a small one. Next year, Nintendo and Sony plan to launch 128-bit machines as powerful as Dreamcast.
Fortunately for Sega, the odds are not as long as they appear. Unlike the markets for toothpaste, soda and other products that change very little over time, the first few months after a video game machine is introduced can make or break the product and the company behind it.
“Other brands are in constant maintenance mode, fighting for half a point of market share,” said Peter Moore, senior vice president of marketing at Sega of America. In the video game industry, “you’re able with the right product to gobble up huge amounts of market share overnight.”
He knows. Sega dominated the U.S. market in the early 1990s with its Genesis console. But it lost customers with the 1995 launch of Saturn, which was viewed as inferior to Sony’s PlayStation, which had a better slate of games. Nintendo sealed Sega’s fate with its N64.
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The Dreamcast features a 128-bit processor and uses a proprietary medium known as GD-ROM. The machine’s processing speed, which rivals that of Pentium computers, allows game developers to render more lifelike human features.
A built-in modem lets Dreamcast players connect to the Internet. The console also has artificial intelligence capabilities that allow it to learn a player’s style.
“If you use one kind of play, the Dreamcast hardware can anticipate that and can adjust to humiliate you,” said Sega’s Moore.
In contrast, Sony’s PlayStation uses a CD-ROM medium, while Nintendo 64 relies on cartridges. Both machines are considerably slower than Dreamcast and lack Internet connectivity.
Sega plans to kick its campaign into high gear tonight during the MTV Video Music Awards with an edgy 90-second spot featuring a leather-clad female gangster who steals a Dreamcast.
The company hopes this spot, together with ads that showcase the historic battle between man and machine--think “Terminator”--will entice hard-core gamers to check out Dreamcast.
The ads, which feature the tag line “It’s Thinking,” will appear on cable channels such as MTV and ESPN. Commercials started earlier this summer in an effort to prime the pump for 12-to-24-year-old males looking for a new video game experience.
“Dreamcast will certainly snag the early-adopter market,” said James Lin, vice president of equity research at Wedbush, Morgan Securities in Los Angeles. “Those guys are hungry for a new system.”
Sega’s ads, created by the San Francisco office of Foote, Cone & Belding, will also run in hip magazines like Rolling Stone, Spin and Vibe. The ads, which underscore Dreamcast’s ability to learn a gamer’s playing style, will crop up on the Fox, WB and UPN networks. Sega is currently running up to 160 television ads a week.
The intense competition to reach consumers has forced the big three to broaden their marketing campaigns. Nintendo is using outdoor ads on billboards and bus benches. Both Nintendo and Sony plan to show ads in movie theaters. Sony’s cinema ads, which start Friday, feature a male stripper who crashes an elderly woman’s birthday party. The ads promote the PlayStation’s $99 price point and feature the tag line “If you can make $99 doing it, it’s worth it.”
The aggressive marketing may prompt many consumers to buy more than one console, analysts say.
“We will see a significant portion of consumers who own all three,” Cole said. “A lot of households have more than one TV, so it’s no problem to hook up three systems.”
Notes
McCann-Erickson, a unit of Interpublic Group of Cos., won the $30-million business of Avis Rent a Car Inc. over two other New York-based agencies, Ammirati Puris Lintas and Lowe & Partners/SMS. Separately, the Los Angeles office of McCann-Erickson won the account of Seattle-based Boeing Co. over three other agencies. . . . Gloss.com, a start-up online beauty retailer based in San Francisco, awarded its account to Los Angeles-based Ground Zero advertising.
GAMERS’ CORNER: Sega’s Dreamcast could turn rivals into also-rans--temporarily. C6
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Playing for Keeps
The nation’s largest video game makers plan an unprecedented marketing blitz this fall to sell cheaper consoles to complete against Sega of America’s newest video game machine, the Dreamcast. Sega’s future rides on the new entry, set to go on sale today. U.S. market share for video game software in the first half of 1999:
Nintendo: 38%
Sony: 61%
Sega: 12%
Dueling Devices
Sega of America is the only video game maker introducing a new console this fall, but Sony and Nintendo are hoping to entice consumers to buy their older machines. How the three systems stack up:
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Company Sega Sony Nintendo Console Dreamcast PlayStation Nintendo 64 Price $199 $99 $99 Processing power 128 bit 64 bit 64 bit Library size 18 titles 661 titles* 165 titles Medium GD-ROM CD-ROM cartridge Graphics (polygons 3 million 360,000 300,000 rendered per second)
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Note: Sony and Nintendo will introduce 128-bit consoles in late 2000.
*Through June
Sources: DFC Intelligence, the companies
