Sega Drops Online Game Network SegaNet
Sega of America Inc. pulled the plug Friday on an ambitious strategy to link video game consoles to the Internet, saying it will focus solely on producing software titles.
The abandonment of SegaNet is Sega’s second major retreat of the year. In February, the once-dominant console maker announced it would no longer produce its Dreamcast machine after losing more than $500 million in two years.
Before dropping Dreamcast, though, Sega spent $100 million last year launching SegaNet, a network that let game players hook up to the Internet and play against other Dreamcast owners.
Sega’s online strategy was generally considered ahead of its time by game industry observers. Microsoft Corp., Nintendo Corp. and Sony Corp. all plan to include online gaming in their next generation of game consoles.
After Dreamcast’s demise, Sega searched fruitlessly for a buyer or a business partner, including Microsoft and Nintendo.
“This makes sense given that Sega just got out of manufacturing hardware,” said P.J. McNealy, senior analyst with Gartner Group Inc. in San Jose. “The upside for SegaNet was limited unless they were able to get other consoles, such as Microsoft’s Xbox or Nintendo’s Gamecube, to use it. At this point, none of those companies have taken them up on it.”
SegaNet has about 250,000 subscribers, but the vast majority don’t pay the $21.95 monthly access fee. Instead, many float on free trial accounts. Sega executives declined to specify the number of paying subscribers.
As of Friday, users who wish to continue access must find another Internet service provider, such as EarthLink Inc., which forged an agreement with Sega to assume service for paying accounts.
Sega will continue to operate its Web site, Sega.com, which matches players for games such as “NFL 2K1” football and “Phantasy Star Online.” Users will be able to log on to the site from any ISP.
Sega was one of the first console companies to pursue an online strategy. The company had hoped to gather revenue from subscribers who then would purchase additional products once online. But the effort proved problematic. Not all consumers found networking their consoles an easy exercise. Some struggled with lag time related to slow dial-up modems.
Analysts said Sega’s pioneering experience should be a cautionary tale for Microsoft and Sony, both of which have plans to connect their consoles to the Web for access to online gaming, digital entertainment and commerce.
“SegaNet was a great idea,” McNealy said. “But it was like offering driving lessons to a 10-year-old. People are going to eventually want it, but this was just too soon.”
