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HIVE EXCLUSIVE: Sega Sports Key to Third-Party Success

11 Sep, 2001 By: John Gaudiosi

Sega hopes to challenge current video game leader Electronic Arts for first place as the leading U.S. third-party video game publisher by fall 2003.

A key part of Sega's transition from console manufacturer to multi-platform software publisher is the Sega Sports brand, which will encompass the core pro sports, football (NFL 2K2), baseball (World Series Baseball 2K2), hockey (NHL 2K2) and basketball (NBA 2K2), as well as Tennis 2K2, NCAA College Football 2K2 and NCAA College Basketball 2K2.

“Our sports games will be the killer app that will enable us to take market share away from our competitors,' says Peter Moore, president and c.o.o. of Sega of America. “Sports games already account for 46% of our revenue and we expect that to grow, especially next year. In the sports arena, it will very much be Sega versus EA and the other companies will have to scramble for what's left.”

“Sega's in a good position moving forward as all three platforms (Xbox, PS2, GameCube) should have good penetration levels in U.S. households in the next 12 to 18 months,” says P.J. McNealy, senior analyst, Gartner G2. “Sega is also in a good position because of the software they're developing for the Game Boy Advance, which is a big market opportunity. I think that there is enough room in the sports genre market for a couple of players. While EA has brand names like John Madden, the gameplay of the Sega titles is pretty compelling.”

“I think Sega has solid prospects for success,” says Anton Bruehl, president of the International Development Group. “I am not sure Sega can unseat Electronic Arts in the sports arena anytime soon, but Sega has always made great games and their sports games are excellent.”

Sega will spend $20 million to market the Sega Sports brand between Sept. 17 and March of 2002 and an additional $18 million to market its entertainment titles. This fall marks the launch of Sega titles on once-rival platforms from Sony, Nintendo and Microsoft.

TV will be a major focus for Sega's marketing. Over half of Sega's sports marketing funds will be spent on TV advertising. Three Sega Sports spots will air on sports programming on ABC, ESPN and Fox and entertainment programming on the WB and UPN. A 60-second spot alerting consumers to the 10-year-old Sega Sports brand will debut on "Monday Night Football" Sept. 17. Sega will have 30-second spots for NFL 2K2 and NBA 2K2, which will be released on Dreamcast, PlayStation 2, Xbox and GameCube.

Sega hopes to build its brand awareness with its two-year sponsorship of the "NCAA Las Vegas Bowl," which will air live on ABC Dec. 25. Sega will have 12 to 16 gaming kiosks at the event for consumers to play its NCAA Football 2K2 Dreamcast game, which is also heading to PS2, Xbox and GameCube. The Sega Sports logo will appear on the field, on the uniforms and in every newspaper nationwide. Sega will also take advantage of its exclusive Rose Bowl license with promotions at that event and will have a presence at all of the core sports' All-Star games and a huge presence at the Super Bowl.

Rental will play a major role in Sega's marketing this fall, as the company wants consumers to try a Sega Sports game on PS2 or Xbox before they buy a football or basketball game.

“We're partnering with Blockbuster Video, which has a 25% response rate with its direct-mail program, with a direct-mail campaign to alert consumers that Sega Sports games will be available on PS2 and Xbox this year,” says Stacey Kerr, senior product manager, Sega Sports. “We're offering consumers who rent a new Sega Sports game from Hollywood Video a $5 coupon off any new Sega Sports game at Best Buy.”

Sega will also be promoting its Sega Sports brand with a contest at Hollywood Video that will send winners to the NFL Pro Bowl in Hawaii next year. Special promotions with retailers will alert consumers of Sega's plans through point-of-purchase displays. SegaSports.com just launched to help serve as an online community for Sega's online sports games. The company will also have a heavy print advertising campaign, which just launched in gaming and sports publications.

“We want to get the Sega Sports brand out there and make it easy for consumers to get their hands on Sega Sports games through trial to generate word-of-mouth awareness,” says Charles Bellfield, v.p. of business strategies and corporate affairs, Sega of America. “The reality is that we already sell more sports games than EA does. With an installed base of 3 million Dreamcasts, we've sold over 4 million Sega Sports games. We were the first to offer online console sports gaming and we'll continue to give sports gamers features that they can't get from EA or anyone else.”

In addition to online game play on Xbox and possibly PS2 and GameCube next year, Sega is developing voice chat technology that would allow players to communicate online while playing. Sega also believes the Internet could generate additional revenues to its core packaged retail business.

“If you provide sports fans a venue to pay $10 to play in an online football tournament with the chance to win cash prizes, I think people would be willing to pay,” says Moore. “We've had a lot of interest from consumer package goods companies like Nike, Reebok, Pepsi and Coke in sponsoring online game tournaments or packages. The average sports gamer will spend a solid two to three hours playing online with no interruptions, which opens up a new advertising opportunity.”

Sega is testing the subscription revenue model this September with Dreamcast's Phantasy Star Online Version 2.0, which will be available at retail for $40 and cost $15 every three months for additional game play and materials.

After the layoffs that occurred as the company shifted into a third-party power, Sega is now in a hiring mode, bringing in new marketing, advertising and public relations personnel.

The company is also delving into its rich library of titles to re-invent and re-purpose older franchises like Shinobi, Golden Axe, Toe Jam and Earl, and Outrun for next-generation consoles. Sega has 11 studios around the world developing games for multiple platforms.

“We're a content company,” Moore explains. “We're no different than an MGM Studios.”

Sega has released more than 800 games in its 22-year history and is now looking at new business opportunities, including licensing its content to Hollywood for feature films like House of the Dead and Crazy Taxi, and experimenting with new technologies like set-top cable boxes (through a partnership with PACE) and wireless devices like personal digital assistants (more than 45 Game Gear games are available on an iPaq disc) and cell phones. Sega also has a 5% stake in ReplayTV.

“While we're focusing on our launch of multi-platform games right now, but the ability to deliver games digitally is definitely in the cards,” says Moore, who believes the company's launch of the Sega Channel in the 1990s was before its time. “Games-on-demand fits right in with movies-on-demand.”

Bellfield expects Sega to sell through its remaining stock of Dreamcast by the end of the year. NHL 2K2, which ships in February 2002, is expected to be the “swan song” release for Sega's discontinued system, which has a rich library of more than 200 games. Moore says Sega will continue to sell its catalog of Sega games, possibly at lower price points, to feed the anticipated installed base of 4.5 million in the United States.

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