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Sega to Cut Dreamcast Price Again; No Price Drop Expected for PlayStation 2

25 Jul, 2001 By: John Gaudiosi

In an effort to sell through its remaining stock of Dreamcast hardware units, Sega will reduce the price of Dreamcast to $79.99 on August 14, according to retailers and analysts.

Sega will also introduce additional $19.99 titles to its All-Star lineup, including NBA 2K1 and NFL 2K1.

“After the initial price drop to $79.99, Sega has told us that they will further reduce the price of Dreamcast to $49.99 either around Christmas or early next year, depending on how much inventory they have left over,” said Doreen McKenzie, director of merchandising and video games, Babbage’s Etc. “They want to be rid of all Dreamcasts by the end of their fiscal year in March 2002.”

“Although we’re already ahead for the year with Dreamcast sales, the drop to $79.99 will double our current monthly sales,” said Pete Roithmayr, v.p., Electronics Boutique. “When you think about the Dreamcast system selling for $49.99 next January, it’s almost scary.”

“We believe this will assure a clean sell-through of the Dreamcast videogame system, which was an excellent, but ill-fated gaming console,” said Anton Bruehl, president of the International Development Group, a videogame consulting house. “With Dreamcast hardware out of the way, Sega will be able to focus on its multi-platform gaming strategy for console and online games.”

Sega sold approximately 83,500 Dreamcast units in June, according to an analyst who studied NPD TRSTS Videogame Group data. But the former first-party console maker is still overstocked with unsold Dreamcast inventory and wants to get rid of the remaining consoles.

Dreamcast hardware sales were up 82% this June compared to last year and the system has been selling well since the price drop to $99, according to Richard Ow, senior account manager NPD TRSTS Videogame Group.

When contacted about this story, a Sega spokeswoman said, “We don’t comment on rumors and speculation.”

Sega’s first-party software has performed well, especially Sonic Adventure 2, which sold over 125,000 units in June, according to NPD TRSTS Videogame Group data.

With few exceptions, the system hasn’t been kind to third-party publishers, although most of the major players abandoned the system before the price drop this past February.

“Dreamcast is a great system with a solid lineup of games,” said Ow. “Sonic’s performance is amazing considering the Dreamcast is supposed to be a dead system.”

With a lower price point and a solid lineup of over 200 games, the system is an excellent buy for mass market consumers.

With World Series 2K2 and the next line of Sega Sports games shipping this fall, along with Shenmue II, Sega has some excellent games hitting retail shelves,” said McKenzie.

After its 30 games slated for this fiscal year ship, it’s unlikely that Sega will spend much of its resources on Dreamcast development. Sega has 26 online games running for Dreamcast, the first console videogame system to take gaming online.

No Price Drop Expected for PlayStation 2

Heading into November, when Sony faces competition from Microsoft’s Xbox and Nintendo’s Gamecube, analysts and retailers don’t expect Sony to reduce the price of PlayStation 2.

“With the inclusion of a DVD player in PlayStation 2, Sony is loathe to drop the price, because console game manufacturers are experiencing severe hardware profit blues,” said Bruehl. “I expect Sony to reduce the price of the recently released Gran Turismo 3 PlayStation 2 bundle from $329 to $299, essentially offering a free game with the system.”

GT3 is a mass market game that has already broken sales records in its first week of release and is expected to have a very long shelf life.

“I think you’ll see the GT3 bundle become the standard PS2 system this fall for $299,” said Roithmayr. “It will definitely help sales of the system.”

Taking a page from Nintendo’s playbook, the company that invented the console bundle, Sony is expected to make a move to counter the dual console launches of its competitors.

“Even if Xbox and Gamecube don’t meet the demand this fall, which is likely, Microsoft and Nintendo will still sell between one million and 1.5 million hardware units,” said Bruehl.

Nintendo is expected to be hit the least this fall, because its system doesn’t have a movie DVD player. However, Matsushita has announced that a hybrid DVD player/Gamecube device, called “Fusion,” will ship in Japan this fall and hit North America during its next fiscal year, between March 2002 and March 2003.

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