16-bit games take a bite out of sales - computer games

Discount Store News, June 1, 1992 by Pete Hisey

Bloodied but unbowed, at least so far, Nintendo and Sega have fought to a draw in their war to dominate the hot 16-bit video game category.

Both recently announced price cuts (Nintendo for the second time in less than six months), with Nintendo's SNES now listed at $149.95 (the old Sega price) and Sega's Genesis even lower at $129.95. Nintendo, however, includes an extra controller, a $20 value that makes the final price for each system virtually indistinguishable.

Figures vary nationally, but it appears that each of the major competitors controls between 45% and 55% of the 16-bit market, with NEC TurboGrafx (at $99) accounting for about 5% and Neo Geo's upmarket system (about $400) somewhat less than that. While the gross figures are about even in monthly sales (a study by Fairfield Research, Lincoln, Neb., noted that the SNES had surpassed Genesis sales for the first time in April), Nintendo enjoys a large advantage in terms of storefronts, although Sega has an edge in installed base, due to its 18-month jump on Nintendo in actual sales.

Where Sega is offered, it often outsells Nintendo, retailers report. However, many retailers reluctant to take on the double inventory commitment necessary to sell both systems, and particularly, the hundreds of software titles necessary to support the systems.

In total, 16-bit systems now make up about 15% of the home video game installed base, but that share is actually higher. Most 16-bit sales are replacement sales; the customer generally already has a Nintendo or Sega 8-bit machine, which rapidly heads for the nearest closet once the new system is installed. Even those who actively use both systems are unlikely to purchase new 8-bit software when so much is available (finally) in 16-bit games. So, in ability to draw software sales, the 16-bit market is disproportionately influential relative to its share of overall hardware installed base, accounting for over 50% of software sales so far this year.

According to Fairfield Associates, a market research firm, Nintendo has been building strength since Christmas, when Sega was an overwhelming favorite, and now owns a slight lead over Sega in 16-bit, 3.1 million units to 2.6 million units. Genesis, however, owns a 3-to-2 edge over SNES in software units sold.

And 16-bit software sales are increasing their share as more systems invade consumer living rooms, according to publishers. Nancy Smith, vice president of sales, Entertainment Arts, noted that she has seen "nice spikes" in sales recently, particularly in the period immediately following the hardware price cuts in April.

Hit titles, she said, are driving the market, and both platforms are releasing their share of good, sellable games. EA is now a leader in both formats (trailing only Sega of America as the leading 16-bit publisher in the United States), concentrating on sports titles. But Smith noted that other categories are hot as well, including children's, strategy games and flight simulators. "Each category is smaller and can support fewer titles, but each is a good strong business," she said.

There is a growing trend away from "twitch" games that aim solely at hand/eye coordination to games that demand a certain level of thought, she added. "The core gamers are getting more sophisticated, and they want games that require some thought," Smith said. So-called edutainment products are starting to sell, she added, and EA will release its Sega version of "Where In Time is Carmen Sandiego," a major PC edutainment title, later this year.

Even in sports games, strategy is becoming more important. A Tony LaRussa baseball game, for instance, puts the emphasis on managing a team rather than hitting a fastball.

Sega will continue to cut into Nintendo's storefront lead this year, she noted. "Some major retailers, like Circuit City, have already added the Genesis, so there have been some major gains for Sega," she said. "Now, if Wal-Mart or Kmart picks it up, they could really close the gap." Kmart is reportedly mulling over just such a move for the fall.

Acclaim vp of marketing Sam Goldberg said the increasing strength of Sega's Genesis. Last year, Acclaim abandoned its Nintendo-only strategy, and now produces software for virtually every platform. This year, the company's hit Simpson's license will debut on Genesis, with one new title, Crusty's Fun House, developed just for that platform. Spider-Man and WWF licenses will also be on both platforms.

Goldberg added that 8-bit is not dead yet. "It keeps chugging along," he noted, adding that younger brothers and sisters have inherited the systems, so choice of titles at retail should take the younger user profile into account. Acclaim's major 8-bit introduction will be based on the Incredible Crash Dummies toy license, aimed at the under-12 crowd.

Goldberg estimates that Sega controls about 60% of the 16-bit market, but cautions "don't count Nintendo out. They are terrific marketers, and they have a great product. Now that they're catching up on the software end, and with the price adjustments, neither will dominate the other."