Stripped-down 16-bit systems are holiday hits - video games

Discount Store News, Jan 4, 1993 by Pete Hisey

It's back to blocking and tackling for Sega and Nintendo in their ongoing war for the hearts, minds, fingers and dollars of America's young. Until recently, the two, which constitute some 85% of the video game market (Atari's Lynx and the Turbo Technologies' Turbo-Grafx system account for most of the rest), have battled it out head-to-head, but with different approaches.

Sega, with an 18-month jump on the 16-bit market, has exploited its technological advantage, initial installed-base lead, and hip quotient with hardcore gamers, while Nintendo has leveraged its marketing clout and enormous storefront advantage. This war was a clear example of push (Nintendo) vs. pull (Sega) marketing.

But this fall, two events practically neutralized each company's advantage. First, Nintendo finally caught up with Sega in software, producing hot titles that have in turn move hardware. At $89 or so, stripped own 16-bit systems started flying off the shelf, giving Nintenndo installed-base parity (actually, although the two companies have radically different figures, it appears that Nintendo is in the lead.

Jill Hamburger, video game and accessory buyer for Best Buy, had predicted that result last summer, when the new prices were first announced. "Both of them are saying that they expect most people to buy the software-included pack" she said in June. "But I think that parents are going to look at that $99 as a magic price point, and let the kids worry about getting their own software. So I think both basic systems will be hot at holiday, and software will be really hot in the first quarter, as the kids go out to buy their own games." To date, it looks like she was right on the money.

And research from Fairfield Research of Lincoln, Neb., indicates Nintendo can thank Genesis owners for a good part of the growth. Many of these new Nintendo owners already owned Sega's Genesis, which in turn indicates that Super Nintendo's reputation with game-playing opinion-formers is on the rise and the $99 price point (just $30 more than a lot of software) is too good to pass up.

"In our third quarter research, only 21% of Genesis owners said they also owned a Super NES," said Fairfield president Ted Lannon. "In November, that figure shot up to 37% If you want to know who's eating whose lunch out there pre-holiday, I guess that says it."

Additionally, twice as many Genesis owners said that they planned to purchase a Super NES "in the immediate future" as Super NES owners who said they planned to purchase a Genesis in the same time frame.

That's obviously good news for Nintendo, but at roughly the same time, Sega got a boost when Kmart reversed an earlier decision, and appears to be ready to stock Sega chainwide (both systems were available at the opening of the newest Kmart prototype in November). Kmart's refusal to carry the Genesis has been a sore point for Sega; the 2,300 storefronts mark an extensive opportunity, and an advantage for the system that can gain shelf space without competition. After all, more than half of America tromps through Kmart stores each year.

If Kmart does roll out Sega, that will neutralize Nintendo's storefront advantage; by the same token, the playground buzz key to selling video games is no longer slanted toward Sega in the lopsided manner of early 1992. Kids now seem to feel that Nintendo is pretty cool,too.

At CES, Sega is trying to reintroduce points of differentiation with its CD system, a $399 add-on that must be plugged into a Genesis. Nintendo's CD product won't be introduced until at least the summer show, and probably won't be on store shelves until year-end.

However, a Nintendo spokesman said that its CD drive will be more appropriate for the market than Sega's, and will cost less. "We're making sure that we have it right," said the company's Bill White, adding that if Nintendo can't develop a unit with truly advanced game play, a good software library and a $199 price point, it won't market a CD accessory. "What we've seen out there so far isn't up to the standards of 16-bit play," he said. "We think 16-bit has a lot of life left in it, and the Super NES has capabilities that haven't even been tapped." Nintendo will introduce a new generation of 16-bit games at CES, with one title ready so far and 10 or so expected by the third quarter, White said.

White added that the CD market is still in its infancy; despite jumpstarts by Sega and Philips, there are too many competing and non-complementary technologies on the market. Nintendo's platform will be compatible with existing CD-ROM expanded architecture technologies. CD games are expensive to develop and many third-party publishers are sitting on the sidelines until he installed base reaches an acceptable level and format wars are settled.

So for the foreseeable future the two giants will be slugging it out in the 16-bit arena, and they're apparently playing on a level field, right down to the hit software that drives the hardware sales. Sega has a must-have in Sonic II, while CapCom's Street Fighter II for the Super NES is a rival for game of the year.