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Sega Dreamcast First-Day Sales Hit $100 Million

The strong sales performance posted by Sega's Dreamcast since its launch two weeks ago is giving the game maker a much needed boost in its ongoing battle against Sony and Nintendo, which will hit the market with new players next year.

Initial retailer reports indicate robust hardware and software sales for the Dreamcast, with some stores selling all of their initial allotment of consoles. Sega reported 300,000 pre-orders for the Dreamcast had been received prior to the September 9 launch. A poll of store managers said they were able to fulfill those orders on the first and second day of sales.

A Sega spokesman said the first-day sales hit the $97 million mark, including software, but added it was too early to know exactly how many units were sold on the launch day.

"Sales were very good," said a Funcoland store manager in Enfield, Conn. "We pretty much sold out all the stock we had. In addition, the titles Full Caliber and NFL 2000 sold well."

An Electronics Boutique manager in the New York-metro area said his mall-based shop sold 200 consoles the first day, and he expects the Dreamcast to "blow away" Sony and Nintendo for the balance of the year.

The one anomaly in Sega's launch has been the software. The company confirmed that several titles, including Blue Stinger, Sonic the Hedgehog and Ready to Rumble, would not work on the system. A Sega spokeswoman said the glitch is not in the console, but due to software manufacturing errors.

Initial sales were so strong that the consoles might be difficult for consumers to find. Several store managers were uncertain when their next shipment would arrive, but added there are enough game titles on hand.

Sega did not know when the next hardware shipment would be released.

The 128-bit Dreamcast carries a $199 suggested retail price and a handful of titles. By releasing the Dreamcast this year Sega gains at least one year of being the only company with a new game console on the market.

Sony reported last week the PlayStation 2 will begin shipping by fall 2000 in the US. and in March 2000 in Japan, where it is expected to carry a $360 suggested retail price. U.S. pricing has not been established. Like the Dreamcast, the PlayStation 2 uses a 128-bit processor, has a DVD-ROM drive and a modem for Internet play.

Nintendo is also expected to ship its next-generation product next year.

Gerry Kaufhold, principal analyst with Cahners InStat, Scottsdale, Ariz., said Sega desperately needs its head start. After being the game console industry leader during the early 1990s the company fell behind Sony and Nintendo and now controls just 1% of the market. Sega laid off 1,000 employees earlier this year and reported a $378 million loss for 1998.

Sega could be doomed if it mismanages the Dreamcast launch, said Kaufhold. "This is not so much a question of will Sega succeed, but that it has to. Sega has two killer game titles right now, but by Christmas it needs to have a road map available showing what will come out for it next year for it to succeed."

The analyst said Sega must overcome a history of being the first to roll out new technology, but then falling behind Sony and Nintendo. This time around, he believes, Sega has learned from its past mistakes, but the company still needs to execute the Dreamcast program properly or it will be out of the industry.

"In Sony, Sega is facing a real machine. Twenty percent of Sony's revenue comes from PlayStation, and Sony's strategy is pretty strong," Kaufhold said. Part of this strategy centered on Sony, and Nintendo dropping the price of their respective games to $99, from about $125. Both companies have slashed prices on favorite games, and Sony has kicked off a multimillion-dollar marketing blitz.

These moves are not designed to steal sales from the Dreamcast, but to increase the installed base of PlayStation and Nintendo owners, he concluded. Then when the next-generation platforms roll out these owners will follow the upgrade path to the new product.