Video game makers fight a battle over hardware

There is a lesson to be learned from how VHS overthrew Sony Corp.’s Beta system and Microsoft Corp.’s Windows has nearly finished off Apple Computer Inc.’s Macintosh. Now it is being taught in the home video-game market. The lesson: To survive, forming alliances is essential.

A year ago, Nintendo Co., Sony Computer Entertainment Co. and Sega Enterprises Ltd. were in a dead heat. Now, SCE — after lining up a bevy of software makers behind it — has expanded its market share. Yet people in the industry remain unimpressed. Noting that the entertainment industry is moving quickly, they say even SCE, which currently enjoys booming sales of its 32-bit game machine PlayStation, may become a has-been if it fails to keep up with new trends and technological developments.

“Nobody can predict what will happen next in this industry,” said Yutaka Sugiyama, senior analyst at UBS Securities. “SCE may be leading the market now, but there is no guarantee that PlayStation’s popularity will last forever.”

PlayStation is currently sold out in Tokyo. A total of 11 million machines had been sold all over the world by the end of last year. Sega, by contrast, continues to suffer from sluggish sales of its 32-bit SegaSaturn. So far, it has moved roughly 7.16 million machines.

Bringing up the rear is the once high-and-mighty Nintendo, which sold about 3.99 million units of its 64-bit Nintendo 64 during the first six months since its June debut. “Being uncertain about who would be the winner among PlayStation, SegaSaturn and Nintendo 64, customers were restrained in purchasing new game machines last year,” said Yasushi Tachikawa, of DigiCube Co., a software distributor. “But now, consumers seem to think that PlayStation is the likely winner, and that is part of the reason why it is selling well.”