Sega: An extra life in online play?

Is it game over for Sega? Or will its push into online play vault the company to the next level?

With 2m Dreamcast systems on the market and a pre-emptive first move into online gaming, the new Sega.com is sending the industry a message: The fat lady has not yet begun to sing.

"Sega is no longer about hardware," said Sega of America spokesman Charles Bellfield. "Our new focus is on ISP revenue. With a 2-million-user installed base -- all with 56K modems -- and projections for about 4m (Dreamcasts sold) in the next financial year, online gaming is our future."

After a February 1 restructuring of Sega, the industry finds the once-dominant games company divided into two divisions: Sega of America, the sales and distribution arm of the company; and Sega.com, the online gaming part of the company.

With the creation of an entire company dedicated to bringing console gaming online, Sega hopes to find renewed life.

But that future may be bleak considering the other players in the market. Sony with its 23m users and Nintendo with its 9m players certainly have more pull, and Microsoft's entry next year makes Sega somewhat of a small fish in a pond full of big ones.

Yet PC Data analyst Matt Gravett agrees that the future of gaming is online, and that Sega is well positioned in that regard.

"Sega is out there doing it first," he said. "If they can crack it before Sony and Nintendo, they will have a big advantage."

While prior online gaming efforts such as Nintendo's SNES and Sega's Saturn failed, the difference this time around is that the gaming experience is more immersive now -- with improved graphics and a faster and easier-to-use interface for getting into multiplayer mode.

The Dreamcast network should also prove to be a major benefit. All the Dreamcast units on the market have integrated 56K modems, which will help ensure a level playing field among users.

Sega.com is also counting on the current sports-friendly Dreamcast audience to get hooked on the network and multiplayer mode.

At this week's E3 show in Los Angeles, Sega.com will announce the availability of "NFL 2K1" and "NBA 2K1" as the first among its new titles. Also available will be "Quake 3 Arena," "Fantasy Star Online," "Half Life" and "Unreal Tournament." Strategy games are expected later this year.

As is customary for a platform company, Sega.com is focusing on distribution and doing what it can to prevent any obstacles to entry, including price -- hence the lack of a local hard disk drive, which would drive up the unit cost, said Sega's Bellfield.

"A hard drive would be too expensive," he said. "We will have a Zip drive, so if you are a consumer and you are downloading levels and you can take it out of your system and swap it with a friend. I would encourage free games through this medium."

ZDNet News' Robert Lemos contributed to this report

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