Sega captures dollar share of videogame market -- again; diverse product strategy yields market growth; Sega charts path for 1996.

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Jan. 10, 1996--Sega(TM) of America Wednesday announced that it led the North American videogame market in overall dollar share for the third consecutive year in 1995.

Estimated dollar share for Sega-branded interactive entertainment hardware and software in 1995 was 43 percent, compared with Nintendo at 42 percent, Sony at 13 percent and The 3DO Co. at 2 percent. Sega estimates the North American videogame market will total more than $3.9 billion for 1995.

Holiday sell-outs of videogame hardware including 16-bit Sega Genesis(TM), 32-bit Sega Saturn(TM) and Sega's portable game systems, Game Gear(TM) and Genesis Nomad(TM), combined with high software sales, put Sega ahead of the competition in overall videogame sales.

"Having products in all of the videogame categories was clearly a winning strategy for Sega this year," Tom Kalinske, president and CEO, Sega of America, said.

"The holiday selling season was a reasonably good one for Sega -- we basically sold all the hardware we were able to bring into the market, and our key software sold extremely well; keeping retailers in stock was our biggest challenge."

Genesis Sold Out Nationwide

Notably, while analysts and retailers had predicted a large decline in the U.S. 16-bit market, Sega did not have enough Genesis systems to meet holiday demand. Sega sold more than 2 million Genesis systems in 1995.

"Clearly, everyone underestimated the 16-bit market, which totaled more than 70 percent of videogame unit sales this year," Kalinske stated. "Given retailer and consumer feedback we could have sold another 300,000 Genesis systems in the November/December timeframe."

Sega attributes the strong demand to a combination of the attractive price point -- below $100 for the 16-bit system with a game included and the strongest first- and third-party software lineup ever developed for the system. In particular, Sega's "VectorMan" and "Primetime Football," Disney's "Toy Story" and Electronic Arts' "Madden '96" were exceptionally strong during the holiday season.

Sega Saturn Climbed Above 3 Million Worldwide, Tripled in U.S. Sales

Worldwide, the Sega Saturn installed base reached more than three million by the end of 1995. In Japan, Sega Saturn experienced tremendous sales and reached an installed customer base of more than 2.2 million. During November and December, Sega outsold Sony, its closest competitor, by a margin exceeding 3-to-1.

In addition, Sega's exclusive software "Virtua Fighter 2(TM)" sold more than 1.5 million units, bringing to 3 million the total number sold in Japan of the "Virtua Fighter" series (including: "Virtua Fighter," "Virtua Fighter Remix," and "Virtua Fighter 2").

North American sales of Sega Saturn in November and December increased over prior months by up to three times in many retailers across the country; the total number of systems sold in North America was 400,000 since the product was introduced in May 1995.

According to Kalinske, North American Sega Saturn performance was limited by a short supply of the integrated circuits used in the system; given the shortage and worldwide market conditions, Sega emphasized the Japanese market. Sega has put in place a strong worldwide procurement and production plan to meet the demand for Sega Saturn in the North American market.

"While we fell short of our North American goal for Sega Saturn, in December we significantly closed the gap with our competition," Kalinske stated. "History repeats itself; we were the underdog once before -- the `next-generation' war is far from over."

More than two million software units for Sega Saturn were sold in North America in 1995. Third party titles from companies such as Electronic Arts, Acclaim, Crystal Dynamics and Time Warner Interactive accounted for a significant percentage of the software units sold.

Most retailers experienced sell-outs of the Sega Saturn $299 core pack and many had shortages of the $349 Sega Saturn with "Virtua Fighter Remix" packed-in. In addition, Sega's key exclusive software "Virtua Fighter 2," "Virtua Cop," and "Sega Rally Championship" -- all of which have been awarded accolades from industry magazines -- sold extremely well. In fact, Sega sold more than 200,000 copies of "Virtua Fighter 2" in December, even though the title didn't reach retail until mid-December and was in limited distribution.

"We've now got the elements -- a $299 price point for the system, stellar software at retail, and a software lineup for 1996 that no other company can match -- to regain the next-generation lead in North America in 1996," Kalinske added.

Strong Market for Sega Portables

With approximately 900,000 units of Game Gear sold, more than 600,000 of those in the fourth quarter of the year, Game Gear was in short supply at retailers around the country. Nomad, Sega's 16-bit color portable unit which was introduced in limited distribution in November 1995, also sold very well.

PICO Grows 138 Percent in 1995

PICO(TM), Sega's edutainment system for children ages three to seven, increased in sales 138 percent in 1995 over 1994, making it the hottest product in the electronic learning aid category for the year. Sega sold more than 225,000 PICOs in 1995, bringing the installed base for this 14-month-old product to more than 400,000 units.

SegaPC: Solid Foundation for Future Growth

Sega brought its properties to the multimedia PC for the first time in 1995 in a limited test that began to leverage the Sega brand within the growing market of home PC users. Sega games for the PC include "Sonic the Hedgehog(TM)," "Virtua Fighter Remix," "Tomcat Alley," "Comix Zone," and "Ecco the Dolphin."

"We wanted to test the PC market with some of our stronger properties, and the results demonstrate that there is a definite market for our arcade style of fast-action videogames on the PC," Kalinske stated. "We now have a strong understanding of the PC marketplace and have plans for rapid expansion of the Sega PC line, with nearly 30 titles due out in 1996."

Sega Charts Strong Course For 1996

In 1996, Sega's primary hardware focus will be on driving sales of Sega Saturn, Genesis and PICO. The company has established a strong lineup of software that will include the extension of current strong properties, as well as 20 original developments and more than 10 translations from Sega's arcade machines for Sega Saturn. For Sega Saturn the company has established worldwide procurement plans that will ensure ample supply of hardware product throughout the year.

In addition, Sega will leverage its 1996 console properties on PCs to continue gaining ground in that growing market.

"We see the market segmented by technology, age and price, and we're the only company than can respond with the right product mix of leading interactive entertainment," Kalinske noted. "We've been in this position before, know what it takes in terms of marketing and product to capture the market segment, and are fully prepared for 1996."

Sega of America is the arm of Tokyo-based Sega Enterprises Ltd. responsible for the development, marketing and distribution of Sega videogame systems and video games in the Americas. Sega Enterprises Ltd. is a nearly $4 billion company recognized as the industry leader in interactive digital entertainment media, and is the only company that offers interactive entertainment experiences both inside and outside the home.

Sega of America's World Wide Web site is located at: http://www.segaoa.com.

CONTACT: Sega of America

Lee McEnany, 415/802-3943

or

Manning, Selvage & Lee

Kelly Fitzsimmons, 213/782-6600, Ext. 235