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Sega Announces Formation of New Company, Sega.com, Inc.; Offers Rebate On Sega Dreamcast Hardware for SegaNet ISP Subscribers.

Business Editors and High-Tech Writers

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LAS VEGAS--(BUSINESS WIRE)--April 4, 2000

New Company Poised to Lead Online Console Gaming, Redefine

Industry Business Model

Continuing its mission to drive the future of console gaming, Sega(R) today announced at the company's annual retailer summit a bold move with the formation of Sega.com, Inc., a new online interactive entertainment company whose goal is to become the definitive online destination for gamers. Sega.com(TM), a privately held, independent company will share marketing resources with Sega leveraging the strong brand equity and installed base of two million Sega Dreamcast(TM) systems in the U.S.

At the core of Sega.com, is SegaNet(TM), the only high-speed online console gaming network, which will offer gamers 3D multiplayer games, chat, community, cheat codes, tournaments and content. SegaNet is also an ISP service for Sega Dreamcast and PC users, offering gamers the best in speed, consistent low latency, customer service and access to all other areas of the web, including personal e-mail (name@sega.net). Additionally, SegaNet will provide gamers content on complementary areas of interest, including music, TV, movies, sports and e-commerce.

The Triple Threat

Sega.com is the only company with all three necessary ingredients for success - the delivery system, SegaNet; the proprietary hardware and delivery system, Sega Dreamcast; and the best videogame content available in the market. "We've got the Internet playing field all to ourselves for at least the next 18 months, during which time we will become ingrained in consumers lives via SegaNet and our compelling online content, introduce them to the online gameplay experience via a console and further cement their loyalty to Sega - a brand they already know and love," said Peter Moore, senior vice president, Sega.

The Games, The Rebate

SegaNet will launch in the U.S. on September 7, 2000 with 10-12 online games available by fall, including "Quake III Arena(TM)," "Sega Sports(R) NFL 2K1," "Phantasy Star Online(TM)" and "Sega Sports NBA 2K1" to name just a few. SegaNet will launch in Canada by year's end. In order to drive rapid adoption of SegaNet, Sega.com is also announcing today an innovative rebate program, whereby consumers who signup for the SegaNet ISP will pay only $21.95 per month. Sega.com is also offering the Sega Dreamcast system for zero cost to consumers. "We believe this $200 rebate will drive consumers to retail outlets where they will purchase software, peripherals and other e-services from Sega," said Moore. Following are three ways consumers can obtain the rebate in late summer 2000:

-- Current Sega Dreamcast Owners - By signing up for SegaNet, consumers will receive a $200 check and a free keyboard (regardless of when they purchased their system).

-- Bricks and Clicks Purchasers - By signing up for SegaNet after purchase of Sega Dreamcast, consumers will receive a $200 check and a free keyboard.

-- PC Users - By signing up for SegaNet, consumers will receive a free Sega Dreamcast and keyboard.

The SegaNet ISP Partner

GTE Internetworking, a division of GTE Corporation (NYSE:GTE) and a leading provider of business Internet services, will provide the managed Internet access services for the new SegaNet ISP. GTE Internetworking provides a suite of managed Internet services to leading customers like the Los Angeles Times, Yahoo! and BankOne.

As part of the agreement, GTE Internetworking will provide national and local access for SegaNet, and will deliver high performance connectivity. Combining GTEI's network with tailored APIs, modem technologies, servers, routers, integration and a proprietary technology that will reside within the games as well as the servers called KAGE will ensure for an optimal end user experience. The combination of the KAGE API allows the games to hit their maximum speed potential with consistency and the lowest latency offered on the Net today, for an incredible multiplayer console gaming experience. Leading Sega.com towards the dominant position in this new market, is Brad Huang, who is Sega.com's president and CEO. "The Sega.com rebate will dramatically expand the installed base. Sega.com will benefit, as consumers will use the rebate money to purchase software and extra value-add services such as tournaments. Additional revenue streams will come from the SegaNet ISP subscriptions, advertisements, e-commerce, promotions and licensing." "Sega's mission is to take gamers where gaming is going, which is undoubtedly online, but also to do so in a way which redefines an industry business model that is outdated and inefficient," said Moore. "In the past, hardware manufacturers and publishers went through five-year life cycles of developing a platform, marketing it like hell to get an installed base, achieving the proper tie ratios between hardware and software and then repeating the process.

Manufacturers, retailers and software publishers lose in that cycle so, true to our heritage, we decided to buck the system and offer gamers the 'next big thing' in gaming - by embracing the Internet." "Through the formation of Sega.com, Inc. and SegaNet, we are able to provide our audience with a totally new experience of online console gaming, while simultaneously grabbing the first-mover advantage in this nascent and lucrative new market," continued Huang.

The Timing Is Right for Online Console Gaming

Online console gaming is expected to skyrocket and Sega is poised to grasp this market. Consumer demand for online gaming is rising with 22 million consumers aged 18 and under citing their primary Internet activity as gaming1. In fact, 24 percent of the videogame market revenue is expected to come from online gaming by 2002.2 Today, 20 percent of Sega Dreamcast consumers are registered for the Sega Dreamcast Network - even though true 3D online gaming is not yet possible. When authentic 3D multiplayer online gaming is available this summer, Sega expects the adoption of the SegaNet ISP to explode. Sega.com is delivering a high-speed, low-latency online console gaming experience via a standard dial-up connection, thus providing the company a substantial head start in the marketplace. Later this year, the company will offer an easy plug and play broadband-enabling connector for when broadband becomes more widespread in the next two to three years.

The Sega.com destination website will be previewed at the Electronic Entertainment Exposition in Los Angeles this May. SegaNet will go live in August 2000, with an official marketing launch on September 7, 2000.

About Sega.com

Sega.com, Inc. is a new online Internet entertainment company whose goal is to become the online destination for gamers. Sega.com also comprises SegaNet, the only high-speed online console gaming network. SegaNet offers gamers the best in 3D multiplayer games, chat, community, cheat codes, tournaments and content. SegaNet is also an ISP for Sega Dreamcast and PC users, offering gamers everything they need to know about gaming and other areas of interest that tie in with gaming and other areas of interest that tie in with gaming including music, TV, community, movies, sports and e-commerce. About Sega Sega of America Dreamcast, Inc. is the arm of Tokyo, Japan-based Sega Enterprises, Ltd. responsible for the development, marketing and distribution of Sega videogame systems and videogames in the Americas. Sega Enterprises, Ltd. is a nearly $2.5 billion company recognized as the industry leader in interactive digital entertainment media, offering interactive entertainment experiences both inside and outside the home. Sega of America's World Wide Web site is located at www.sega.com.

About GTE Internetworking and GTE Corporation

GTE Internetworking, a unit of GTE Corporation (NYSE:GTE), offers business enterprise and service provider a full spectrum of integrated Internet services using IP networking technologies. GTE Internetworking delivers complete e-business infrastructure solutions including network solutions, dial-up and dedicated Internet access, high-performance Web hosting, virtual private networks (VPNs), managed Internet security, network management, and systems integration for integrating the Internet into business operations. Additional information about GTE Internetworking can be found on the Internet at http://www.bbn.com.

Note to Editors: Team names and logos are trademarks of the teams indicated. All other (NFL-related marks) are trademarks of the National Football League and NFL Properties. Officially licensed product of PLAYERS INC. The PLAYERS INC. logo is a registered trademark is a registered trademark of NFL players.(c)1999 All rights reserved.

The NBA and individual NBA member team identifications used on or in this product are trademarks, copyrighted designs and other forms of intellectual property of NBA Properties, Inc. and the respective NBA member teams and may not be used, in whole or in part, without the prior written consent of NBA Properties, Inc. (c) 1999 NBA Properties, Inc. All rights reserved.

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