Speculation emerged last week over Sega's next-generation console, codenamed Katana, which is due for release next year.
Following Sega's defeat in the console war with Nintendo and Sony - signalled by the US withdrawal of Saturn after worldwide losses of Y32.8 billion - it is facing a significant challenge in distinguishing the Katana console from those already on the market.
Sega has also seen diminishing sales of the Saturn in the UK and is relying on the Katana to revitalise its flagging reputation in the games console market.
The console was rumoured to be based on a DVD drive and will include a modem. The price tag is expected to be about $200. Mike Welch, analyst at Inteco, commented: 'The inclusion of a modem and online gaming is interesting.
In the US, it is attractive due to free local telephony, but in the UK and Europe, people will not be keen on running up their phone bills.'
Analysts estimated the online games market will be worth $1.3 billion by 2001. Sega has confirmed it is working with Microsoft and the Katana is believed to use an operating system based on Windows CE, possibly to attract developers to the platform.
Mark Hartley, Sega Europe marketing manager, was reticent but said: 'At present, there is no information on the Katana. It will launch in 1999.'
However, the appointment of Naohiko Hoshino as director of product development and third-party licensing and Mark Maslowicz as licensing and acquisitions manager was seen as vital pre-launch preparation.
Welch added: 'Sega lost a very large installed base and it will be difficult to get that back. It will have to offer something different. Things like DVD or modems are options for differentiating a console, but if Sega pitches it as something other than a games console, it could lead to problems.
Consumers will ask if it is a multimedia home entertainment system or a games console. They are very different markets.'
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