Dreamcast sales climb on eve of troubled PlayStation 2 launch

Game players and retailers may be frustrated by the expected shortages of Sony's upcoming PlayStation 2 console, but at least one party is benefiting: Sega.

Sega's Dreamcast game console has been trounced in sales by Sony's original PlayStation all year. But Sega is staging a comeback, with sales more than doubling ahead of the launch of the much-anticipated PlayStation 2, according to market research firm PC Data, which tracks retail sales of technology products.

Sega vs. Sony rematch Sega of America president Peter Moore

The surge in Dreamcast sales is significant, given that many had written off Sega's long-term prospects in light of the massive hype surrounding the launch of the new Sony console later this month. Sega appears to have capitalized on the chance Sony provided when it warned last month that initial PlayStation 2 availability would be half that of previous forecasts, likely leading to widespread shortages during the holiday shopping season.

Sales of the Dreamcast consoles were up 156.6 percent between July 23 and Sept. 30, according to PC Data, pushing Sega into the No. 2 spot, ahead of Nintendo and behind Sony, based on revenue.

Sega of America president Peter Moore told CNET News.com shortly after Sony's announcement that the company was already hearing from retailers looking for more Dreamcasts.

"It created a mild panic among retailers," he said. "As the brand that takes advantage of this best, it's our job to find the inventory."

To be sure, Sony will still dominate the market when the PlayStation 2 arrives, given that the console is essentially already sold out through preorders and reservations.

But Sega has been preparing itself for the Oct. 26 arrival of PlayStation 2, slashing prices on its Dreamcast by $50, to $150--half the price of the PlayStation 2. Further, Sega has been offering a rebate for the full cost of the Dreamcast to buyers who sign up for the Seganet online gaming network and Internet service.

These moves, coupled with Sony's component-related supply problems, have sent Dreamcast sales surging.

"The PlayStation 2 is pretty much already sold out," said Matt Gravett, of PC Data. "It's like when people go to the movie theater and can't get into their first-choice movie because it's sold out. They go to another movie."

Sony is currently selling a revamped version of its original PlayStation, dubbed "PSone," while Nintendo has been bundling its Nintendo 64 with Pokemon and Donkey Kong games.

"It really looks like Sega reached the part of the market that was looking to buy a new system," Gravett said. "They added to the market."

Since Sega cut prices, its market share has increased to 29.9 percent of unit sales and 39.7 percent by revenues. With the original PlayStation, Sony has 49 percent of the market in unit sales and 42.3 percent by revenue. The Nintendo 64 declined to 20.8 percent by unit sales and 17.9 percent by revenue.

From January through August, Sega captured about 15 percent of the market, according to Gravett. The PlayStation took 45 to 50 percent of the market during that time, and Nintendo had 30 to 35 percent.

The overall market for game consoles is still growing, Gravett said, despite the fact that many people are waiting for the PlayStation 2 and retailers are working to clear stores of original PlayStation inventory. Sega sales, while higher than earlier this year, are still lower than last fall, when the Dreamcast launched, he said.

"The big thing this holiday season is going to be the PlayStation 2," Gravett said. "There could be some backlash against Sony because there are going to be some shortages."