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Dreamcast's next target: set-top boxes

Sega is finalizing plans to incorporate its gaming console technology into other devices, such as next-generation set-top boxes.

Amid reports that Sega will stop selling Dreamcast as a standalone gaming console, the company is finalizing plans to incorporate its technology into other devices, such as next-generation set-top boxes.

"Sega's continual commitment to Dreamcast involves incorporating the Dreamcast technology with set-top boxes," Sega of America spokesman Charles Bellfield told CNET News.com. Bellfield said Sega will probably look to partner with other companies that will make the set-top boxes and that announcements will be coming shortly.

A set-top strategy could give Sega a potentially cost-effective way to remain in the hardware market without relying solely on making its own consoles. Reports surfaced Tuesday that the company was planning to stop making the Dreamcast console in March. Sega denied the report.

Sega said in late October that it would look to provide content to other devices, such as set-tops, handheld computers and cellular phones. However, the company did not outline what role Dreamcast would play in those plans.

Analysts say a shift in Sega's strategy is inevitable. Consoles are expensive to manufacture and develop, and Sega doesn't have the resources of such competitors as Sony.

By licensing the architecture, Sega could essentially expand the number of parties selling devices that function like Dreamcast consoles.

Such a move also gives insurance against the possibility of Sega being forced to become strictly a game developer.

Bellfield said gamers in the future will be able to play games over a variety of devices. He likened it to the situation with home audio products, in which tape decks are available as standalone components or integrated with a radio, CD player and receiver.

"Both dedicated game consoles and convergence devices play a part in the future of digital entertainment," Bellfield said.

"The console is not going away and the Dreamcast technology is not going away," he added.

IDC gaming analyst Schelley Olhava said the plans to expand Dreamcast to set-top boxes and other devices make sense if they help create new outlets for Sega games and characters.

"The thing about Sega is they always have been well-known for coming out with very good content," she said. "They have a really good library of solid games for Dreamcast."

Set-top alliances may not be a boon for the Sega.Net online gaming service, however, as cable operators and other parties may limit Sega's role in providing game content. "But it could still get Sega games into a lot of households, and that's what they need," Olhava said.