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Sega US preps free Dreamcast lure for its ISP

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Sega' US operation is following the lead set last month by Japanese company J-Data Co. and offering free Dreamcast consoles in exchange for Internet access contracts. Sega of America's scheme centres on the launch of an online gaming company, to be called Sega.com, and an ISP service, SegaNet, to connect online players together. SegaNet is due to go live in the autumn. Sega will offer a $200 rebate to anyone who signs up for a two-year subscription to SegaNet. The ISP is expected to charge $21.95 per month for access, which amounts to $526.80 over the two-year period. That's rather more than the average ISP fee of around $10 per month, so while the $200 rebate will nicely cover the cost of the console, users will be paying over the odds for Net access. But maybe they'll be happy with the free keyboard they'll also receive as part of the deal. Essentially the deal is about building marketshare before Sony launches the PlayStation 2 in the US next autumn. Anticipation of the Sony machine is already hitting Dreamcast sales in Japan - they were never quit as high as Sega would have liked as it is - and the same effect is likely to be seen in the US and Europe. Arguably it's already happening. Giving away hardware to entice users to sign up for long-term ISP contracts isn't a new approach, but it's not one that's been quite as successful as some industry watchers have hoped. The idea of companies offer free kit as a loss-leader really hasn't emerged beyond a small number of 'free PC' deals that have since faded into obscurity. Sega's plan may have more success since it's focused on a very specific audience - online gamers - and not on users who kind of feel they ought to get online, but it's still a gamble. That said, as the Japanese market is showing, maybe it's got nothing to lose at this point. Well, apart from the support of retailers that is, which is presumably why it's giving the consoles away via a rebate rather than simply mailing SegaNet subscribers a free box. Sega said it wants to distribute four million Dreamcasts in the US between April 2000 and the end of the year for a total installed base of six million units. Sega's plan mirrors a scheme put in place last month by Japan's J-Data Co., which will offer 50,000 free Dreamcasts in exchange for a year's susbcription to Japanese ISP Momotaro Internet. The membership fee plus the monthly subscription comes to around $306.21 for the first year. Sega.com expects to break even in its first two years of operation, which shows you just how high an ISP's margins are. ®

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