Xbox refuels Sega's software dream
TOKYO, Japan (CNN) -- Microsoft chairman Bill Gates announced that Sega will develop 11 game titles for the Xbox game machine's launch in Japan.
The software deal is a huge boost to Sega since it abandoned the game console market last month to shift its focus to the more promising gaming software business.
The announcement also indicates Microsoft's commitment to take on Sony and the PlayStation 2 in Japan's booming gaming market.
Sega shares jump
Sega saw its shares jump in reaction to the news. They leapt more than 5 percent before closing 3.2 percent higher at 2,260 yen, outpacing a 0.56 percent fall in the Nikkei 225 index.
Investors were nervous about the future of the world's third biggest game maker after it faced $650 million in special losses from ending the Dreamcast console, leading to a record $473 million net loss in the year to March.
Late Sega president Isao Okawa made headlines for his $695.7 million private donation to bail the struggling game company out of its financial woes.
Sega will provide Microsoft's Xbox a much-needed array of 15 to 20 game titles when it hits shelves this northern autumn in Japan and the United States.
That will help to determine whether the Xbox, which Microsoft hopes will give it a new growth opportunity in interactive entertainment, will be able to compete effectively against established competitors such as Sony's industry giant -- the PlayStation 2.
Microsoft committed to Japan
"People don't know how committed we were for the Japanese market... We've got the Japanese market full-speed ahead on the Xbox," says Gates.
"There's no way to get in small."
That's important in Japan, where close coordination between hardware and software makers is credited with putting its videogame makers at the forefront of the $20 billion industry.
Software titles are crucial to the success of game consoles because they generate sales and also offer higher margins for both the hardware manufacturer and game developer.
Microsoft vs. Sony
The cubic Xbox with its bright green "X" logo, built-in online capability and hard drive, is bolstering Microsoft's hope of breaking into interactive home entertainment.
Microsoft says it would spend more than $500 million in the first 18 months of the Xbox's launch on marketing.
"Even for us that's a huge, huge investment," Gates says.
Microsoft also opened an avenue for online gaming with the Xbox console by allying with Japanese Internet services company NTT Communications.
Sony has also announced an alliance with NTT DoCoMo to develop networked gaming services.
Sony has a firm grip on the market with its PlayStation series, with the first version becoming the most successful video game machine yet, and the second version gaining a wide head start with its launch nearly a year ago. Together, they represent a combined user base that is approaching the 100 million mark.
The new Sega titles for Xbox would include racing games such as Sega GT 2 and adventure titles such as Panzer Dragoon.
Sega has plans to supply games to Sony as well as to Nintendo, which will launch a next-generation console this year to go head-to-head with the Xbox and PlayStation 2.
Reuters contributed to this report.
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