Get Out Your Earplugs!

Attention, parents: if you thought the video-game craze was abating, keep your earplugs handy. Though sales fell in 1991, a new high-decibel appeal to the teenage sensory system is about to be launched. Last week Sega of America took over Sony's huge Jumbotron screen in New York City's Times Square to demonstrate a CD-ROM player that will hit the U.S. market next month as a $300 accessory to the Sega Genesis game system. With 100 times more memory capacity than current 16-bit cartridges, compact discs enable software companies to produce what Sega officials call interactive cinema. Instead of fey animated characters that bounce around and make beeping noises, CD-based games like Night Trap feature human actors, compressed full-motion video, special effects, high-fidelity sound and byzantine plots that let players control the action. "CD is far better than anything a game player has seen before," boasts Tom Kalinske, president of Sega of America.

CD-ROM may well be the future of the video-game industry, and two companies are maneuvering for long-term supremacy-Sega and Nintendo. For years, Nintendo was the industry's King Kong, racking up billions in sales thanks to popular games like Super Mario Bros. With $4.2 billion in revenues in fiscal-year 1992, Nintendo remains dominant. But over the past three years, Sega has been outflanking it, bringing more sophisticated technology to the market and stealing young customers. For example, while Nintendo opted to milk revenues from its hugely successful eight-bit NES system (70 million units sold worldwide), Sega in 1990 took a technological leap ahead, introducing the U.S. industry's first 16-bit game color player (Genesis). With twice the processing power of eight-bit cartridges, 16-bit games are faster and more sophisticated. With a 11/2 -year head start on Nintendo and a popular hedgehog named Sonic, Sega's Genesis captured the bulk of 16-bit sales last Christmas. Today, both Sega and Nintendo claim more than 60 percent of the 16-bit market. Kalinske estimates that Sega's worldwide sales will jump by $1 billion this year-to $2.5 billion. "The dictatorship is over," he says. Industry analyst John Taylor agrees: "There are two gorillas out there now."

Nintendo last week made its own announcement. It said Sony Corp. would be making a combination CD/cartridge player that would be compatible with its 16-bit game cartridges and with future Nintendo compact discs. Nintendo plans to unveil a 32-bit CD peripheral in August 1993. Like Sega's CD player, Nintendo's future CD unit will be an accessory to existing 16-bit cartridge players. To boost their 16-bit hardware sales (and thus broaden the base for later CD sales) both companies have been slashing prices. Current units now cost only $100. Bill White, Nintendo's corporate spokesman, maintains they're "not worried" about Sega's growing clout or its CD system. He contends it is premature to move toward CD-based software while programmers continue to improve 16-bit games. When Nintendo's 32-bit system reaches the market, he adds, "it will prove to be superior."

Olaf Olafsson, president of Sony Electronic Publishing, says that with the arrival of CD technology, "video games are moving from being a narrow toy business to a broad interactive entertainment industry." It now takes more than a year and $1 million to make an interactive video game. Sega is selling "make your own video" CDs featuring the bands Kris Kross, Marky Mark & the Funky Bunch and others. Each disc has a real video jockey issuing instructions to the player while a hit song blares away. Around the monitor, several picture-in-picture screens show clips from well-known movies and the band's most popular videos. Players select video cuts, add special effects and overlay lyrics. When completed, the VJ plays back the video and offers a blunt evaluation. If he isn't pleased, the user will be ridiculed-"Don't quit your day job!"--and hear a toilet flushing. While Sega has an advantage over Nintendo in CD development, it must produce compelling software to go toe to toe with Nintendo. Simply put, capture the imagination of teenagers-or perish.