Sega licenses Dreamcast architecture

In addition to doubling as a cable TV set-top box and games console, the new terminals will have broadband connectivity, a hard disk drive, support services such as chat and Internet telephony and will allow users to battle each other through a network gaming system. Sega is planning to build in support for DSL (Digital Subscriber Line), cable and satellite broadband services into the box giving it the potential to be used on a wide variety of networks.

It is no surprise that Sega turned to a set-top box maker as its first licensee. The Japanese company incorporated networking gaming capabilities into the first models by building in analog modems and has been working with a number of cable TV network operators in Japan towards using the Dreamcast as a cable Internet terminal. In July it launched a broadband service with 40 operators in Japan for Dreamcast users, who need to buy a broadband adapter unit to access the service.

Sega's announcement comes just days after it first announced it was considering licensing the Dreamcast platform. The company said that licensing was one of a number of options being considered for the system, one of which was discontinuing production of standalone Dreamcast consoles. The company has been battling fiercely against Sony Computer Entertainment's PlayStation and PlayStation 2 consoles and the GameBoy system from Nintendo -- a fight it has been steadily losing.

In the face of continued losses, Sega said last week it will begin putting a stronger focus on its software business and possibly supply software for the rival PlayStation and GameBoy platforms. Tuesday's announcement with Pace also has the potential to boost software sales as it could spread the use of the Dreamcast system into more homes.

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