Future arrives early at Hoover, Alabama: Michael Marray on a cable breakthrough for video game addicts

While the rest of us stumble around in the Dark Ages the future has already arrived in Hoover, Alabama and Cheyenne, Wyoming. The people there are probably not used to being at the cutting edge, but their cable systems are among the 12 areas chosen for test marketing of Sega Channel, which recently began piping Sega video games directly into homes.

Sega is experimenting with pricing of between dollars 12 and dollars 20 per month for unlimited playing time 24 hours a day. The response has been encouraging and it intends to begin national rollout of the channel, developed with Time Warner Entertainment and Tele- Communications Inc, later this year.

Sega Channel carries a selection of about 50 games, with the menu changed each week. The user selects a game such as Fatal Fury or Sonic Spinball, which is then downloaded into an adaptor attached to the cable box with enough memory to play the game.

The appearance of Sega Channel is of more than passing interest to stores that sell or rent movie video cassettes and video games, since it represents the beginnings of the 500-channel, movies- and-games-on-demand future that is supposed to spell their ultimate demise, making the idea of walking to the corner shop to rent a video laughably old-fashioned.

But some industry observers feel that the growing band of 'information superhighway' pundits, and many stockmarket investors, have been carried away with all the hype and should take a hard look at the buoyant sales and cash-flow forecasts of video rental and retailing companies.

Michael Wallace, an analyst at UBS Securities, points out that, like movies shown on pay-per-view or premium cable channels, Sega games will only be available on cable after a first run in the shops. Thus the so-called 'test drives' of new games on Sega Channel will stimulate interest at the retail level.

The normal shelf-life of a game is six months, Mr Wallace says, so the new version of Mortal Kombat scheduled for release this autumn will have its usual sales run before moving to the cable channel. It will help the retail industry rather than hurt it, he argues.

Such arguments are at the centre of the debate over the proposed merger between Blockbuster Entertainment and Viacom, agreed at the height of the takeover battle for Paramount Communications. The deal would take Blockbuster into big-time movie making, programming such as MTV, cable systems and interactive technologies, and indeed into Sega Channel as well, since Viacom recently became the latest cable operator to sign up to carry the service.

Enthusiam for the merger has since fallen flat, for the reason that Viacom's share price slumped after the Paramount acquisition went through. It has, however, been recovering of late.

The two parties have until the end of September to decide whether their engagement leads to marriage. Even if it falls through, Blockbuster shareholders will not be too perturbed. As one analyst put it: 'Technology for the future home entertainment system is unlikely to be widespread before the year 2000, giving Blockbuster ample time to continue to diversify its business away from core domestic video rentals.'

In other words, the future won't be arriving for a few more years - unless you live in Hoover, Alabama, that is.