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Pace Could Resurrect Sega Channel

Pace Micro Technology plc said it has integrated Sega Corp.'s gaming platform
into advanced set-top boxes that feature on-board hard drives.

That move could spark the Second Coming of failed cable project The Sega
Channel.

The combination will allow consumers to play games over broadband
connections, the companies said. Pace is currently developing gateways for the
cable, satellite and digital-subscriber-line platforms.

In the cable sphere, Pace's surge into the U.S. market has been sluggish,
getting set-top orders from just two MSOs: Time Warner Cable and Comcast
Corp.

Pace's advanced box -- which the company likes to spin as a 'home gateway' --
also uses its 40-gigabyte hard drives to facilitate personal-video-recording
functions, allowing viewers to record and 'time-shift' television shows.

That same hard drive would also store Sega games, giving operators the option
of making downloaded titles available to subscribers under pay-per-play or
pay-for-time scenarios.

Pace, a big backer of home-networking technologies, said the hard drive could
also serve as a 'games jukebox,' allowing users to port the games to hand-held
devices through wireless connections.

Besides games, Pace's 3-D-graphics-capable boxes could also 'spice up' other
applications such as electronic program guides, president Neil Gaydon said in a
press release.

Sega, the brains behind 'Sonic the Hedgehog,' has been under extreme heat in
the console-gaming market, causing the company to consider halting production of
its 'Dreamcast' console and focusing its efforts on building game software.

Much of that blame centers on the successes of Sega's rivals, such as
Nintendo Co. Ltd. and Sony Computer Entertainment Inc. On top of that, software
behemoth Microsoft Corp. plans to launch its new 'Xbox' this fall.

Despite Sega's recent hesitancy, the video-game-console arena is expected to
continue to explode as the equipment becomes more versatile with features like
high-speed connections and DVD support.

According to Multichannel News'sister company, Cahners In-Stat
Group, sales in that area will blossom from last year's $4.1 billion to $7.8
billion in 2004.