MORTAL KOMBAT

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The folks at Sony--the company that brought you the Trinitron television and the Walkman, and will soon launch the PlayStation game player--are newcomers to the $5 billion U.S. video-game business. But it didn't take them long to get into the mtv-blaring, schoolyard-taunting, testosterone-burning spirit of the thing. Hanging in front of the big Electronic Entertainment Expo in Los Angeles last week was a Sony banner that boasted EATS NINTENDO FOR LUNCH--THEN THROWS UP.

That pretty much set the tone for the first annual EEE (or E3, as insiders call it), the new spring showcase for the latest and loudest in video-game software and hardware. It was not a pretty sight. Five hardware manufacturers--Nintendo, Sega, Sony, 3DO and Atari--are battling for one of the top spots in a market that most analysts believe has room for no more than two or three.

"It's going to be a bloodbath," says Adam Berns, producer of a new $2 million adventure video game called Fox Hunt. "By next Christmas, we're going to see who's still standing."

The video-game market is in the midst of one of those awkward transitions it endures every five years or so, as the old game-playing systems get banished to the closet and new, more powerful ones take their place on the family TV. What is supposed to happen this year, according to the industry's timetable, is that the so-called 16-bit machines (like Sega's Genesis and Nintendo's Super NES) will be phased out in favor of machines that crunch data 32 or 64 bits at a time.

But things are not going according to plan. The 16-bit market is winding down all right. Sales are expected to drop as much as 40% this year. But 32-bit systems from 3DO and Atari have been sitting on shelves in U.S. stores for nearly two years, and lately they have been doing only that, sitting there. Last Christmas millions of parents passed over all the competing video-game systems in favor of home computers that can play games and do productive work as well.

The video-game makers profess to be unconcerned by the threat from the computer industry. Instead, they spent most of last week blasting one another, rather like characters from one of their games, challenging their competitors' statistics, sneering at the performance of their systems and doing their best to keep one another off balance.

Nintendo started it by executing an elaborate head fake, announcing just before E3 that the hot new Ultra 64 machine it had promised to unveil later this year would be delayed until April 1996--after the critical Christmas buying season. Sega, which apparently was making its plans around Nintendo's original schedule, surprised everyone by announcing that its new 32-bit Saturn would be available immediately instead of in September. Sony, no stranger to the stratagems of consumer-electronics marketing, neatly parried with its own surprise: a pre-emptive price cut on the PlayStation--before the official list price was even set--to $299. That positioned the game system well below the $399 list prices of the Sega and 3DO machines and only slightly higher than the $250 price Nintendo has been promising for the Ultra 64. (The Atari Jaguar player, at $159, would appear to be the best bargain of the lot, but the beleaguered company has had trouble attracting top-flight game developers.)