Sega Nintendo 1992

 The biggest battle of the sequels in entertainment history is ringing in the Christmas green. And surprise, "Home Alone 2" isn't one of the contenders.

Genesis, Sega Enterprises Ltd.'s video game that's home to Sonic the Hedgehog, one of the highest-profile rodents since Mickey Mouse, is again challenging the Super Nintendo Entertainment System. And Nintendo Ltd.'s system, starring the acrobatic Super Mario, is struggling to retain that company's unquestioned leadership of the home video game market.

Super Nintendo was first available last Christmas. But Sega Genesis won over many recession-battered shoppers who, on the whole, never got as crazy as retailers had hoped about either of the expensive systems, which play plug-in game cartridges over a standard TV set.

Genesis, sold since 1989, was by this time last year outselling Super Nintendo 2 to 1, based on its $150 price tag, which was $50 cheaper, and its availability of 159 game cartridges, compared with Nintendo's 25.

This year, however, may hit the sales jackpot for both systems. The video game industry projects sales of $5.9 billion, compared with $4.4 billion last year. For the first time dollar sales of 16-bit systems such as Genesis and Super Nintendo are expected to surpass 8-bit systems, a nearly decade-old technology with half the computer memory that processes less information, leaving games with slower, duller and less-animated graphics.

"Sixteen-bit is a comfortable technology, now," says Glenn Rubenstein, who at age 16 is an industry consultant and video-game columnist for the San Francisco Examiner and Wizard magazine. And since last Christmas ruthless price cutting by both companies and a proliferation of game cartridges available for both systems has made all the difference, fans, retailers and analysts say.

But Sega has beaten Nintendo to the punch again this Christmas with its $299 accessory CD-ROM (compact disc-read-only memory) player-among the costliest game hardware yet-that can incorporate live video footage, in yet another commercial leap to storing information other than sound on compact disc.

Sega's CD system has already sold out of shipments of 70,000 units since its introduction three weeks ago, the company says-and has generated a priceless buzz even among fans who won't find one under their Christmas tree. Meanwhile, Sega's Sonic the Hedgehog 2, a 16-bit game cartridge introduced Nov. 24 amid a $10 million ad blitz, sold more than 400,000 units-$20 million at retail-in its first week. That's half again as many units as any other 16-bit game has sold in its first week, Sega says.

Nintendo, meanwhile, says its Super Nintendo 16-bit hardware system is outselling Sega Genesis. But once hype gives way to actual sales receipts, "it's very, very close, just about even," says Jim Silver, associate publisher of The Toy Book, a trade publication.

Random checks of retailers that stock both, including Kay-Bee Toy Stores, the nation's No. 2 specialty toy retailer, confirm a close race, although reliable independent sales figures for this Christmas season aren't yet available.

Nintendo retains greater consumer recognition because of the 30 million Nintendo 8-bit systems sold in the United States by this year. The brand is also carried by 17,000 stores, nearly twice as many stores as Sega. The company ended 1991 with 70 percent of the video market, compared with Sega's 20 percent, according to trade publications. But Sega's 16-bit and CD-ROM scoops "make it the leader, in the mind of many consumers," says Tom Alfonsi, video game buyer for Pittsfield-based Kay-Bee.

Indeed, a half-hour stakeout of F.A.O. Schwarz in the Back Bay, where three out of four video screens played Nintendo games without drawing much attention Sunday afternoon, revealed a continuous line of a half-dozen or more children who waited to play Sega's Sonic the Hedgehog 2.

No matter who wins this year, retailers--including Wal-Mart Inc. and K mart Corp., the nation's two largest--are counting on video games to prime their share of what appears to be a robust rebound in holiday spending.

A rebound may especially bless the $10 billion toy industry, which didn't fare badly even during the recession's nadir. And Sega and Nintendo hardware, including a Nintendo-associated cartridge named Street Fighter 2 (in which players may set their enemies on fire) Were the industry's top five toy items last month, based on dollar volume, according to Playthings magazine.

"Not only are they the hottest thing: It's another way we'll get people into the stores to buy other toys," says Kay-Bee's Alfonsi. Video game sales at the 1,300-store chain are up 20 to 30 percent over last year.

Sega and Nintendo's success with 16-bit systems, however, has been a task at which even the dutiful Mario might cringe. The companies sold a combined 3.7 million systems last year, and both companies claimed to own nearly two-thirds of the 16-bit market.

But Nintendo was clearly disappointed with Super Nintendo's early results, based on its prior success. Of the 8-bit systems it has sold in the United States, 9 million traded in a single year--1989. And Nintendo had never cut prices to build market share of its older, 8-bit system. But Nintendo slashed Super Nintendo prices, just four months after introducing its machine-and Sega, which had once sold Genesis for as much as $179.95., followed suit.

In a story replayed many times in the history of electronics retailing, a fierce price war between two arch-rivals on competing hardware systems is an attempt to dominate a new technology format--and, therefore, to dominate software, the real moneymaker. In this case, that software is game cartridges like Sega's Sonic 2, which sell for $55 piece.

"The more hardware, you get out there more quickly, the more software you can sell," says Kay-Bee's Alfonsi. And giants have learned the hard way, such as Sony, which saw its Beta videocassette recorders crumble into oblivion in the mid-1980s under the force of VHS equipment produced by other electronics companies.

Right now both Super Nintendo and Genesis retail for $99 without game cartridges-and Toys 'R' Us, the nation's biggest toy retailer (which wouldn't comment for this article), through tomorrow is offering Genesis with a Sonic cartridge for $129.99. Toys 'R' Us is also engaging a coupon price war for $7 off the price of certain 16-bit cartridges.

If Nintendo lost momentum last Christmas, "we sure as hell have regained it," says Perrin Kaplan, a Nintendo spokeswoman. Nintendo has introduced its $60 Mario Paint and Mouse, a self-described "edutainment" game that uses an Apple MacIntosh-like mouse to create fingertip-control color animation, which can later be stored on videotape. The company plans to introduce a new line of software built around the mouse control.

But by and large, the agenda in video this Christmas appears again to have been set by Sega, due to the interest generated by its new CD system, which is crammed with $400 worth of software that includes an audio CD sampler of hit songs.

"Sega wins by default," says Rubenstein. Ron Staffieri, Kay-Bee's chief executive, says the chain sold out of its initial shipment of the machines within a week. The CD game can incorporate live-action footage, some of it produced by Sega's own studio (the company also has a licensing agreement with Sony Entertainment that will incorporate footage of the Francis Ford Coppola-directed "Dracula," among other productions, into future software).

"This is the future," says Tom Kalinske, chief executive of Sega of America. "Movies shot with two alternative plot lines and three endings," with the excess footage aimed at the video game aftermarket.

But Nintendo, as ever, says it will have the last word next August, when it introduces what it promises will be a twice-as-fast, twice-as-brilliant 32-bit D-ROM player, jointly developed with Sony Corp. of Japan

"We'll open no wine before its time," says Kaplan, paraphrasing Orson Welles in the old commercial.