Sometime in 2003, Sony EyeToy, a unique video gaming concept used with the PlayStation 2 console, was launched. Less than a year later, this revolutionary technology was a huge success in Europe. Sales skyrocketed and went beyond what was expected. However, a second product under the EyeToy concept proved to be a disappointment insofar as sales are concerned. This case study looks into whether EyeToy was merely a fad. How can Sony retain its momentum in sales?
Anita Elberse; Youngme Moon
Harvard Business Review (505024-PDF-ENG)
July 28, 2004
Case questions answered:
- Is EyeToy an important product for Sony? What role does EyeToy play within Sony Computer Entertainment Europe’s SCEE strategic objectives?
- What are the reasons for EyeToy Play’s phenomenal success – and Groove’s failure to emulate Play’s performance?
- If you were Phil Harrison, would you continue to invest in the development and marketing of EyeToy software? If so, how much? Why?
- What EyeToy software should Sony focus on in the coming years? Which of the concepts in the pipeline is the most attractive? What is the ideal EyeToy development pipeline? Why?
- What is the appropriate marketing strategy for EyeToy products? How should Sony advertise, price, and bundle its new products? Why?
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Sony EyeToy Case Answers
Sony Computer Entertainment Business Consulting Report
Sony Computer Entertainment was one of the largest companies in the entertainment industry. Sony Computer Entertainment Europe (SCEE) launching of the EyeToy play was experiencing tremendous success in sales. SCEE Decided to continue the development of this product and the EyeToy Groove came in the market but showed negative results generating difficult decision-making situations for SCEE. The criteria analyzed to come up with a recommendation includes pipeline for the EyeToy, advertising, pricing, and resource allocations.
After the analysis of the strengths and weaknesses of the product, the reasons for the failure of the EyePlay Groove were clear. SCEE entered a user’s market that does not represent its majority of buyers and introduced a product that users were getting bored of very quickly. Suggestions about areas that SCEE can focus to improve growth and profitability include improving the speed of software development and increase the popularity of PS2 to regain market share, add value to console with longevity and portability.
- Market video-game consoles comprised of Software (developing video games and programs that user can run on a video game console) and Hardware (Creating accessories and gadgets with the purpose of improving the gaming experience). The video game industry represents a $30 billion-a-year market.
- Competition Microsoft and Nintendo have escalated quickly gaining market share the last few years forcing Sony to produce better quality game consoles and innovative games for its users.
- Customer Users age falls mainly between late teens to mid-twenties. The EyeToy targeted a broader clientele including young children and adults. This new group of users does not consider gaming the main activity in their daily basis resulting in not buying Play Station products and not meeting sales expectations of the EyeToy Groove. On the other hand, core customers might not feel attracted to the EyeToy since its games did not represent a challenge and were meant for hard-core gaming.
- Sales 2.5 million units of the EyeToy Play were shipped to be sold by retailers, it was a total success for Sony because it sold 10 times more units than originally planned. After launching the EyeToy Groove, the product showed disappointing numbers by selling only 100,000 units in Europe. After not meeting sales expectations SCEE reconsidered launching the product in Japan and the U.S. The reason for the low sells of the EyeToy Groove is explained by its cost of purchase and the unattractive games offered. The lack of interest for this product represented a threat to the company’s profitability and the product does not show positive signs of future sales growth.
- Promotion Sampling-driven marketing campaign that demanded a high amount of resources. SCEE spent $5 million in the marketing campaign for EyeToy Play, which was a large amount of money invested by the company considering other cost incurred in the product such as research and development, and manufacturing expenses. The marketing campaign included, but was not limited to, press events, EyeToy Demos, TV advertisement, online marketing, and merchandise giveaways. Promotion of the product took place in shopping centers, bars, restaurants, music festivals, and beaches.
- Place The main markets were Europe, Japan, and the United States. Sony sells its manufactured products to retailers that ultimately sell to the consumer. SCEE launches products in Europe before expanding global, which could be unbeneficial because the EyeToy Groove could have been better appreciated in other markets given to cultural differences. For instance, U.S.A families normally enjoy playing group games and value activities that bring groups together as could have been the case with EyeToy Groove.
- Price PS2 consoled was introduced at €480/unit but had to lower the price to €199 in 2003 to remain competitive against Nintendo’s low pricing strategies. The EyeToy Play was available to the public for €60 and the EyeToy Groove had a cost of €40. Pricing for consoles is not customer sensitive, but the price of accessories is an important point of consideration. To get the EyeToy Groove a previous purchase of the PS2 and the camera has to be made adding up to a rejected sum of money by the users. This might have been the turn down point for the EyeToy Groove.
- Product The EyeToy is the latest technology added to the video game experience offer by SCEE but it does not represent an essential item in the product line. Its launched show the potential of a new niche for the non-gamers market but SCEE strategic objectives are focused on hardcore gaming.
The objective of Sony with the EyeToy is to improve the gaming experience of PS2 users and strengthen the position of the brand in the gaming industry but despite EyeToy success, the product does not represent a major source of income for SCEE which gives them the flexibility to decide whether to continue or cut its production.
Innovation was the key component for the successful introduction of the new technology EyeToy and its simplicity caught the attention of a broader consumer market than the one normally targeted by SCEE. Unfortunately for EyeToy Groove, budgets for marketing were limited and developing new games could take up to 3 years, which is a very long time considering that users demand new games very quickly. Also, The EyeToy currently did not offer complex or exciting movement games making it not as attractive for most of PS2 hard-core gamers who far outnumber non-hardcore gamers.
The video game industry remains to show strong signs of growth and opportunities. Finding a niche in the non-gamers market could sound tempting but NCEE is better off focusing on its current market, this is because its direct competitors have been gaining market share the last couple of years and NCEE could fight to earn that lost market back now that the software industry has been steadily increasing.
Recommendations of alternatives for EyeToy
After the analysis above, it is recommended that the resources implemented on EyeToy will be better used on other projects to improves PS2 experience. Considering the decline in units sold the last couple of years, to try to regain popularity for PS2 in the global markets is a priority. Also, to focus on software development is a great strategy to follow given that it has been a very lucrative business for SCEE. It is recommended to withdraw and put EyeToy on standby from the market and focus on some of the following alternatives,
- Working on speeding up game development to supply the demand for new games; a problem with EyeToy was users getting bored with the games offered
- Pushing to enhance performance on video games to obtain higher graphics quality and resolution, reduce errors of codes, in an attempt to catch players to play for longer periods of time.
- Add value by making long-lasting consoles with a better design and easy to transport.
- Balancing video games that are all platform compatible and trendy PS2 only games to increase the popularity of the Play Station. The EyeToy could be adapted to operate all platforms and as an attempt to get sell off leftover inventories.
- Conduct research on future trends to create games that will have more interest from the users. For example, create games related to highly expected sports events, movies, or characters.