Jianxiong Guo Ashley Hegland Matthew Joffre Preetham Pillarisetty

1. Jianxiong Guo Ashley Hegland Matthew Joffre Preetham Pillarisetty September 28, 2005

2. Background • Sony Computer Entertainment Inc. • Playstation 2 • Video Game Industry: Hardware Vs. Software • EyeToy History To-Date

3. Problem Statement Central Problem What is the optimal marketing strategy that Sony Computer Entertainment Europe (SCEE) should pursue to enhance the competitiveness of the Sony PlayStation and grow the Sony brand? Symptoms • Inadequate initial marketing strategy for the Sony EyeToy • Lack of brand synergy between the Sony Eye Toy and the Sony PlayStation • Groove sales cause concern that product may be a fad and that Sony will not be able to sustain the initial success of the technology • Uncertain adoption by the complementary network of 3rd party game developers

4. Situational Analysis Internal Analysis Product Price Promotion Place • Experience marketing to hard-core gamers • Sony & PlayStations brand & $$ • Can be sold profitably at a price consistent with other gaming offerings • First to market • Expertise in technical development Strengths • Internal funding methodology designed for software • Reliant on success of PlayStation console • Margin constraints on bundling camera with software • Weak groove sales hurt future efforts with retailers • Product needs to be seen / tried / buzzed • Target customer not well defined • No experience positioning to broader market Weaknesses External Analysis Social Technological Political Economic • Potential to leverage resources and know-how from other Sony divisions • Camera technologies are rapidly improving • May appeal to broader market than other offerings • Royalties from 3rd party developers Opportunities • Technology will likely be imitated by competitors if successful • 3rd party developers not 100% sold on development Threats

5. Situational Analysis Cont. Internal Analysis A Competitive But Profitable Market: Power of buyers - High Power of suppliers - Low Barriers to entry - High Threat of Substitutes – High Rivalry Among Competitors - High

6. Strategic Orientation Modes Product Ecosystem Perspective 1. User Network – gamers 2. Complementary Network – 3rd party 3. Producer Network - Sony

7. Alternative 1 Cost-leadership mass market penetration strategy, using pipeline products. Strengths Weaknesses • Heavy costs of product-line-developments • Risks, lack of experience of marketing to the mass market • Substitute new technology emerging • Jeopardize Sony brand • Protect EyeToy technology in a most effectively way • Extend product life cycle • Extend technology platform

8. Alternative 2 Abandon all Sony Pipeline offerings except EyeToy Play 2 and focus on mass market with third party software. Strengths Weaknesses • Over time may lead to less competent game designing team and game market sensitivity. • Could decrease synergy between between EyeToy and PlayStation in the mid to long term. • Greater mass market appeal in the short-run • Could create more solid complementary network

9. Alternative 3 Initially focus on integrated high-profile game leadership & alliance strategies in the hard core gamer segment and use selected publishers, such as “Electronic Arts”, to market to both the mass market and hard core gamers. Strengths Weaknesses • Does not have the potential that alternative 1 does to enhance the life cycle of the technology • Less mass market penetration potential than alternative 2 • Targets most sophisticated players and biggest spenders first. • Pricing and bundling issues can be resolved in partnership with 3rd party developers. • Leverages core competence in R&D

10. Alternative Analysis

11. Recommendation Alternative 3: Focus on integrated high-profile game leadership & alliance strategies in the hard-core gamer segment and use selected publishers, such as “Electronic Arts”, to market to both the mass market and hard core gamers

12. Implementation • Re-design marketing strategy to initially target the hard core gamer market (mass market to broad and costly to target now) • Larger than average budget must be allotted to initial campaign (manage the internal funding issue) • When hard core-focused games are in the pipeline, invest the majority of allocated marketing budget toward marketing communications in gaming magazines, high-profile sports events, gaming conferences, internet marketing, and television commercials • Year1: Essentially a massive one-time effort to create the critical mass required to tip the demand for the EyeToy. • Year 2+: Spending on communications and promotions can be reduced significantly: • Natural word-of-mouth among customers initiates (buzz) and; • 3rd party games developers advertising and joint advertising.