Emotiv Systems, Inc.
Emotive Systems is at a crucial crossroads in the development and sale of their product. They need to find the best way to get to the market quickly but also get the device on enough user’s heads to grab a foothold in any industry they choose. There are many different paths the company could take and lots of things to consider before choosing one. Do and Le must consider which device/s they want to target, how best to distribute the product, the pricing structure (and any future discounts or rebates), their competition, their strategy, and the future of the company. Game Consoles
One option for EPOC is to enter the video game console market. With estimated worldwide sales to reach 40 billion globally in 2007, there is huge potential in this category. However at first glance none of the three big name consoles are ready to partner with EPOC. The Wii consoles shouldn’t be pursued for the obvious reason that the platform doesn’t have the performance that is necessary to support the Emotiv software. Xbox, on the other hand, would be a great platform for the headset unfortunately Microsoft is taking a conservative approach to new technology. Microsoft does see the system as “very interesting” but will wait to see it succeed before adopting it. The third console, PS3, suffers from internal hesitation (chicken before the egg scenario), however the European Sony could be a great place to kick off our product. The company could begin to sell an EPOC Lite in Europe to get the product in the hands of consumers. This would accomplish a few things. First the company would develop a game package for a relatively low cost (2.5 million euro compared to a normal games cost of up to $20 million) that could be later sold with the headset to increase the “out of box experience”. This move would also be a foot in the door with Sony which might later lead to sales in the US (once Sony sees the market for it) With the sales numbers from the Eye Toy as a reference we can get an idea of the possible market for EPOC Lite. To estimate lets say we can sell a similar number of EPOC Lite at a discounted rate of $99 and a discounted cost of $60 (about half). This could produce $198,000,000 in revenues. Then subtract the 5% for royalties to the console company, we could be looking at up to $188,100,000 in revenues and $68,000,000 in profits (assuming we only sell direct). This could potentially cover our costs for the year as well as any development cost for the specific system. We still must consider the ramifications of “dumbing down” the system, however. Considering the simplicity of the Washi Washi games that seem to be readily adopted for their novelty, I believe it is safe to assume the EPOC Lite could conjure the same interest. The last option would be to launch the system with out partnering with any of the consoles. This would be too capital intensive for the company at this time and would not provide the reach to the customer that would be needed to gain a foothold in the industry. If motive is to enter the game console market the best bet seems to be a gradual introduction starting with Sony Europe and then hopefully gaining some momentum in the US market and with the other console makers. Looking at the demand for the PS3 around the world and in the US the market share is growing. This is another great reason to start with Sony. From April to September 2007 Sony’s worldwide market share grew from 2.8m (15.6%) to 4.9m (16.9%) and there was similar growth in the US market. If we take Sony’s retail price and divide into these numbers we have a demand for about 2137 unit in the US and 4675 worldwide. The charts below gives a similar calculation for all of the consoles (the most conservative numbers were used. i.e. the lesser market share and the higher console price. Using these numbers and the retail price of the EPOC discussed later we can see there is significant demand with Sony to cover our costs and will only...
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