Xbox360 likely to stay scarce into spring

[Nato King]

Two months after its introduction, Microsoft's Xbox 360 is still an elusive prey for shoppers in the USA and might well remain so until spring.
USA TODAY
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The Xbox 360 is the first of three new video game systems due in the space of a year and has been hailed as an advance in home entertainment and online gaming. But the software giant's inability to make enough of the systems to satisfy demand could hurt it in the battle for supremacy with Sony. Sony's PlayStation 3 could arrive as soon as spring.

Microsoft "needs to get the supply-and-demand situation nailed real soon," says John Davison, editorial director for Ziff Davis Media's video game industry magazines. "If it drags out much longer, it's just going to promote apathy rather than excitement."

In the short term, prospects don't look good. Microsoft initially hoped to have shipped as many as 3 million systems by the end of February. But by the end of the year, Microsoft had shipped only about 1 million worldwide (about 800,000 to the USA and 100,000 each to Europe and Japan), according to estimates from analyst Michael Pachter with investment firm Wedbush Morgan Securities.

The NPD Group estimates that Microsoft sold 600,000 systems from Nov. 22 to Dec. 31. In comparison, it sold 1.4 million of the original Xbox systems in the first two months of 2001. "That was a new brand, and certainly now that it's established with a very loyal following and given the amount of hype and buzz they created, that is one barometer of what possibly could have been," says NPD analyst Anita Frazier.

Circuit City, like many other retailers, has held off promoting the 360 in advertisements.

"We think supplies are going to remain pretty tight for the next 90 days," the chain's Jim Babb says.

At this month's Consumer Electronics Show in Las Vegas, Microsoft's Peter Moore said the start-up of a third manufacturing plant would help increase supply.

"We are making them as fast as we possibly can, and we do expect over the next three to four months that availability will get a lot better," Microsoft chairman Bill Gates said. "The challenge we had - and we're not the first to have this - is the demand far exceeded supply."

Microsoft should offer more of an explanation for the shortage, says Richard Doherty, research director of the Envisioneering Group. He surmises that the company might not be getting enough quality 360 units off the production line, or perhaps it is delaying to produce more units with an HD DVD drive, which Gates announced at the show.

Damage to Microsoft and 360 is growing every week with no clear explanation," he says. "The silence is unfair to consumers and fans alike."

[CarGuy]

I'm pretty apathetic already. Lucky for microsoft I already bought a couple games and accessories. Bastards.

[Double_Diablo]

Wow. I didn't think it was that bad considering I saw about 10 unsold premium units at my local EB Games last Saturday.

[swivel]

It's hard to see any good in this situation. What is really important now, is to make sure that some top-notch games come out before the PS3. There is a huge chance now that the large number of PS2 owners will wait the remaining time to stick with Sony and buy the PS3. A few great games could sway them over to the XBox side.

Anyway, it isn't like Sony is going to be immune to this problem. These chips are much more complex, and yields are not going to be the same, percentage wise, that the older chips were. Especially the experimental Cell proc. So Sony is going to have a supply-side problem as well.

The irony is that when the PS3 is "released" will probably be when you can actually go to a store and buy an XBox 2. This could be really cool to watch, and great for Microsoft. A gamer gets fired up for a PS3 and goes to their nearby store. Sorry, all sold out, even pre-orders are waiting on units. However, we do have a few XBox 2's in, and there are more games out for it, and MS just dropped the price $100, and the latest and greatest game just came out, and they are both getting all the same games from EA and other companies anyway....

The PS3 launch will probably sell tons of XBox 2's. Meanwhile, the XBox 2 launch isn't helping any competitors at all. That might be the new, true advantage to launching first, in this new age of worldwide releases and low yields.

[Nato King]

It's hard to see any good in this situation. What is really important now, is to make sure that some top-notch games come out before the PS3. There is a huge chance now that the large number of PS2 owners will wait the remaining time to stick with Sony and buy the PS3. A few great games could sway them over to the XBox side.

Anyway, it isn't like Sony is going to be immune to this problem. These chips are much more complex, and yields are not going to be the same, percentage wise, that the older chips were. Especially the experimental Cell proc. So Sony is going to have a supply-side problem as well.

The irony is that when the PS3 is "released" will probably be when you can actually go to a store and buy an XBox 2. This could be really cool to watch, and great for Microsoft. A gamer gets fired up for a PS3 and goes to their nearby store. Sorry, all sold out, even pre-orders are waiting on units. However, we do have a few XBox 2's in, and there are more games out for it, and MS just dropped the price $100, and the latest and greatest game just came out, and they are both getting all the same games from EA and other companies anyway....

The PS3 launch will probably sell tons of XBox 2's. Meanwhile, the XBox 2 launch isn't helping any competitors at all. That might be the new, true advantage to launching first, in this new age of worldwide releases and low yields.

Very nice post swivel I read all of it in one breath it was that good.

[swivel]

Very nice post swivel I read all of it in one breath it was that good.

*blushing*

Thanks. It's weird to have concrete evidence that anyone reads my drivel. Much less that I am not on everyone's Ignore List already!

[Crazy Joe]

It's hard to see any good in this situation. What is really important now, is to make sure that some top-notch games come out before the PS3. There is a huge chance now that the large number of PS2 owners will wait the remaining time to stick with Sony and buy the PS3. A few great games could sway them over to the XBox side.

Anyway, it isn't like Sony is going to be immune to this problem. These chips are much more complex, and yields are not going to be the same, percentage wise, that the older chips were. Especially the experimental Cell proc. So Sony is going to have a supply-side problem as well.

The irony is that when the PS3 is "released" will probably be when you can actually go to a store and buy an XBox 2. This could be really cool to watch, and great for Microsoft. A gamer gets fired up for a PS3 and goes to their nearby store. Sorry, all sold out, even pre-orders are waiting on units. However, we do have a few XBox 2's in, and there are more games out for it, and MS just dropped the price $100, and the latest and greatest game just came out, and they are both getting all the same games from EA and other companies anyway....

The PS3 launch will probably sell tons of XBox 2's. Meanwhile, the XBox 2 launch isn't helping any competitors at all. That might be the new, true advantage to launching first, in this new age of worldwide releases and low yields.

Here's the thing though, since Sony doesn't have a concrete release date and they have seen what happened to MS, they may delay their launch a month or two and give themselves time to manufacture more consoles. Also, I can't see there being a price drop on 360's in time for PS3 launch. Obviously there will be a slight shortage, but I don't think it will be even close to the magnitude of the 360's problems.

[thatdude222]

i dont care, cause i got my 360.

[swivel]

Here's the thing though, since Sony doesn't have a concrete release date and they have seen what happened to MS, they may delay their launch a month or two and give themselves time to manufacture more consoles. Also, I can't see there being a price drop on 360's in time for PS3 launch. Obviously there will be a slight shortage, but I don't think it will be even close to the magnitude of the 360's problems.

Maybe not. And another thing I failed to think about is the fact that Sony seems to be wanting to space the launch out more. I think global launches are a bad idea for these complex systems. You would have to stockpile and delay a launch for many months to get a good release.

I'm not sure if Sony will be able to delay the launch here very much. Right now they are looking at a November launch here. Delaying past Christmas would be suicide. Anyone that doesn't already own an XBox 2 by then will surely get one. And right after Thanksgiving would be a great time for MS to lower the price. They have already hinted at a price drop annualy, and that would be the right time.

Good points. Speculation is fun, and time will tell.

[pitt4ever]

On an off-topic note, did you know that you can rename your hard drive on the main menu? I named mine Awesome-O!

[l Maximus l]

One thing is for sure, I fear no beer.

Errr...I mean, I am not worried about the future of the XBox 360. I mean, it's made by Micrososoft...

[Tim]

Maybe not. And another thing I failed to think about is the fact that Sony seems to be wanting to space the launch out more. I think global launches are a bad idea for these complex systems. You would have to stockpile and delay a launch for many months to get a good release.

I'm not sure if Sony will be able to delay the launch here very much. Right now they are looking at a November launch here. Delaying past Christmas would be suicide. Anyone that doesn't already own an XBox 2 by then will surely get one. And right after Thanksgiving would be a great time for MS to lower the price. They have already hinted at a price drop annualy, and that would be the right time.

Good points. Speculation is fun, and time will tell.

I have to say I enjoyed reading your analysis. And, agree with it. However, I think MS's global launch had more to do it's Live product. Xbox Live is going to be the Xbox's biggest advantage over the Sony and Nintendo products. Getting consumers hooked on Live getting great press about Live before the other consoles reached market was probably the smartest think MS has done .

[swivel]

I have to say I enjoyed reading your analysis. And, agree with it. However, I think MS's global launch had more to do it's Live product. Xbox Live is going to be the Xbox's biggest advantage over the Sony and Nintendo products. Getting consumers hooked on Live getting great press about Live before the other consoles reached market was probably the smartest think MS has done .

I agree with you. However, this was Microsoft's advantage with the last generation as well. Nintendo and Sony seem lost when it comes to the internet's uses. (though both are now doing interesting things with their portable systems) Microsoft nailed multiplay with the first XBox, and greatly expanded that with the next generation. So I don't think it was a big surprise or shock for them to maintain their lead here. Especially since we haven't seen what the competition has planned (if anything).

I'm not sure, though, that the global launch is getting a lot of new people online the way MS wanted. They are two million units short of what was already a conservative number of release units. So you have to assume that the people who paid a premium to get an XBox 2, either through increased costs or through time and energy required, are not the audience that Microsoft wanted to snatch. They want the PS2 owners who never gave the XBox a shot. They want the huge Japanese market that looks down on the XBox. So far, these are exactly the two groups that are not being reached.

The people that own XBox 2's are probably 99% XBox owners. They were going to buy the XBox 2 no matter what the various systems could do, or when they came out. There was too big an investment on already-owned software. Too much loyalty to a brand. If XBox owners buy XBox 2's, and PS2 owners buy PS3's, then MS will get trounced in the next generation as well. Perhaps again with superior hardware and online capabilities.

This is something that the analysis never bears out. People wrongly assume that the best product and the best price will create market dominance. It doesn't work that way, unfortunately. Entrenchment is too strong for many superior products to compete. In order to buck that trend, the new product has to be overwhelmingly superior. Right now, the XBox 2 is overwhelmingly superior than any other gaming console in the universe. But, since you can't readily get one, in any number, that point is... not so much moot... as delayed.

Come spring, and after E3, consumers are going to have to make a choice. Stick with what they know, or move to a better product. If the XBox 2 is only slightly better than the PS3, Microsoft loses. I think this will be the case. I think the PS3 is going to sell much better than the XBox 2, even though the online capabilities will be horrible, the unit will cost $50 more, and the launch games will be mediocre. It will still outsell the XBox 2.

The fanboys will be upset on one side, and joyous on the other. But we shouldn't be keeping score. The bean counters and CEO's are the only guys who should care about units sold. What matters for the us is that there will be enough of both systems sold for the software developers to continue making games for both.

[Whisper]

didn't think this shortage was going to end up true

what a massive failure by microsoft.. i have feeling we will be playing 3rd fiddle to Nintendo sometime soon

[swivel]

didn't think this shortage was going to end up true

what a massive failure by microsoft.. i have feeling we will be playing 3rd fiddle to Nintendo sometime soon

The tragedy is that there is this huge demand out there for the systems. You know Gates is just going nuts thinking about how many consoles they could be selling right now... but just can't get them to the shelves.

In 6 months there will be consoles sitting on the shelves, and less demand. And that stinks if you are pulling for the XBox.

Before this release, I was looking at all of the pro/con lists people were generating for the three companies. All of the predictions about what this next generation would bring. And I kept thinking that the only surety, the only known advantage we could 100% count on was the big jump MS was going to get on the competition.

There is still a good chance for that. The PS3 and Revolution are 9 months from release date here in the states (according to current speculation). I think where this hurts the most is in Japan, where there is only 4 months or so of a gap now. And the Nintendo DS is the console of choice over there right now, anyway. And the new DS design is coming out soon, which will tide them over.

Perhaps when the new factory gets online, all of this will just go away. I would love to see 5 million units ship in the US before Thanksgiving.

[Whisper]

they've already lost a lot of people who are now content on waiting until the ps3... microsoft has taken the biggest advantage they had ... getting out first, and ****ed it all up... sony knows this, so they can take more time now, perfect their system, and blow microsoft out of the water