FromHell440
02-28-2008, 12:07 PM
Interview on the Xbox 360 shortages.
Next-Gen speaks with Microsoft Xbox spokesman David Dennis to get the backstory on the Xbox 360's supply issues.
Microsoft was by no means surprised that PlayStation 3 outsold Xbox 360 in January. The firm began reaching out to mainstream and gaming media outlets (including Next-Gen) earlier this week to explain why Xbox 360 had such a down month.
But the fact that PS3 did outsell Xbox 360, even in light of hardware shortages, shouldn’t be downplayed. Aside from the psychological effect that this news could have on industry watchers, the fact that PS3 outsold Xbox 360 for the first time could mark the beginning of a brand new year where Sony finally turns over a new leaf, and begins turning the PS3 into a truly formidable player.
Microsoft isn’t ready to relinquish its market share, however…
Next-Gen: Did the shortages actually start in December, or did Microsoft just start seeing them in January?
Dennis: We saw the sales outpacing our forecasts as far back as November. But because we had inventory built up in advance of the holiday, it really didn’t become a shortage issue until the latter half of December. The sales continued to be robust through January, so it just continued to worsen.
At the same time, we had already re-dialed up the manufacturing and we’re doing everything we can to get the channel refilled with supply, but it’s not something you do overnight. It’s a very complicated manufacturing process when you’re dealing with overseas.
So Microsoft is actually increasing the manufacturing. It’s not just a matter of reallocating hardware from one region to another.
That’s correct.
What’s the manufacturing rate?
I don’t know it, to be honest. And I don’t believe that it’s something that we’d disclose if I did know it. … It’s just not a number that we’re putting out at this point.
Why couldn’t Microsoft see this coming? You had Halo 3 coming out along with one of the best software lineups coming out during a holiday period. Those are obvious hardware drivers.
We certainly did build up supply in anticipation of [the holidays]. We said back at E3 that we were going to have the strongest holiday ever. We certainly weren’t asleep at the switch. But the demand was simply greater than expected, and the supply just didn’t keep up.
Now, Xbox 360s aren’t totally out of stock, because the Arcade bundles are still available. But not as many people are buying them. What does that say about the Arcade bundle?
Certainly, the Arcade bundle is a great value and it appeals to a certain type of customer. But we know that the Elites are a very high-demand unit, and so is the Pro. Those are clearly the first ones to be sold. But the Arcades are still selling well. You’re correct—they are still the ones that you can typically find in stock if you’re looking for one, but the Elites and Pros are just higher priced products, and higher-demanded products at this time.
When will Microsoft have the supply issue resolved?
We expect this to continue through February.
So you’re thinking in March demand could be met?
We expect it to sort of equalize about then, yes.
Do you think Xbox 360 will go back to topping the PS3 on a monthly basis starting in February or March?
I hate to predict, but I certainly believe that once we get the supply out there, with the demand continuing, that we’d certainly hope for the 360 to get back into its pre-holiday rhythm. We’ve got a lot of marketing muscle behind products like Grand Theft Auto IV, and we certainly plan to have consoles on shelves available when that game launches, so that there are no supply issues by that point in time.
We believe that the value-add of having additional premium content for Grand Theft Auto on our box will certainly be a sales driver for the console. … Once we get units out there, we’re confident the momentum will continue.
There are some people speculating that this is some kind of artificially-created shortage. What do you have to say in response to those kind of accusations?
It’s absolutely not accurate. We’re doing everything we can to replenish supply. It’s simply a case of the demand outpacing our forecasts.
Next-Gen speaks with Microsoft Xbox spokesman David Dennis to get the backstory on the Xbox 360's supply issues.
Microsoft was by no means surprised that PlayStation 3 outsold Xbox 360 in January. The firm began reaching out to mainstream and gaming media outlets (including Next-Gen) earlier this week to explain why Xbox 360 had such a down month.
But the fact that PS3 did outsell Xbox 360, even in light of hardware shortages, shouldn’t be downplayed. Aside from the psychological effect that this news could have on industry watchers, the fact that PS3 outsold Xbox 360 for the first time could mark the beginning of a brand new year where Sony finally turns over a new leaf, and begins turning the PS3 into a truly formidable player.
Microsoft isn’t ready to relinquish its market share, however…
Next-Gen: Did the shortages actually start in December, or did Microsoft just start seeing them in January?
Dennis: We saw the sales outpacing our forecasts as far back as November. But because we had inventory built up in advance of the holiday, it really didn’t become a shortage issue until the latter half of December. The sales continued to be robust through January, so it just continued to worsen.
At the same time, we had already re-dialed up the manufacturing and we’re doing everything we can to get the channel refilled with supply, but it’s not something you do overnight. It’s a very complicated manufacturing process when you’re dealing with overseas.
So Microsoft is actually increasing the manufacturing. It’s not just a matter of reallocating hardware from one region to another.
That’s correct.
What’s the manufacturing rate?
I don’t know it, to be honest. And I don’t believe that it’s something that we’d disclose if I did know it. … It’s just not a number that we’re putting out at this point.
Why couldn’t Microsoft see this coming? You had Halo 3 coming out along with one of the best software lineups coming out during a holiday period. Those are obvious hardware drivers.
We certainly did build up supply in anticipation of [the holidays]. We said back at E3 that we were going to have the strongest holiday ever. We certainly weren’t asleep at the switch. But the demand was simply greater than expected, and the supply just didn’t keep up.
Now, Xbox 360s aren’t totally out of stock, because the Arcade bundles are still available. But not as many people are buying them. What does that say about the Arcade bundle?
Certainly, the Arcade bundle is a great value and it appeals to a certain type of customer. But we know that the Elites are a very high-demand unit, and so is the Pro. Those are clearly the first ones to be sold. But the Arcades are still selling well. You’re correct—they are still the ones that you can typically find in stock if you’re looking for one, but the Elites and Pros are just higher priced products, and higher-demanded products at this time.
When will Microsoft have the supply issue resolved?
We expect this to continue through February.
So you’re thinking in March demand could be met?
We expect it to sort of equalize about then, yes.
Do you think Xbox 360 will go back to topping the PS3 on a monthly basis starting in February or March?
I hate to predict, but I certainly believe that once we get the supply out there, with the demand continuing, that we’d certainly hope for the 360 to get back into its pre-holiday rhythm. We’ve got a lot of marketing muscle behind products like Grand Theft Auto IV, and we certainly plan to have consoles on shelves available when that game launches, so that there are no supply issues by that point in time.
We believe that the value-add of having additional premium content for Grand Theft Auto on our box will certainly be a sales driver for the console. … Once we get units out there, we’re confident the momentum will continue.
There are some people speculating that this is some kind of artificially-created shortage. What do you have to say in response to those kind of accusations?
It’s absolutely not accurate. We’re doing everything we can to replenish supply. It’s simply a case of the demand outpacing our forecasts.