360 Shortage Rumours Marketing Ploy?

Joystiq wonders out loud if the shortage rumours going around about the Xbox 360 may not just be a marketing ploy on Microsoft's part. From the article: "The bottom line: in all likelihood, you'll be able to walk into just about any store on November 22nd and obtain an Xbox 360. But all it takes is a little, good, old-fashioned FUD (Fear, Uncertainty and Doubt) to drive sales through the roof and make this rumor a self-fulfilling prophecy." If this is in fact a ploy, it may be backfiring on them. Gamasutra is reporting that an analyst is downgrading his opinion of how the launch will go based on these hardware shortage rumours.

Comments

Ha.y

[\\]

"An analyst downgrading his expectations"? Are you fucking kidding me? So when they blow the fucking roof off the even lower expectations they can be ZOMG even MORE bullshit amazing than they will already surely be?

This is like MS having elevnty million consecutive quarters beating earnings expectations because they had them lowerered just to beat them every time.

Bullshit.

Re:Ha.y

[badasscat]

This is like MS having elevnty million consecutive quarters beating earnings expectations because they had them lowerered just to beat them every time.

Not sure you really understand how this works. MS can say whatever they want; they can say they expect to sell one single unit and then afterwards claim they beat expectations by 1.5 million percent. But analysts don't base their expectations on what manufacturers say. They never have and they never will.

Analysts do their own research. They literally will do things like call up the factories involved in producing the various parts required and asking them how many units they can produce in a month. If necessary, they'll visit said factories to look at the assembly lines themselves. Sub-contractors are usually public corporations themselves so they have to publish stuff like manufacturing capacities, and it's not hard for an analyst to independently verify these numbers. (And they do require verification; the fact that a factory turned out 15 million doorstops last year does not mean it will also be able to turn out 1.5 million Xbox 360 outer casings by the end of November.)

They'll do this for everything; packaging, materials, assembly infrastructure, delivery logistics.

That's on the supply side.

To determine demand, they'll also survey stores to get a sense of the number of preorders in various regions, and with a large enough sample size they can extrapolate that nationally. They'll do their own cold-calling too, random phone or other surveys of end-users, and/or more targeted focus groups and surveys geared just to people of a certain age or who identify themselves as gamers.

There are also laws that govern how these analysts can function; they can be accused of orchestrating or participating in pump and dump schemes just like the companies themselves.

The point being, if an analyst downgrades something like this, it's because he/they knows something we don't and that maybe even MS doesn't want us to know. It's not something that can be orchestrated by MS. In this case, there are probably a few weak links in the supply chain - it doesn't sound like it's the demand that's being downgraded, just the supply. And he even says it's probably not going to affect MS at all in the long run.

I'm not convinced that you won't be able to walk into a store and buy an Xbox 360 at or soon after launch, though, but day one and immediately afterwards, you will probably have to hunt. They're not going to have 3 million systems out there if analysts believe they'll only have half that.

Re:Ha.y

[SamBeckett]

You sir, are SEVERELY wrong. While I applaud the thought process, you left off one key bit... Who exactly is employing this analyst? Who exactly would even benefit from the knoweldge this analyst gains? I have three words for you:

My Crow Soft.

Simple fact is that anyone else who would/could benefit from this news:

1) Is either Microsoft, Sony or Nintendo. In either case, the responsible party has a vested interested in turning out biased news.

2) Is a small-time 'stakeholder' and would not get a big enough return for the cost of doing this so-called analysis.

The more likely scenario is an asshat pulling numbers out of thin air or an astroturf attempt by Microsoft. I don't--this is slashdot and I don't read the articles.

Re:Ha.y

[Dachannien]

TFA says that the analyst works for UBS Securities. He's a stock analyst, same as any other, who produces analysis that his employer sells as a product. The point is that the analysis is used by investors to help them decide where to put their money.

In this case, the analysis is probably really good news for investors in the companies supplying the parts for the 360, since it indicates that at least some of them are working to capacity, and it's still pretty good news for MSFT (though the part about them taking a loss on each unit makes that a little screwy - hopefully the slow supply will help them gauge software sales so that they can make better decisions on future supply).

What's next?

[KDR_11k]

"Slashdot Stories about XBox 360 Marketing Ploy?"

More on the effects of the rumours...

[WTBF]

Here is some more information about what the proposed shortage is causing people to do.

No shit....

[chudgoo]

Every console release is met with reports of (mostly artificial) shortages.

This drives up demand and makes the fanboy froth over.

I once found a stash of Nintendo64 systems in Wyoming of all places when there was a "shortage" nationwide. I promtly bought all I could afford (three) and resold them on ebay for record profits. The same thing will happen with this one, too.

Re:No shit....

[PowerBallad]

"I promtly bought all I could afford (three) and resold them on ebay for record profits."

Define "record profits."

Dur

[Gogo0]

If MS were truly afraid of there being a shortage, they would delay the launch of the Xbox2. Arent they always touting how they will have such a headstart that will put them in an unbeatable lead?
Delay it for a month and fix your launch planning issues, an eleven-month lead can still be spun by marketing.

Re:Dur

[Anonymous Coward]

The game companies would kill them... it's not just MS with a stake in the christmas sales.

No, that's the plan!

[jspayne]

Are you kidding? They want there to be a shortage during the Holiday rush. Not a big one - not so much that they miss making fistfulls of money - but one just big enough so that there are TV news reports of soccer moms beating each other senseless over the last unit at the local Toys R Us.

The real marketing question is how many units to ship to make sure there are just enough so that almost everyone gets one.

Re:No, that's the plan!

[pr0vidence]

The real marketing question is how many units to ship to make sure there are just enough so that almost everyone gets one.

I suspect around 5 or 6 units would be pretty close.

Analyst

[Blakey Rat]

How do I get a job as analyst? I can make up random BS with the best of them... is there some kind of school youhave to go to?

Re:Analyst

[Thing 1]

I, for one, believe that it's not what you know, it's who you know.

So, no, schooling won't help. I, for one, think that socialization is the best answer.

But then again, wtf do I, for one, know?

Of course this a Marketing gimmik...

[Vesuvias]

What Marketing team in thier right mind would miss an oppourtunity to setup thier product as the sold out christmas toy of the season? Lets put this in perspective: Microsoft is on the hook to developers to provide a certian number of units (assuming there is contract for this sort of thing). They also see a juicy christmas oppourtunity to drive demand via a shortage (I will explain why this is a huge opportunity in a second). The answer is simple, worldwide release lets them fullfill there contracts for number of units delivered. It just spreads the units around the world instead of isolating them to a certian region. Game developers are happy as the expected base of units is actually met and marketing is happy as there is now a shortage its just confined on a regional basis. Every christmas we get to see the same speculative news reports on which toy will be "The Toy(TM)" for this season. A shortage at release allows ebay scalpers to drive prices through the roof. The news reports catch wind of xbox 360s going for 1500$ on ebay and it is declared the defacto winner of "The Toy" for christmas 2005. When microsoft dumps a huge inventory on the market on december 20th, last minute moms and dads are all too happy to pay 400$ for the same "toy of 2005" that was going for 1500$ on ebay just a week earlier. Then the competitive keep up with jones christmas buying fever kicks in "I just got off the phone Kim she says she actually found xbox 360s at walmart for 400$ and she got one for billy." "Crap honey, johnie specifically asked for that but we already bought him gifts for christmas. But if he wakes up christmas morning to find out that santa brought billy a 360 and not him what will he think?" And the entire inventory sells out again. What makes this whole thing even more brilliant is that Sony can't do this with the PS3. Second movers lose the shortage advantage. Second means that if there is a shortage than the deciding perant picks an in stock xbox 360 as opposed to an out of stock PS3. Also people remember last years "The Toy" winner. And that always makes it a great christmas pick even if it's not the christmas 2006 "The Toy". And what if "Halo 3" is the 2006 "The Toy". So is this sheer luck on Microsofts part or brilliant marketing? In either case they will make out like bandits because of it.

Dilbert said it best.

[ShadowsHawk]

Marketing is your best friend when you have a mediocre to crappy product. How many people bought a pet rock?

Re:Dilbert said it best.

[Anonymous Coward]

Yes, but Microsoft hasn't been marketing the 360 well at all. I personally know 2 people who were planning to buy a 360 at launch until they saw the MTV special, saw the borring E3 performance and read the announcements that Microsoft has made over the past couple of months. Microsoft actually said that the launch titles weren't of the quality you should expect from 360 titles but were there to wet your appitite; Microsoft thought that this would cause people to think "Wow, how great will the games end up looking" when most people actually thought "yeah, the launch games don't look all that special".

Personally, what I am expecting from the XBox 360's launch is a PSP like affair; it will sell well enough to people who must own the newest thing (regardless of price) but through out the holiday season you'll be able to go to practically any store and buy a XBox 360. The only way they're going to sell out is if Microsoft planned shortages which, unlike the PS2, may actually turn people off of the system; people are odd that way, one day they'll be saying "Wow, the iPod Mini sold out everywhere, it must be awsome" and the next day they'll say "The OmegaSphere sold out, I didn't want one of those pieces of crap anyways"

Remember the Xbox?

[metamatic]

There was supposedly going to be a big Xbox shortage too. I used to work across the street from Best Buy. I remember walking through every day, and they had stacks of unwanted Xboxes. Same at EB, they couldn't shift 'em and started offering special bundles.

Now, PS2 on the other hand... Those were hard to find. The worst bit was when I got a PS2, I couldn't find any Sony memory cards anywhere.

Re:Remember the Xbox?

[Anonymous Coward]

Couldn't shift them? Special bundles?

In my neck of the woods, both the PS2 and XBOX were hard to find during the year of their release, while the GCN (same year as the XBOX release) wasn't too hard to track down.

But those packages you mention weren't "special bundles." EB/Gamestop/insertretailerhere "forced" customers to buy bundles if they wanted hardware in the initial shipments. At EB (where I picked mine up), you had to buy the hardware, another accessory (such as a controller), and three games from a list. Granted, I probably would'be bought as much anyway, but the point of those bundles wasn't to move hardware that wasn't going anywhere, it was to forcibly move software with it.

Re:Overall It Doesn't Matter

[Rod Beauvex]

Strikes me as more of a Saturn. Early release date, badly thought out hardware, and I haven't too much about games.

Just one thing...

[quantax]

I don't get how this actually translates to someone wanting or not wanting to buy a XBox360. I figure, if someone wants one, they will likely be of the mind that they will be buying one regardless any supply issues. On the flip side, hearing this does not make you more likely to want to buy a xbox if you haven't already. I can somewhat see the 'marketing trick' in that people who want one will be even more eager to ensure they get theirs first, but that doesn't translate to more sales in the long run.

Re:Just one thing...

[vexx0]

Its not a marketing ploy for people who already made up there mind but for the ones that can't decide yet. They might think oh no if I dont get one right away I wont get a chance for a while if I decide I want it. They want people to buy them without figuring out how much it sucks first. It happens every time, poeple buy the consoles on launch then relize that they realy didn't want it. If you don't beleave me just go see how many used systems are up for sale about a month after launch.

Microhype

[Neo-Rio-101]

The thing is, nobody trusts Microsoft. When it comes to marketing, even more so. They can hype something all they want but everyone knows that Microsoft is just going to jerk their chain. They've done it before, they'll do it again.

In Japan, Microsoft just look try-hard. I saw their ads over here. It just screamed "try-hard" at me. Looking try-hard in Japan just turns people off - doesn't matter how good the product is. I wouldn't be surprised if the Xbox 360 flops over here again.

I'm doubting how well the launch will go too...

[aztektum]

Based upon the fact that I talk to 5-10 people every couple of weeks that are not at all interested. I'm talking about people you could consider gamers, many who have every console from Xbox/PS2/Cube back to the Atari still and more (handhelds up the wazoo).

Will it sell well? No doubt. Will it sell astronomically well? Not bloody likely.

You can't trust analyists.

[uwmurray]

Uh-huh. Back to the real world kiddo.

You've obviously never worked as an analyist or for a large bank. What you've described is what an analyist _should_ do. Analyists work for banks. A given bank is often long on some set of stocks (abc) and short on others. Bank analyists often provide 'analysis' that lines attempts to move the market in such a way to help thier banks long positions go up and thier short positions go down and find numbers to support thier analysis. How many times have you sean an analyist trash a stop thier bank is underwriting?

The analyists were screaming buy, buy, buy! untill the dot-com bubble burst - and I'm pretty sure we all know that wasn't goverened by supply and demand; it was simply a tulip craze. Analyist predictions are a useful tool to see which way banks are trying to move the market, and where they are placing thier bets - nothing more.

Re:You can't trust analyists.

[17028]

But we certainly trust people who can't spell the word "analyst".