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Xbox 360 'Must Sell Out' on Release Day
tlhIngan writes "According to a Norwegian retailer (as reported by Gizmodo), Microsoft's making some peculiar demands during the XBox 360 launch. In particular, each retailer is to get 20 XBox 360 consoles (6 core editions, and 14 premium editions). However, to get the full allocation, they have to ensure they will sell out on the day of release (December 2nd over there)! Plus, each console must leave the store with at *least* two games each. Is Microsoft marketing like the beanie babies again - using 'Sold Out!' as a way to hype the popularity of their machine? It may appear to be, since Microsoft recently slowed down production of the XBox 360 as well."
Oh well, I feel for people who want one on launch day, but for the first time ever I think I won't be one. I'm probably gonna hold off until Halo 3 to pick up my 360.
And of course, I'm getting a Revolution the day it comes out, if I'm here in the States. :-D
I understand that life's not fair, just why is it never unfair in my favor?
The "must sell with 2 games" might possibly be reatailer-initiated, but the "must sell out" certainly isn't... if you're a retail store, you want to have slightly MORE stock than is necessary, to make sure that when the n+1 person walks in your door with a fist full of cash, that you have a console to sell them.
Is this really so lofty of a goal for Mircrosoft to set for their new system. Retailers should have no issue finding 20 reservists for the system. This is similar to the numbers of reservists for most other consoles (XBox, GC, PS2) and is probably a very small portion of the consumer base for any given retailer.
Each customer must also purchase 2 games. It's obviously a given that everyone will be buying at least one game (Halo 3) and then why not any of the other promising titles that come out with the release. Most (if not all) gamers like to diversify their playing experience.
The big issue here is the money of course. The premium system already will run $400 and games (I haven't checked the exact price yet) will probably run the standard $50. Anyone who is going to shell out the $400 (or $300) for the system will probably manage to scrounge up another $100 for two games.
I'll be surprised if Microsoft doesn't manage to sell out the 360 on the first day.
Plus, each console must leave the store with at *least* two games each.
I'm pretty sure this is illegal in a lot of places. (at least in the nehterlands)
Even if Microsoft lowered the price of the Premium bundle to $199.99 I think they would have a great deal of difficulty selling out a reasonable innitial shipment of systems; the reason for this is that there are no really compelling games at launch. In a lot of ways I am reminded of both the Dreamcast launch and the PSP launch when I think about the XBox 360's launch. The 360 is being released with the timing of the Dreamcast, with the launch line-up and cost of the PSP; I can't see how this will turn up successfully.
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Well it just looks like Microsoft is making use of what marketing research seems to be telling us about human behaviour. Things that are in short supply, no matter the cause, tend to be valued more. There also seem to be more than enough hardcore gamers to create buzz on the first day no matter how much those first 20 360s cost or what the bundles are. You'd think that if people know they're being manipulated this way, they would choose not to participate, but in the end, people want what they want. So it really doesn't matter how artificial the manipulation is, some shops are still going to be mobbed.
But, given all of the above, they could still come out weak like the PSP launch if they're not careful. As the mantra goes, it's the games that really matter. If they get things like Perfect Dark Zero out on launch day then they've got a shot at a strong launch, if not there will be plenty of 360s on the shelves on days two and three.
To the making of books there is no end, so let's get started
"This sounds silly, but the traditional way to "sell out" of an item is to lower it's price.
That's the traditional way to sell out an overstock. The 360 won't be overstocked, it will be intentionally understocked.
"Keeping the price high by artificial fixed prices means that it's hard to 'sell out'."
They aren't keeping the price high by artificially fixed prices. They are keeping the ideal pricing point high by limiting supply.
MS needs to justify the high MSRP for the 360... and the high wholesale price. MS doesn't want to reduce the price until late next year. The best way to do that is by showing that there is enough demand that you still sell out at the current price.
Producers of a unique commodity often limit supply to keep demand and price (by extension) high. My understanding is that MS will be taking a loss on each unit anyway... so if they have to drop the price in the short-term, they'll be hemorrhaging instead of slowly leaking.
This isn't artificial price-fixing. This is manipulation of the market by restricting supply. It's done all the time with unique goods, and preserves the profit incentive to continue producing innovative goods.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
how exactly is this going to be enforced, how do they intend to check up on retailers? Surely they could report back to microsoft that they'd sold two games as promised, but just hold the ones people didn't want in the stock room then order a few less over the next few weeks as the excess is sold off 'naturally'
An addendum: Microsoft may face another obstacle, in that Perfect Dark Zero, regardless of whether it turns into a killer app via word-of-mouth, it does not currently have the hype or awareness level of a killer app game. The Perfect Dark series is not well known in the mainstream, and the hype level just isn't there right now, a mere 2 weeks from launch time. PDZ, thus, won't reach "killer app" status at least until it's been on the market for a couple weeks. This may in some part explain MS's strategy for limiting supply: consumer demand is more likely to peak a few weeks after launch than at the initial launch, and they're just not likely to sell out the large supply they have instantly on launch, given the lack of a pre-established killer app.
In short, this is the Halo approach, the same approach used on the first XBox. Halo ultimately did generate the kind of buzz that moved lots of systems. Will PDZ do the same?
If it doesn't, that puts the 360 in the company of the PS2, Dreamcast, Jaguar, 3DO, 32X, Sega CD, and Genesis. What they all have in common is that they all failed to launch with a title that proved to be a killer app. Some of them didn't even attempt to launch with one. Of these, only the Genesis and PS2 would qualify as successes. They both managed to break out the killer app before they were wiped out by their competitors.
Don't forget, though, for a lot of consumers the Genesis was their SECOND system. The Genesis launch failed to catch their eye, the SNES did (effectively, Nintendo "won" the console war for those people), and then they bought the Genesis. But Microsoft, unless they REALLY get some serious exclusive killer apps late in the game, is not going to manage to sell many PS3 owners on the 360. It's just too expensive. So MS has only a limited time to nab 360 buyers, and the price they pay is that they won't be on equal footing to duke it out with the PS3 on its launch date, because PS3 will have all the limelight at that time.