Microsoft Abandons 360 Sale Target

Next Generation is reporting that Microsoft has, reluctantly, admitted they won't hit their 90 day sales target for the Xbox 360. From the article: "In a report in today's Financial Times, the company shifted its attention to the longer-term target outlined at CES last week. The firm now says it will hit sales of 4 million to 5.5 million by the end of its financial year, in June. Analysts believe sales of the console had hit around 1.3 million by the end of the Holiday sales period. But as January moves along, retailers have yet to see evidence of shortages easing."

Comments

*sigh*

[game kid]

Basic economics: meet increased demand with reasonably-priced supply at the right time and you get dough. Otherwise...

Shortages

[Insurrection]

Really I picked up my console on launch day, no line up, no wait. It was a core console, which I still see around from time to time. The hardest part was getting games for the system. If your not picky, core consoles are around, you'll just pay more in the end.

Not a result of M$

[the computer guy nex]

but rather all the companies hired to make the pieces. Thats the problem when you auction out each individual piece of a console to the lowest bidder - one of them missing their mark pushes everything back.

Good news for them is the PS3 launch is looking further and further out, possibly 2007.

Re:Not a result of M$

[Ayaress]

I still think it is them, at least in part. Most console releases are met with shortages, waiting in line in the cold only to find out they're sold out already, and so forth. It's the way the companies play the game. It's how a lot of companies play the game. It worked with Tickle-me-Elmo, it's works with cars, toys, designer clothes, sports drinks - virtually everything. When people CAN'T get something, for some reason, many of them will want it MORE. You start off with a moderate demand and insufficient supply. A lot of people will see that it's sold out. Maybe they didn't want it specifically - Maybe little Billy would have been just as happy with a GI-Joe, but then Billy's parents see that Tickle-me-Elmo is flying off the shelves like hotcakes. This tells them, "Hey, a lot of people are buying that. That must be the toy every kid wants! I bet Billy wants one, too." It's subtle, but every holiday season since the invention of the advertisement bears the same sort of patten.

Heck, back in high school, I even saw this in food service. I worked concessions at a race track for a few summers. We served a lot of food, but very few people ever ordered our mushroom swiss burgers. We kept two in the steam table at a time, and prepared more from regular hamburgers as we sold them. It was a good day if we sold four of them, and on off weeks without a big race, we'd close at 9 and probably not sell any.

However, once in a while, we'd get one person order two, and the next person order one. We have to tell that person we're sorry but we don't have any ready right now, but if you'll just hang on a couple minutes, we'll fix one and would you like a coke while you wait.

After that, almost invariably, several of the people already in line will also want one. As soon as one of us said we were short on something (this would also happen with chicken strips, which usually didn't sell very well but would occasionally sell faster than we could fry them), we'd get a short run on it. Often, "just to try," or even more revealing, customers have said to me, "Hey, you sell out of those, they must be popular. Give me one, too." I can only imagine that a good number of those people get out to their seats and realize they just paid an extra $2 on top of the cost of a regular burger for a spoon full of mushroom sauce and a slice of cheese they could have had for a quarter and that they really did just want a pepsi after all.

Re:Not a result of M$

[rseuhs]

Good news for them is the PS3 launch is looking further and further out, possibly 2007.

Not really, Sony sold more units of PS2 than Microsoft sold XBox360 this season.

Sony could hold the PS3 launch until 2008 and still overtake the XBox360 within 3 months.

I mean: Just look at the numbers: Sony sold 100 Million of PS2s, (40 million of those in North America), that's roughly 14 million each year on average and still somewhere around 10 million per year.

Now Microsoft misses their target of 3 million worldwide during launch and during holiday season and downgrades their "5.5 million" projection to "4 to 5.5 million" (which we all know means 4 million) for the first half year?

Sony will probably sell 10 million PS2 this year, too - maybe a little less. But it looks like Microsoft will stay well below 10 million, even if we assume a 2007-PS3 launch.

If I were Sony, I would release in America first, that would cripple Microsoft's only reasonable market and would be the final nail in XBox' coffin. (The XBox360 doesn't do that well in Europe neither.)

Re:Not a result of M$

[justchris]

Uh-huh. There are so many things about what you said that are just wrong, so let's start with the most obvious.

Sony has not sold 100 million PS2's. First off, the 100 million mark was meant for the PS1, not the PS2, second, it was the number of PS1's shipped not sold. The PS2 has shipped over 75 million consoles since it's release, there are no concrete statistics on how many it has sold.

Second, unfortunately, the video game market is pretty much reaching saturation. Nearly everyone who wants a PS2 has one. At this point, most people are simply replacing broken PS2's. While it's a crappy piece of hardware that breaks pretty easily, that's still unlikely to account for another 10 million sales this year.

As well as I'm certain the PS3 will sell, it will not manage to overtake the 360 in 3 months, especially not if it's delayed until 2008. With a 2006 or even early 2007 release, you have people who will save their money, not buy a 360 to wait for the PS3. But if PS3 releases later than first quarter 2007, people will just give up on it and get either a 360 or Rev, and then won't have the money to afford the PS3.

However, I agree that Sony should release the PS3 in the US first. The Japanese might not like it, but it would effectively cripple Microsoft's marketing hype, and with the 360 doing so badly in Japan, they can afford to wait there.

Re:Not a result of M$

[rseuhs]

First off, the 100 million mark was meant for the PS1, not the PS2

http://www.google.at/search?hl=de&ie=ISO-8859-1&q= ps2+100+million+sold&btnG=Suche&meta=

http://en.wikipedia.org/wiki/PlayStation_2

The PS2 has shipped over 75 million consoles since it's release, there are no concrete statistics on how many it has sold.

You honestly believe that there are millions of PS2s in the sales channel? Honestly? I mean, a few hundred thousand I can believe, but millions?

Re:Not a result of M$

[justchris]

I stand corrected, 100 million shipped.

But yes, I can believe there are millions of PS2s in the sales channel. The number of retail stores currently extant worldwide, even with only 1 PS2 per storefront, would put the number of unsold PS2s right about in the million range. Assume a reasonable 3 PS2s per store front, and that's at least 3 million unsold. That's not an average, it takes into account no variables, that's giving the PS2 the benefit of the doubt and assuming no retail outlet could possibly keep more than 3 in stock without someone coming in to buy one.

Re:Not a result of M$

[rseuhs]

That would only reduce the "really sold" units by 3%, hardly relevant for the sake of this argument.

Also if there are really 3 million units in the stores, then it would just show how many of them are still sold, because no store wants to keep any product long on the shelfes.

Let's use logic

[faloi]

If we don't technically produce enough units to meet our sales goals, we can't possibly hit our targets. My cynical side can't see an easy to turn this into another way to massage a manufactured shortage to continue to pump demand, but I suppose it's possible. Part of me does wonder if there are a lot of units tied up in bundled packages that aren't selling, though.

Re:Let's use logic

[supabeast!]

I think you're probably right about this all being a marketing ploy - Microsoft probably knew all-along what it could do, and set a higher number so it could issue press releases about missing it, convincing people that the hardware is just so badass it's hard to even make it, and keeping the hype machine running.

I also think you're right about systems tied up, although it isn't just bundles. Microsoft has a whole lot of systems tied up in Japan, where nobody gives a shit - I could have a Japanese Xbox 360 sent via airmail and it would be here by Friday, because the Japanese can see what a joke the 360 launch is.

I do wonder...

[Fred Or Alive]

If anyone still seriously thinks the Xbox 360 "shortage" is all planned by Microsoft.

The Xbox 360 launch has definatley been a bit of a screw up for them. If only for not getting enough systems into shops. Microsoft's plan was to launch early and try and get a lead on the PS3, but they just can't seem to actually get enough units out...

Re:I do wonder...

[NanoGator]

"If anyone still seriously thinks the Xbox 360 "shortage" is all planned by Microsoft."

I got an idea! We'll sell more XBOX360's by not making them available for purchase!

</Slashdot Logic>

Re:I do wonder...

[AlexMax2742]

Yeah, we can just file that next to the "Gamecube came out in second place! Really!", and "Linux is ready for the desktop".

Re:I do wonder...

[chrismcdirty]

File them under "Things that are true?" I don't think the Xbox one belongs anymore..

Re:I do wonder...

[ad0gg]

Microsoft missed out big time, a lot of missed sales during christmas season won't be made up till next christmas season where they have to compete against the revolution and psx3. Any who says Microsoft purposely held back production has no clue how consumer economics works. I guess MS learned that a worldwide launch doesn't work and that they pissed off their fan base who's only way of getting one still is via ebay or overpriced bundles.

Re:I do wonder...

[DrEldarion]

Not only that, but they tried to launch worldwide before they had a lot of games attractive to Japanese gamers. The XBox was already a failure in Japan due to not having enough games the Japapese would like, and this just further entrenches the image of the XBox and its successors as an "American console".

Bundles Save!

[fwitness]

I don't know what you mean about bundles. I mean you can get a great deal right now on a 360. Hell, if you buy that system with the extra third wireless controller, you *save*! By my calculations you Toys R Us saves you exactly erm...$0. That's not the point though, you can have your XBox360 now!! Limited time only!

Ground zero?

[Red Flayer]

FTA: "He added. 'That's just the way of the beast, particularly when you are ramping up factories from ground zero all the way up to full capacity.'" (Peter Moore)

Ground zero?

Well, I guess building XBoxes at the site of nuclear detonations might have something to do with their supply chain getting all messed up.

Re:This is still impressive

[Furry Ice]

Actually, the PS2 sold 510,000 units on the first DAY in America. Even the Dreamcast sold more than 200,000 on the first day. http://en.wikipedia.org/wiki/Playstation_2#Sales_R ecord

The most ironical part?

[SharpFang]

The most ironical part? Lower XBox sales mean higher profits at end of financial year for Microsoft.
It will take quite a while till the games start paying back the loss generated by each unit sold. Probably 2 financial years till XBox360 investments break even, maybe 4 for any real profit. Currently the more XBoxes are sold, the more Microsoft loses, at least short-term. Bigger sales = bigger losses.

Re:The most ironical part?

[joranbelar]

The most ironical part?

That "ironical" isn't a word?

Lower XBox sales mean higher profits at end of financial year for Microsoft.

Uh, no. Simple math here - if you sell less, you bring in less money. If you bring in less money, you get LOWER profits.

It will take quite a while till the games start paying back the loss generated by each unit sold.

What on earth are you talking about? The loss comes at the time of MANUFACTURING, if they SELL it, they get back a portion of that loss. While it's true that it might not cover the entire cost of the unit, it is better than not covering any part of the cost of the unit at all!

Currently the more XBoxes are sold, the more Microsoft loses, at least short-term.

No! No no no! Stop parroting a ridiculous meme whose concept you don't even understand!

Bigger sales = bigger losses.

NO! Quit repeating yourself! There is no universe that exists where taking in LESS money means you make MORE money.

Buying an X-Box 360 will not cause Microsoft to lose money! They already put the money down when they built the thing! NOT buying it will cause them to lose what money they did invest in building it!

Re:The most ironical part?

[kleptonin]

The most ironical part?

That "ironical" isn't a word?

http://dictionary.reference.com/search?q=ironical

ironical adj 1: characterized by often poignant difference or incongruity between what is expected and what actually is; "madness, an ironic fate for such a clear thinker"; "it was ironical that the well-planned scheme failed so completely" [syn: ironic] 2: humorously sarcastic or mocking; "dry humor"; "an ironic remark often conveys an intended meaning obliquely"; "an ironic novel"; "an ironical smile"; "with a wry Scottish wit" [syn: dry, ironic, wry]

Re:The most ironical part?

[Brantano]

I think he was going on the idea that Microsoft selling a 360 loses them money for each machine they build and make there money back in games (It does, they sell the systems for a loss). However, if you dont sell systems your obviously not going to sell more games, so your going to lose money anyway. You must pump out more systems at a loss, then rake in the profits on all the games that are sold on the system.

Right now microsoft is in a bad position, they cannot meet up with demand, they cannot sell systems and thus cannot sell games (which is the only thing making them money alongside peripherals). Not only this but they are going to have to worry about losing there stock value and getting their stock holders angry (Hell, they've already suffered through a 4 BILLION dollar loss on the xbox). But really they have to worry about keeping their third party developers. If developers see that this system is taking a nose dive into the ground, they really arnt going to want to develop for it.

Re:The most ironical part?

[SharpFang]

That "ironical" isn't a word?
Wrong, it is.

Uh, no. Simple math here - if you sell less, you bring in less money. If you bring in less money, you get LOWER profits.

Selling what? Air? Sand? You're talking about selling damn expensive devices.

What on earth are you talking about? The loss comes at the time of MANUFACTURING, if they SELL it, they get back a portion of that loss.

And you think the current store supply is sufficient to fill demand for XBox360 till June? Do you really think Microsoft is too poor to use JIT?
Storage inbetween production and sales is a small insignificant margin. In modern manufacturing it contains at most 3 days worth of sales of given product.

There is no universe that exists where taking in LESS money means you make MORE money.

Let's take this school task:
In January shares of SCO were $1/share and IBM shares were $15/share.
Silly joranbelar bought 50 shares of SCO paying a total $50, and 10 shares of IBM paying a total of $150. He spent $200.
Meantime smart Sharpfang bought 5 shares of SCO paying $5 and 13 shares of IBM paying $195. He also spent $200.
In August both joranbelar and Sharpfang decided to sell their shares. In the meantime SCO lost the litigation, resulting in shares dropping to $0.10 and IBM signed a new contract with Apple resulting in its shares gaining value of $20.
As result Sharpfang got $260.50 and joranbelar earned $205.
Sharpfang earned $60.50 by selling 18 shares. joranbelar earned $6 by selling 60 shares.

Bigger sales = more manufactured = bigger losses.
Less sold = less manufactured = lower losses.
Got it?

Re:The most ironical part?

[SharpFang]

Yes, that's true that in the long term low sales of XBox may be pretty disastrous to Microsoft. But looking at the short-term perspective, we get a pretty ridiculous image where even a failure to sell something causes improvement of financial results of the Evil Empire.

Re:The most ironical part?

[hobbesx]

You're assuming that the costs are mainly attributed to the product itself. It's certainly arguable that a very large portion of Microsoft's costs in this case are the manufacturing process itself. From the (possibly made up) reports I've seen, most of their problems are due to yield, not production capacity per se.
The way I see it, the production costs are mostly fixed but the number of Xboxen being produced is less due to poor yield. The only way to effect losses of manufacturing cost positively would be through sales, not artificial shortage.

Re:The most ironical part?

[TeraCo]

That's the only way the anti-MS brigade can get out there and buy an XBox360 though.

I can see it now. "Must.. hurt.. Microsoft.. by.. buying.. 360... ... and... 6 games."

Before anyone asks, I despise console gaming for what it did to some of my favorite PC games, and will never forgive it :/

Re:The most ironical part?

[SharpFang]

You missed the essential keyword: Modchip! :D
Now how long till 360 gets hacked? I'm definitely not buying one before that.

Re:The most ironical part?

[justchris]

I so wish I could mod this "Practically Perfect in Every Way".

Re:The most ironical part?

[justchris]

Let's see if we can figure out why this doesn't apply.

Oh yes. Microsoft has already manufactured the units. Not only that, but any profit they are going to make on the sale of those units they have already made! That's right, they sold the units to retailers. Once the units are out of their warehouse, they've made all the money on the hardware they're going to make. It matters not one whit to Microsoft, profit-wise, if you buy an Xbox360, at least, not directly. When you go to a shop and buy your 360, Microsoft neither gains nor loses money. Doesn't happen, doesn't matter.

Selling more units does not lose them more money than selling less units, unless they manufacture less units. The parent's point is, if they manufacture the units, but don't sell them, they lose more money than they do if they sell every unit they manufacture. Since the unit exists, they obviously manufactured it, and so buying it and giving them money will not somehow magically make them lose more money than they've already lost manufacturing it.

But again, they've already sold the unit. However, if it sits there unsold, then they can't tell 3rd party developers they've sold so many million units, developers lose faith in them, and less games are made. Less games are made, so less games are bought. The less games that are bought, the less they make on licensing fees (or whatever they're called), while still paying out money for marketing, running Xbox Live & whatnot. So, once again, buying a 360 only helps Microsoft. If, for some reason, you are bent on destroying Microsoft, stop people from buying the 360, don't encourage them to buy.

Great big fat...

[shoptroll]

DUH!

when you can only sell 400k in the first day and have to spend two weeks getting your supplies back, you think it's still possible to sell 3 million?

pfft.

Doesn't really mean anything yet

[SmallFurryCreature]

This is not lack of demand but lack of supplies. At the moment we don't know what demand is. Could be that it tops at say 2 million (just a wild guess) and until unit 2.000.001 ships we won't know. Or rather a week later when it is still sitting unsold in the shop.

The only bad thing about it is that the PS3 is getting nearer. As the campaign for it ramps up some people not yet lucky enough to get a 360 might decide to wait to see what the PS3 will be like.

This about lack of production capacity, not lack of demand. The moment 360 consoles start to be easily available in stores then we can start judging on how good the launch has been. It is kinda odd that MS is having so much trouble with production but then MS not getting production right is nothing new. It is a new business for them after all. Sony has assembled hardware all its live. If Sony is going to get it wrong as well then it will be news.

Re:Doesn't really mean anything yet

[Micklaine]

"This is not lack of demand but lack of supplies."

QFT. It's silly that Microsoft set any sales target. Apparently, they should have set a production target, since, well, they certainly didn't meet the demand that was there. It's sad to see yet another console launch marred by a lack of the product. In essence, they rushed the console out the door in time for the holidays and to beat big, bad Sony to the punch.

That said, Microsoft is probably going to do all right since the PS3 is still a ways from release. I keep hearing Q2 batted about, but let's be realistic, there's just too few rumblings coming from the head honchos at Sony to expect anything sooner than a Q4 release in time for the holidays. Then we can celebrate yet another console shortage! Oh yeah, and Christmas/Hanukkah/Kwanzaa/National Atheist's Red & Green Day. -Mick

Re:This is still impressive

[Anm]

Sony shipped/"sold" that many to the retailers. With room for someone rounding somewhere, its confusing but not inconsistent. But considering how quickly the retailer sold out, that really is that misleading.

Anm

Re:This is still impressive

[dtfarmer]

Don't be a moron. That article was on the day of release in NA and they were reporting what Sony told them - that they wouldn't be shipping 1m consoles as previously targeted - only 500,000. Of course if you think that means they shipped 500,000 and not 500,001 or 499,999 consoles you have bigger problems. Now after the fact, reports showed they shipped and sold around 510,000 - but probably not 510,000. It might have been 509,999 or 510,001 or even 506,000 or 514,000.

Point is when dealing with a really big number usually someone decides to round that number off to make it easy to quote and remember. Now the last time 'the computer dweeb nex' posted this shit (on Friday) it was 200k in 3 months, but now it's 200k in six months. So if the 510k sold in 24 hours is wrong and it's only 500k, he's still a troll and a moron to boot. So both the PS2 and 360 sold out their entire stock in NA at release, 332k for the 360 and 510k for the PS2. Of course the difference in Japan was a bit more pronounced - 980k for the PS2, 42k for the 360 (around 110k for the original xbox, iirc.) Does this mean the 360 sucks? No. These are just sales statistics and have nothing to do with how good a machine is.

obligatory eBay price analysis: demand not high

[javaxman]

eBay listings for the 360, if they are any indication, seem to show that folks aren't willing anymore to pay much, if any, of a premium beyond the suggested retail price anymore. Which is pretty shocking, when you consider that retail outlets do seem to be completely sold out... wouldn't you expect these things to be selling for more on eBay if the demand was really there?

Re:obligatory eBay price analysis: demand not high

[Jarlsberg]

It's january. Who's got the money to buy expensive luxury items now? It's buyer's market, hence lower prices.

Re:obligatory eBay price analysis: demand not high

[javaxman]

Who's got the money to buy expensive luxury items now? It's buyer's market, hence lower prices.

Still, we're talking about an item which is not actually available at retail... you'd think that if it was in really high demand, you'd be paying a decent premium to obtain one when you normally couldn't. The fact seems to be that even among people who do have the money, there isn't a feeling that the luxury item in question is extremely valuable, and the need for it isn't extremely urgent. Nobody needs one by some gift-giving day, so if it's more expensive to buy it this week, we'll wait until next week.

It would appear that anyone *really* excited to have an Xbox 360 who can afford one already has one... and that's not near as many people as MSFT would like, even if they are having production problems ( which they are )... they'd rather have that eBay price higher, as it would indicate pent-up demand for the product.

I could be wrong, but I'm guessing there isn't actually a lot of unsatisfied demand for the Xbox 360. A little, maybe, since it is selling out, but not a lot; it's only selling out because there aren't many units hitting the stores. Again, I could easily be wrong, but it's hard for me to look at this and think it's good for MSFT.

Maybe they'll get lucky, and the whole Blu-ray thing will push the PS3 back really far... maybe not...

Example of poor jounalistic integrity

[Keeper]

Microsoft has been targeting 4.5 to 5.5 million units by the end of their fiscal year since the console was launched. Hell, you can find articles with those numbers in it before their launch; this one was published Nov 8th:
* http://msnbc.msn.com/id/9968123/from/RL.5/

This article combines a bunch of random quotes out of context, and strings them together with some out of context source information in an attempt to make it look like company officials are acknowleging missing theirs sales targets.

This doesn't mean that the sales targets have been hit or missed, just that the article is a piece of made up trash.

Re:Example of poor jounalistic integrity

[Keeper]

No, they haven't. The article didn't even get that right.

http://www.microsoft.com/billgates/speeches/2006/0 1-04CES.asp

"Let's fast-forward to Xbox 360. We're quickly moving from thought leadership to market leadership. And tonight I'm pleased to announce that Xbox 360 achieved an unprecedented global launch for the world of videogame consoles. In the first 90 days we will have launched Xbox 360 in nearly 30 countries, and Xbox 360 is on track to ship between 4.5 and 5.5 million consoles by the end of June."

Re:This is still impressive

[dtfarmer]

And, after Googling for a good half-hour and finding NOTHING, I can't help but think that YOUR statistics are about as valid as nex's, although it is fairly difficult to link to nothing for proof.

Not very good at googling are we? Here's a couple sources for ps2 numbers that back the 500/510k numbers besides Wikipedia. Also from NPD directly a story that cites $168m PS2 sales for the first weekend, which is in line with the numbers in the IGN story which say $149m PS2 sales first day. Here's a quick hit that mentions around a million in first weekend sales in Japan, which matches up with the 980k Japan weekend number, which already has a cited source article on Wikipedia you can check out.

A source for 360 sales numbers, for good measure, both Japan (2) and US. Although the US numbers after restating by NPD were a slightly lower 326k, rather than the 332k I mentioned that were in the initial report. Thanks for playing.

By the way, this post took me longer to fomat and type than to google up these links, I'm sure I could find more than just these few if I used a good half-hour for just googling. I'd ask my fifth grade teacher, but after 20-some-odd years, I wonder if he's still even alive?

Re:This is still impressive

[dtfarmer]

There's a good reason your fifth grade teacher won't let you site [sic] the Wikipedia, there's no way to back up the statistics claimed there.

My fifth grade teacher certainly would not let me site Wikipedia, even if he would let me cite it. (My fifth grade teacher taught all subjects except gym, including english.)