Xbox likely to stay scarce for the next 3 months

Two months after its introduction, Microsoft's Xbox 360 is still an elusive prey for shoppers in the USA and Thailand, and might well remain so for several months.

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 within a few months.

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, 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 in the US, 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."

The availability of the Microsoft Xbox 360 on the Thai market is also below the market demand and sales of the classic Xbox is almost at a standstill.

Microsoft should offer more of an explanation for the shortage. Microsoft 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 Bill Gates announced at the show.

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