Peter Moore on Shortage Conspiracy Rumor

[fitbabits]

Next Generation (http://www.next-gen.biz) has posted an interview with Peter Moore (http://www.next-gen.biz/index.php?option=com_content&task=view&id=1668&Itemid=2) in which he addresses the rumors of deliberate shortages for the Xbox 360 launch.

"I've seen all of the conspiracy theories. Somewhere in Roswell, New Mexico, we have a hangar where we're stockpiling it, creating false shortages. No."

He added, "It's ridiculous. We are trying to get as many units to retail as we possibly can."

He has also said that some retailers took a gamble on the number of machines they would be allocated. "A lot of retailers, I think, stretched their allocation. Individual retail store managers said, 'I'm going to take a fly that I'm going to get 200 Xbox 360s on day one and take the preorders accordingly,' and they only got 100 or 150. Well that's 100 or 50 disappointed people. We have to manage that."
He raises a point which I've thought of myself - how much of the shortage is down to individual stores over-estimating how many machines they would get on launch day. I've personally spoken with a few district managers who were urged to 'get the customers money and let Microsoft take the heat for the shortages'.

[Ernst_Jager]

Everyone knows Microsoft is the cause of all the worlds problems! They make the perfect scapegoat for just about any electronic problem. I refuse to believe any major retail outlet would lie to the consumer.

[bapenguin]

Well, my local EB was told they would get 70 systems at launch. Whether those numbers came from Corporate, From Microsoft, or some other means I'm not sure. Needless to say, they are getting 26 now.

I heard a rumor that the local Walmart is getting over 200. Not sure how true it is.

[Suicidal ShiZuru]

Most stores are probably responsible for that sadly, and I dont see how MS would take the heat. You preorder from that store with the assumption of getting the product on the specified date/release that they will have in stock. They should know what theyre getting not just guesstimate.

~Seems like Walmart always has plenty of any new release, seemingly nothing is ever sold out at local ones.

[AspectVoid]

Talking to the people in my local game stores, they were never told by Microsoft how many units they'd get in the first shipment. They had to take a guess at what Microsoft would give them up until around the first week of November, and by then they were all into what they thought would be their second or third shipments of the system.

Microsoft could have solved this by simply telling everyone something along the lines of "You can only guarantee 25 Core systems and 35 premium systems for launch day." Give the stores a number that they knew they could hit and make that the only guaranteed first day units. Instead, Microsoft stayed silent and forced the retail stores to guess what they would get.

[Suicidal ShiZuru]

But were they telling customers about this? I doubt it.

[agentgray]

That's good. Blame the retailers for a product that they have failed to manufacture in large numbers. I find it hard to believe that Microsoft really knows how many they are going to sell and the retailers don't. For Pete's sake, they had pre-orders, and even some of those won't be met.

Doesn't this type of thing happen with almost all consoles at launch?

[crashedout]

Whatever, if it is marketing ploy they will not admit it unless it turns out to be a success. Saying they are making as many as possible and not shorting the next few weeks lets people believe there are really not that many and drives up demand. I like MS but I seldom believe that they say leading up to a launch.

[Knite]

I heard a rumor that the local Walmart is getting over 200. Not sure how true it is.

shhhhh.. I still want a chance at one and with more people knowing you'll r00n it!

[Stormwatcher]

The "it's a ploy" theory is silly. They need machines at people's homes so they can sell more games a make more money. They aren't stupid or insane enough to jeopardize their income with such a imbecile plan. the original Xbox lost 4bil dollars, they can use the cash.

[EternalGamer]

But were they telling customers about this? I doubt it.


This is exactly my problem. I have been in my local Gamestop as late as September when they were technically on their second shipment, and heard them tell the guy THEY WEREN'T SURE whether or not they would get it at launch. They would say that it was possible the second shipment would come in the same time as the first. They were so hungry for reservations that they tell people just about damn anything. It is there fault. Absolutely.

Now if they told people flat out that they couldnt' guaranteee anything that's one thing. But people automatically assume they will get the product when it comes out unless you tell them otherwise. It your job as the employee to inform them of other possibilities.

This seems to vary a bit from store to store as we have found out in another discussion. I would venture to guess that baps is right that the stores in districts with the more aggressive DMs are the real problems. Most employees don't strive to decieve and get your money at any cost on their own--they don't get any of it, they have no reason to want to fuck you over.

Dan

[CrashCart]

This is exactly my problem. I have been in my local Gamestop as late as September when they were technically on their second shipment, and heard them tell the guy THEY WEREN'T SURE whether or not they would get it at launch. They would say that it was possible the second shipment would come in the same time as the first. They were so hungry for reservations that they tell people just about damn anything. It is there fault. Absolutely.

Agreed.

And a few extra characters for good measure..

[Heretic Machine]

Well I can't help but think it a little odd that they only started manufacturing these things three or four weeks ago... If that's not artifically creating a shortage, what is?

[Evil Avatar]

Doesn't this type of thing happen with almost all consoles at launch?

Not to this degree, because no other console has ever tried a worldwide launch.

[Heretic Machine]

Evil... do you not remember the PS2 launch? That was way worse than this is going to be.

[CrashCart]

Well I can't help but think it a little odd that they only started manufacturing these things three or four weeks ago... If that's not artifically creating a shortage, what is?
If this is the case and it has been ready for significantly longer, then sure.. But how can your local GameStop guarantee you a system, when they have no idea how many they'll be getting? I haven't been following the 360 as closely as some, as I don't intend to get one on the first day.. Eventually, sure. But I'm not camping my local Wal*Mart for one.

Perhaps I'm a bad businessman, but I would at least tell my customers that I don't know how many units I'll be getting in on day one, as Microsoft hasn't given me that information. So I can't guarantee you'll get one at launch.

I don't know if its been brought up here, but it probably has as readers here seem to like Penny Arcade as much as I do.. Either way, I'd like to bring up something 'suggested' by those guys over in Washington:

We got an email from an employee at a "dedicated games retailer" that might intrigue you, regarding how 360s are being distributed. I'd imagine it's probably store by store, but here you go: they are going to the people who purchased the most accessories, as opposed to the people that got on there first. We've heard it from people going into stores as well, where the person behind the counter - in what I'm going to call an act of kindness, given the situation - suggests that they throw a couple peripherals on the pile to guarantee it. I'm not saying this is what happened to me, I'm just saying that it happens.
In any event, I've got an idea (http://www.penny-arcade.com/comic/2005/11/11).

[Citizen Philip]

The question becomes then: If you're going to release a new console and not penalize overzealous vendors for overselling, you reap what you sow. If their was a montary cost for 'particuarly optomistic' release quantities, it wouldn't be done.

Personally, I think it's silly to think a vendor WOULDN'T do it in the first place and it's your own damn fault for assuming a pre-order is to your advantage: all it does is guarantee the store they have a sale.

Caveat emptor.

[Kelegacy]

Evil... do you not remember the PS2 launch? That was way worse than this is going to be.
Yeah because everyone and his mother wanted a PS2. The success of the PS1 was staggering, and opened the floodgates for an insane launch. And Sony could play svengali, controlling the masses with their scarce stock. It was like the Tickle Me Elmo or Furby...people went nuts and hurt each other for a chance to get a PS2.

Now, I don't mean to downplay the 360, but I haven't heard anywhere near as much hooplah about it, out there in the real world (meaning, away from the internet gaming sites).

[Heretic Machine]

Look, you don't spend this much money on a product and then miss the holiday season by ACCIDENT. That just doesn't happen, these people planned this. If they didn't, they would of started producing the system much sooner, even if that met cutting costs.

[superherotaco]

I agree with Perigon, companies pull this kind of thing all the time. Make a shortage and demand goes up so you can sell them at high prices. Look at beanie babies, cabbage patch dolls, PS2, just a couple items that became pop-culture icons because of planned scarcity. Tickle Me Elmo doesn’t really fall in this category, the company didn’t really know it was going to be such a hit, in fact originally its big selling point was the fact that on Xmas one would say “You won a million dollars” and that family would have the million dollar Elmo… but I that’s a little off the topic.

[Wonka]

Penalize overzealous vendors? Are you crazy? The last I checked MS wanted to sell X360s too. I hardly think they are in a position to get all draconian about their vendors business practices...

And why would pre-ordering be a disadvantage again?

You sir are going to have to lay off the crazy talk and start making some sense!


I preordered my console in MAY before we even know how much the damned thing was going to cost... I will be getting one. It's funny but I do NOT feel disadvantaged.

At the store I ordered from I was still not the 1st preorder, (I was #11) and that's NOT a guarantee, but thats about as safe as it gets. If MS cannot even get a dozen consoles to a typical store that would be a case where almost nobody gets one. In that case, it would still suck, but at least I couldn't blame myself for not getting one. And that is a lot of why people preorder their consoles. They want to do everything that they can.

[doubtingthomas]

The "it's a ploy" theory is silly. They need machines at people's homes so they can sell more games a make more money. They aren't stupid or insane enough to jeopardize their income with such a imbecile plan. the original Xbox lost 4bil dollars, they can use the cash.

I totally agree. What would anybody rather have? A bunch of Christmas hype about their product being hot and sold out and you can't get it and people are spending hundreds of bucks over retail on Ebay for your product? Or would you rather have millions of dollars going in your own pocket for the sale of systems, games, xbox live subscriptions, etc. In any business I've ever worked, being sold out of your product has NEVER been viewed as a good thing. That means you're losing money.

[bapenguin]

I don't know...I've seen what's happened on the media relations side and it's just as bad as the retail side...they are completely disorganzied on the whole thing. Not only that, they painted themselves in a corner by giving the concrete date before they knew the date they could go to manufacturing. If this happened back in say, September, and there was a big shortage....then yeah...I'd say it could have been artificial to spike sales for the HOliday's. But when it's this close to the holiday's...there's not much that cna be done about it and that's a lot of lost money on MS's part.

[RMan]

The "it's a ploy" theory is silly. They need machines at people's homes so they can sell more games a make more money. They aren't stupid or insane enough to jeopardize their income with such a imbecile plan. the original Xbox lost 4bil dollars, they can use the cash.
Who, I think the rather simplistic view of economics you have is not the formula that MS is working by. First off, do you think it makes sense to develop software and give it away for free? The quick answer is no, but the real answer is that it depends on the collateral benefits (like in the case of Internet Explorer, by itself a monstrously stupid financial plan, but in conjunction with all other MS products and existing competition, the wise choice). Let’s also look at Halo 2, clearly they spent way more money on marketing than the average game would spend on marketing(way more than what “makes sense” for a game), and the reason is that a sold copy of Halo 2 is worth WAY more to MS than it would be to another publisher since it’s also proof of the viability of the platform and thus brings them money through other channels.

In this case, I think you have to understand the whole story to make sense of it. First, the idea that MS needs the money, grow up, they’re in it for the long money, not the quick cash, they are not hurting for cash. Second, they are not primarily selling a system in a vacuum here, it’s not just about maximizing sales each individual month, it’s about making sure that when the PS3 hits it gets as few sales as possible. They know that this generation there will be less people buying both systems, there might be many households with 2 consoles, but this generation that second console is most often going to be the Revolution. Make no mistake, this is a fight between MS and Sony, and like any war, if you can take 3 soldiers from the enemy while only losing 2, sometimes that’s the right choice. They know that eventually if the gamer was ever going to buy a console, then they’re likely to buy a 360 or PS3, so it’s important to make sure that sale is a 360, but equally important it’s not a PS3 (strategically, these result in different tactics). They also know that throughout the life of the console, the console gets stronger towards the middle and end of it’s life since it’s userbase continually grows, maximizing that growth is what’s important, not getting one or two million more units into houses by Christmas (which, in the end, would not amount to ¼ of the Xbox userbase anyway, much less touching the PS2).

Ok, so if you still think that MS is just about making the buck as quickly as possible, why have they stated publicly that they will release Halo 3 at the PS3 launch? If Halo 3 is just a game, then release the game at the time it makes the most money, right? The answer is no, Halo 3 is more effective as a means by which to take the steam away from Sony than it is just another revenue stream. By not supplying the demand to users, they’ve created a greater number of sales to hardcore users that are also buying a larger volume of games per console (and hardcore users are more often going to be happy with the system). So, they can tell developers that they can’t even make systems fast enough, and they have a huge software sellthrough rate (definitely a good thing). But if they just maximized sales in the next two or three months, then they couldn’t create a surge of sales on or slightly before the PS3 launch. If they can retain a high demand until the PS3 launch, then drop the price on the PS3 launch, they can effectively take the knees out from under them, and trust me, this is VERY important to MS. The idea that this is just a simple matter of supply and demand is an extremely naïve view of what’s going on, IMO.

[Stormwatcher]

Rman, Basic Marketing 101: People who fail to get your product because you can't supply it get ROYALLY PISSED OFF. this "god damn I have no x360 because MS Suxxx" effect is 10x worse than any benefit they could reap from this so-stupid-only-gamer-forum-regulars-could-have-imagined artificial shortage ploy.

The history of IE has NOTHING to do with console gaming launches!!! This is CONSUMER MARKET! ELETRONICS! CHRISTMAS! They NEED to push as many x360's as they can so that they establish a strong user base before the PS3 hits. That will help them keep the big publisher's good will.

And, come on, don't be stupid! What is more impressive: "We sold 10million consoles" or "we sold 100,000 consoles then ran out".

The need to have a big installed base also helps reward those devs and publies which managed to release their games in launch, or at least before xmas. They win NOTHING with an artificial shortage. Nothing at all. PArents get pissed, kids get pissed, hardcore gamers get pissed... MS WON'T jack up the price when it gets rare, that is also stupid.

BTW, Tickle-me-Elmos are a very poor comparison. The toy maker had to sell those before xmas, then forget about them. They were one shot stand alone products. Consoles are a completely different beast. Launch is just the start of a 4-5 years road.

BTW, HAlo 3 is yet another issue entirely.

[Serapth]

Rman, Basic Marketing 101: People who fail to get your product because you can't supply it get ROYALLY PISSED OFF. this "god damn I have no x360 because MS Suxxx" effect is 10x worse than any benefit they could reap from this so-stupid-only-gamer-forum-regulars-could-have-imagined artificial shortage ploy.

The history of IE has NOTHING to do with console gaming launches!!! This is CONSUMER MARKET! ELETRONICS! CHRISTMAS! They NEED to push as many x360's as they can so that they establish a strong user base before the PS3 hits. That will help them keep the big publisher's good will.

Not so simple marketing actually. MS intends to have a constant supply of Xbox's coming through the supply chain between now and Christmas. Your right, a small percentage of people are going to be rightously pissed they couldnt get an XBox on day one but this segment of the marketplace are the most dedicated and frankly will put up with the most shit. That or they pre-ordered in may.

The other segment ( the majority segment ) of the market place is the average guy or gal. They may have wanted an XBox, but obviously not enough so to pre-order months in advance. In otherwords, they are sitting on the fence. Suddenly, day one, the xbox comes out and BLAMMO, sold out in 20 minutes. Yet, the store can say we expect our next shipment in 3 days. Now, the undecided feel pressure to get one or miss the opportunity even though a week before they didnt even know they wanted one.

My prediction, there are plenty of XBox360's out there and basically everyone that wants one before Christmas should be able to get one regardless of what EB is telling people. Microsoft is just going to meter that number out between now and say, the 24th. In a sense, each time they resupply, there will be another mini-launch event, which will generation even more media buzz for the Xbox.

Now, if the flipside were true, and say they had 10 million units and released all of them to retail on day one. Wheres the hype? The early adopters will all get theirs and be very happy, but joe sixpack will look at it sitting on the shelf unsold and think... "hmmm... must not be very good". Eventually they will sell all 10 million units, but at a much slower pace then they would if they spread the 10 million out across weeks and convinced the public that they were scarce.

There is alot more to marketing then telling the public how cool your product is. This is one more example, and frankly ive already seen alot of reports on mainstream media saying how scarce its going to be, so frankly... its working.

Now, analogy time. You ever watch a porno movie... dont lie, I know you have. Now, picture the XBox360 release as a porn. If it had one damned wicked sex seen with 20 amazing girls but the guy blows the money shot 5 minutes in and it was over... how excited would you be to watch more?

In summary, MS is controlling the supply chain for the same reason porns stars dont blow their load in the opening minutes of a porn. Building anticipation and excitement is often a good thing.

[BigJonno]

I blame Sony and the "you can ONLY get a PS2 at launch by pre-ordering" fiasco, which was a blatent attempt to hide the lack of decent titles for the first six months of the systems life. Correct me if I'm wrong, but I can't remember there being a big pre-order/launch shortage thing before then. Since then we've had Xbox shortages, the "guaranteed to sell out so pre-order NOW" PSP lies and now the whole "we don't even know how many we're getting, but we'll take your money now" 360 affair.

That PS2 thing really pissed me off. Just 'cause big chains sell lots of your last console (with plenty of kiddy and casual games) doesn't mean they're going to sell more units of your new machine at launch. I worked in Toys 'R' Us at the time and I reckon we had just as many units as all the specialist videogames and entertainment stores combined. We had trouble shifting them because no gamer is going to think about Toys 'R' us when pre-ordering a new console. The only reason we filled all our pre-orders was that me and the other multimedia staff were telling all our gaming mates that we had stacks of them.

[Achilles]

Suddenly, day one, the xbox comes out and BLAMMO, sold out in 20 minutes. Yet, the store can say we expect our next shipment in 3 days. Now, the undecided feel pressure to get one or miss the opportunity even though a week before they didnt even know they wanted one.MS doesn't have a warehouse of these just sitting around. The reason they'll get more in 3 days is because that's when the next shipment arrives from China. From here until Christmas and until the demand dies down they'll be shipping them as soon as they're manufactured and getting them to retail as fast as possible. Why do you guys think quality control on these units is so bad at launch. It's not to build anticipation or create some marketing bs, it's because they ship them the second they're off the line.

They couldn't have started making them sooner, there wasn't a physical way to do that. All the software needed to be final, you can't patch a console, it all needed to be tested, the games needed to be finished. Maybe if you're making pet rocks you could just start making them sooner, but a console has a ton of stuff that goes into it and the fact that they ever come out anywhere near on time is a minor miracle, that goes for Sony as well.

[Serapth]

MS doesn't have a warehouse of these just sitting around. The reason they'll get more in 3 days is because that's when the next shipment arrives from China. From here until Christmas and until the demand dies down they'll be shipping them as soon as they're manufactured and getting them to retail as fast as possible. Why do you guys think quality control on these units is so bad at launch. It's not to build anticipation or create some marketing bs, it's because they ship them the second they're off the line.

They couldn't have started making them sooner, there wasn't a physical way to do that. All the software needed to be final, you can't patch a console, it all needed to be tested, the games needed to be finished. Maybe if you're making pet rocks you could just start making them sooner, but a console has a ton of stuff that goes into it and the fact that they ever come out anywhere near on time is a minor miracle, that goes for Sony as well.

Regardless to if they do or dont have millions of units in warehouses, im saying *if* they do, it would be suicide to flood the market. In this case, a tight supply chain that over time manages to satisfy demand is better then an oversupply.

[Sensei-X]

As much as I would like to blame MS I don't for a second think GameStop. EBGames, etc. are even close to being blameless in this. In August when I finally got around to putting my money down at GameStop for an X360 the guy who took my pre-order said I might get a second shipment system or possibly even third. As I was leaving I glanced over and saw a VIP poster which proudly proclaimed that if you pre-paid your Xbox 360 in full you were guaranteed a system on launch day. Makes you wonder how many people who reserved early are getting screwed on launch day to fulfill the VIP pre-orders and also makes you wonder if all the rumors of certain pre-orders being bumped up if they have games and accessories pre-ordered alongwith the system are true.

[Achilles]

Regardless to if they do or dont have millions of units in warehouses, im saying *if* they do, it would be suicide to flood the market. In this case, a tight supply chain that over time manages to satisfy demand is better then an oversupply.I see what you're getting at now. There are a lot of consoles to be sold though, starting out with I think 3 million by Christmas which is what they're managing now, and 8 million is the same difference when the goal could be upwards of 90 million like the PS2's install base is.

I think if they were going to do this as a marketing ploy they'd ship just enough to cover pre-orders, then sell the rest as the excited launch day people spread the word. You've already sold people who have put money down, there's no way that they're going to anticipate it more by not getting it on launch day, all you're going to do is piss them off and make them cancel their pre-orders in favor of standing outside of a walmart.

[Serapth]

I see what you're getting at now. There are a lot of consoles to be sold though, starting out with I think 3 million by Christmas which is what they're managing now, and 8 million is the same difference when the goal could be upwards of 90 million like the PS2's install base is.

I think if they were going to do this as a marketing ploy they'd ship just enough to cover pre-orders, then sell the rest as the excited launch day people spread the word. You've already sold people who have put money down, there's no way that they're going to anticipate it more by not getting it on launch day, all you're going to do is piss them off and make them cancel their pre-orders in favor of standing outside of a walmart.

Yeah, but if they do that, they lose the word of mouth market aswell. Also, dont forget, MS wants to sell as many of these things as fast as they *properly* can. I still think everyone that wants one is going to get one before christmas. Its just the consoles will be metered out in batches to inspire a sense of urgency in buyers. In the end, if MS doesnt satisfy market demand, they also shoot themselves in the foot.

So, in a way, MS is doing a balancing act. Trying to make their product scarce enough to be in demand. Yet at the same time, supply enough of them that they get a good headstart in the marketshare battle.

Edit:
Another thing to keep in mind is, its still a month to Christmas. What better advertising is there for little billy to go over to lucky Bobs place and see what a kickass ( though rare ) game machine the Xbox 360 is. What do you think Billy is going to ask for for Christmas when he gets home. I still remember being a kid, where if my friend had the ATAT and I only had the ATST, well, my friend was cooler then me. Sad what we learn at young ages :)

[Venkman]

To whoever blames MS for the shortage:

It's not MS to blame. It's your Mom.

[Serapth]

To whoever blames MS for the shortage:

It's not MS to blame. It's your Mom.

Actually, its my mom you should blame. And dont ask what she did to your controller... you dont want to know.

[kickmybum]

When Halo2 dropped the EBGames I pre-ordered from said it wasn't available until next shipment (which was a week away) and I stopped in earlier and saw some on the store shelves. Not that this is similar, but I have a feeling that stores really don't care too much about telling people that pre-ordered "Go screw yourself".

[Achilles]

So, in a way, MS is doing a balancing act. Trying to make their product scarce enough to be in demand. Yet at the same time, supply enough of them that they get a good headstart in the marketshare battle.Well that's not what they're doing, but I see why you may think that it's what they're doing. What they're doing is shipping them as fast as they can make them.Edit:
Another thing to keep in mind is, its still a month to Christmas. What better advertising is there for little billy to go over to lucky Bobs place and see what a kickass ( though rare ) game machine the Xbox 360 is. What do you think Billy is going to ask for for Christmas when he gets home. I still remember being a kid, where if my friend had the ATAT and I only had the ATST, well, my friend was cooler then me. Sad what we learn at young ages :)But as-is Bob, who preordered the 360 3 months ago may not get it by christmas. There's no advertising there. People who pre-order their systems from specialty stores have to be assumed to be less in number by far than everyone who potentially wants one. If you fill all those pre-orders on day one you're not flooding the market, you're just creating a very happy base of hard-core customers who will then go pimp that system to their friends in time for Christmas.

[Serapth]

Well that's not what they're doing, but I see why you may think that it's what they're doing. What they're doing is shipping them as fast as they can make them.But as-is Bob, who preordered the 360 3 months ago may not get it by christmas. There's no advertising there. People who pre-order their systems from specialty stores have to be assumed to be less in number by far than everyone who potentially wants one. If you fill all those pre-orders on day one you're not flooding the market, you're just creating a very happy base of hard-core customers who will then go pimp that system to their friends in time for Christmas.

See, thats where you and I vary in opinion. I dont think they are shipping them as fast as they can make them. I think they are making them as fast as they want to ship them, which sounds odd at first, but makes sense in the end.

Simply put, the weakest link in the 360's supply chain has to be ATI, and frankly ATI is pretty damned good at manufacturing whatever needs to be made ( used to be a stock holder in this company. They are pretty slick in this regard ). IBM themselves have god knows how many fabs they could make the CPU in, and frankly the CPU was probrably the first component finalized so they have had how long to finish it? Ram and DVDs are pretty much off the shelf components that can be sourced in about whatever amount MS wants. Finally, MS has 3 contract manufacturers lined up to make the 360, one of which is Flextronic, which has a scary amount of capacity for production.

With three seperate companies pumping out XBox's around the globe, I honestly think MS could make to order about as many as they needed. I have heard of no particular shortages component wise that is causing 360 delays ( I believe for the PS2, there were particular pieces that slowed down production, the EE being the foremost ). So, without a supply chain hiccup, why wouldnt they be able to meet about whatever production level they wanted?

As to Bob not getting his Xbox in time for Christmas, personally I think thats a combination of two things. 1) Fear mongering. Fear creates hype, hype creates sales. 2) Microsoft isnt targeting gaming stores for sales, plus gaming stores pulled a jackass move with the overselling of preorders.

Everything im hearing lately is the allocation isnt going to places like gamespot or EB. Its going to walmart or bestbuy. So, bob may not be able to get his pre-order by Christmas(from EB), but their is a good chance he could walk down to Walmart or Target and pick on off the shelf on the 22nd. Hey, im not just speaking out my ass here... im gambling off it. I didnt pre-order an XBox 360, as in September the local EB said the initial alotment ( however they came up with that number ) was sold out. Its the way EB works. However, for the Xbox, DC, PSP and PS2, I had ZERO issues ever just walking into a chain store and simply buying one on day one. Every console launches with this kind of hype.

All said, and a little off topic. The villian here really is EB and co. They over sold a product where they didnt know how many they are getting. And, frankly they do it every time something new comes out. Plus, like a poster earlier said, often even though they say they are sold out, often you can still go in and buy one off the shelf day one. Dirty dirty bastards. ( They did that to me with the PSP and Halo2 )

[Achilles]

See, thats where you and I vary in opinion. I dont think they are shipping them as fast as they can make them. I think they are making them as fast as they want to ship them, which sounds odd at first, but makes sense in the end.As someone looking at it from the outside I can see how you’d think the chips would be finalized and that wouldn’t be a problem, and allocations from major manufacturers should be a problem, etc. However that’s not the case, not that I can provide examples of that. Consider that they may have been finalizing this stuff right up until the first retail unit rolled off the assembly line. I’ve been involved in two console launches however, and both have been like this.

Chain stores like walmart and best buy do get allotments that are usually larger than the pre-ordering specialty stores. They also sell a lot of systems and games. They probably could have pulled their walmart and best buy allocations and given them to fill pre-orders, but those retail partners aren’t people you want to screw over. It does really suck that Gamestop and EB kept on taking those pre-orders even though they had no idea how many they'd actually get.

Anyway I'm telling you how it is, you don't have to believe me because I can't back it up with anything, but just consider that there may be a different cause for the shortage than the one you descirbed (a very well explained description I might add :) )

[Serapth]

Anyway I'm telling you how it is, you don't have to believe me because I can't back it up with anything, but just consider that there may be a different cause for the shortage than the one you descirbed (a very well explained description I might add :) )

My only hesitation in believing what you say is all the companies involved are fairly high profile. I watch tech companies not only as a geek, but as a potential short term investor so instead of just reading gaming news, I tend to read the financial reports aswell. If there were shortages, generally they hit the financials far before they hit the gaming world. ( Not going to make my little rant about how gaming media is retarded and hype driven.... really... im not going.... honest.... ). So far, their hasnt been a peep about supply chain problems, which leads me to beleive that everything is going smoothly.

That said, as an investor, if you know something, I would love to hear it :).

SIDE POINT: To anyone with disposible income that follows tech stocks closely, you should really look into investing. Take a look back to what ATI's stock ( ATY on the TSX ) did when they officially announced they would be the chip provider of choice for the Xbox360. Frankly, I made about 8 xboxs in 6 weeks times worth of profit, on something that was basically "well known" in the gamer community.

[RMan]

Rman, Basic Marketing 101: People who fail to get your product because you can't supply it get ROYALLY PISSED OFF. this "god damn I have no x360 because MS Suxxx" effect is 10x worse than any benefit they could reap from this so-stupid-only-gamer-forum-regulars-could-have-imagined artificial shortage ploy.
Oh, please. So you’re telling me that the guys getting pissed off they didn’t get their system on day one are so pissed that they won’t buy one before the PS3? Sillyness, MS doesn’t care if your pissed, as long as it doesn’t result in lost sales, they’d like you to talk about the high system demand as much as possible, that’s positive buzz. This is a perfectly logical strategy for those familiar with concepts beyond Marketing 101.
And, come on, don't be stupid! What is more impressive: "We sold 10million consoles" or "we sold 100,000 consoles then ran out".
Umm, that’s a phenomenally stupid comparison, but I’ll assure you, if they absolutely knew they’d sell 10 million units this Christmas, then I’m quite sure we’d have many more systems available.
They win NOTHING with an artificial shortage.
I don’t think it’s artificial, just intentional. I don’t think they’re hording systems, just willingly produced less than the demand. Again, they have no competition until the PS3 launch, they don’t lose nearly what a common product with competition loses when there is a lack of supply, and they get a higher satisfaction rate increased sales rate between launch and the PS3 launch. And what are they losing? Few common consumers were running out to get this at launch anyway, and the bulk of the people that get screwed by the shortage will still get it before the PS3, so the damage is clearly quite low. You can argue that it’s not worth the tradeoff, but to argue that they don’t get anything from a shortage is clearly not true.
Launch is just the start of a 4-5 years road.
Yea, which makes leaving Christmas on a high note rather than leaving systems sitting on the shelves even more important.
BTW, HAlo 3 is yet another issue entirely.
Very pertinent, they’ve publicly stated that they’re willing to sacrifice Halo 3 sales in order to hurt the PS3 launch, why on earth do you think they’re system release plan doesn’t have hurting the PS3 in mind as well? I mean, they can’t say it publicly since it’d hurt publisher relations, but it’s the same company, why would the product strategies not have the same goals at heart?

[mister_slim]

Well I can't help but think it a little odd that they only started manufacturing these things three or four weeks ago... If that's not artifically creating a shortage, what is?
The first 360's came off the line sometime in August. They have had some technical difficulties though.
Let’s also look at Halo 2, clearly they spent way more money on marketing than the average game would spend on marketing(way more than what “makes sense” for a game), and the reason is that a sold copy of Halo 2 is worth WAY more to MS than it would be to another publisher since it’s also proof of the viability of the platform and thus brings them money through other channels.
Another aspect is that MS shipped more copies of Halo 2 than they had sold of Halo (I've still seen no sign the initial shipment sold through, actually). Claiming 6.4 mil shipped was obviously a PR point.
I see what you're getting at now. There are a lot of consoles to be sold though, starting out with I think 3 million by Christmas which is what they're managing now, and 8 million is the same difference when the goal could be upwards of 90 million like the PS2's install base is.

3 million in the first three months. If I give them a month shipping time, which is rather generous, they're only manufacturing 3 million in six months, which doesn't demonstrate a lot of confidence in the 360 sell-through.

[Achilles]

The first 360's came off the line sometime in August. They have had some technical difficulties though.

3 million in the first three months. If I give them a month shipping time, which is rather generous, they're only manufacturing 3 million in six months, which doesn't demonstrate a lot of confidence in the 360 sell-through.Or it doesn't demonstrate an ability to build them that quickly. Given the retail demand they could probably sell 8 million by Christmas worldwide. I doubt the 3 mil in 6 months number.

It's an interesting theory about them having final retail hardware in August, but I believe they didnt have anything close to final retail kits by then.

[mister_slim]

Or it doesn't demonstrate an ability to build them that quickly. Given the retail demand they could probably sell 8 million by Christmas worldwide. And where'd you get the 3 million in 6 months number?

Where'd you get August from? They certainly didn't have final retail hardware in August.
August is what MS told the WSJ. August, September, October, November, December, January, to manufacture the 3 million units they expect to sell by the end of February. If they don't have the capacity to hit a million a month they obviously don't expect to sell that well.

[Achilles]

August is what MS told the WSJ. August, September, October, November, December, January, to manufacture the 3 million units they expect to sell by the end of February. If they don't have the capacity to hit a million a month they obviously don't expect to sell that well.Or they don't have the capacity. You can't just pull production capacity out of thin air.

I think this is the WSJ article (http://online.wsj.com/public/article/SB113227316117900733-M_MemrOYwql5ffGm4_NuqIa4KEE_20051218.html?mod=tff_ article) that you’re talking about. It says they’d make as many as they possibly could and that they expect to have 5.5 million sold by the end of July. "The faster I can build volume, the better off I am," Within the first 90 days of the Xbox 360's launch, Microsoft executives expect to deliver as many as three million Xbox 360 consoles, putting them on track to sell up to 5.5 million units by the end of July.And that the critical problem making enough 360s is that there are a ton of parts suppliers.But the critical challenge comes in funneling these parts, and more than a thousand others, through a manufacturing chain that looks like a road map of Los Angeles stretched across three continents.Here’s the section that you’re referencing. Personally I think they mean final development hardware, not retail hardware but the article isn’t clear. In all, 250 suppliers make parts for the machine. Some 25,000 workers world-wide have roles in making either the parts or the Xbox 360 itself, Mr. Holmdahl says. The two Chinese factories started rolling out finished Xbox 360s in August and now push out tens of thousands of units a day. After each Xbox 360 rolls off the line, it undergoes two hours or so of automated testing and five minutes of manual testing before being packed into a plane or a 40-foot-long ship's container.The analyst, Chris Cotty, later in the article is incorrect, so at least the sun still comes up in the morning.

[mister_slim]

Or they don't have the capacity. You can't just pull production capacity out of thin air.
True. But it isn't out of thin air though. It appears they've had a few problems scaling up manufacturing, but it's not like they've only had a couple of weeks to put the launch together. They've known the target date for a while, they've known the quantities they need, they should know the sales projections. I mean, if they can't figure out that launch is where demand peaks and plan accordingly what the fuck are they doing?
Here’s the section that you’re referencing. Personally I think they mean final development hardware, not retail hardware but the article isn’t clear.
I think they meant final, retail hardware started coming off the line (in very small quantities though).