360 Sells 400k Units, New Stock This Weekend

Next Generation is reporting an estimate of 400,000 units sold for the Xbox 360 in its first week on the retail shelves. Microsoft is planning on having more stock available as of this weekend. From the article: "It seems even the biggest retailers are in the dark. Speaking to USA Today, Circuit City's Jim Babb said, 'We knew demand would outstrip supply for some time. I have been told we'll get additional supplies, so I can only advise customers keep checking back with stores and on the website.' Microsoft is gearing up for its European launch this weekend, but many believe the shortages could be even worse over there. Retail supplies are said to be tiny, and many customers who have pre-ordered have been told that they may not receive their machines this side of the New Year."

Still confused on the sell-out history

[voice_of_all_reason]

I remember a bunch of posts on earlier threads saying that new systems have never sold out before -- and this was a constant trick by the company to get fence-sitters to go for it.

I couldn't afford PS2/Gamecube or PS/N64 when they were released, but is this usual? I sure don't remember any system flat selling out on release, so does Xbox 360 set the standard now?

Re:Still confused on the sell-out history

[SteveX]

400k XBox 360's isn't that far from Sony's 500k PS2's when it launched, and the XBox 360 is going to be restocked faster than the PS2 was.

Re:Sticking with PC's I guess...

[Quarters]

This is enough reason for me to not buy an XBOX360 EVER. In order to create a frenzy which in turn creates buzz and will most likely help sell even more of their consoles later on, they purposely make sure to not have enough supply for the demand in the beginning. This is just rude and evil.

Or, more likely, it's just business. While the rude and evil theory resonates with a certain age group quite well it just doesn't stand up logically.

Microsoft, like most electronic manufacturers, doesn't own the factory that makes their hardware. They sub out the manufacturing to Pacific rim contract manufacturers like Flextronics. Flextronics only has a certain amount of manufacturing capabilities. On average those facilities are running at near full capacity. It's not in Flextronics' best interest to have extra production capacity that is just sitting around unused. Microsoft has to work out a deal with Flextronics to get a finite amount of production capabilities, more than likely givng up their 1st gen XBox manufacturing run in the process, just to get more space. They get X amount of facility and tell Flextronics that they want to launch te console on a certain date. Flextronics says, "Ok, that means you will have # consoles at launch and # consoles each week after that."

At this point Microsoft has a few options:

1) Live with that production capability 2) Sub out to more manufacturers 3) Pay Flextronics to build more space

Option 1 saves the most up front money but means a hard limit on the # of consoles at launch. Option 2 can increase the # of consoles at launch, but the availability of those consoles is dependent on the # of manufacturers available, the amount of capacity they are offering, and the price point for that capacity. Option 3 can increase the # of consoles at launch, but is time dependent (can we get the facility going in time?) and will probably end up being a monetary loss for Microsoft. They are essentially building out Flextronics's business for them.

All of these options have to be weighed against the expected necessary weekly production of consoles over the entire lifespan of the console. #3 is a very bad option in this light. While Microsoft could easily make a lot more consoles for launch by paying Flextronics to build more capacity there's no reason to expect that they will need to utilize that amount of capacity over the life of the console. Microsoft would pay for a short term production increase, cut back on production when supply became greater than demand, and leave Flextronics to sell that production capacity out to other companies, like Sony or Nintendo. It's definitely not in Microsoft's best interest to create production capacity for their competitors.

So, Microsoft strikes a balance between cost, # of units available at launch, and required capacity over the life of the console. That will almost always mean demand is higher than supply when there is peak interest in the console, but over the life of the console the supply:demand ratio will be as close to 1:1 as possible.

This whole equation is compounded for Microsoft because of the fact that they are trying to get XBoxes launched in all markets before the demand for them has leveled off in the first market. There just isn't enough manufacturing capacity available to ensure that all of the markets have a glut of product at launch.

Do you really think it's in Microsoft's best interest to annoy potential customers with an artificially introduced shortage? What good does it get them? The lack of available consoles isn't increasing the number of people that want a 360. It's not like Mr. Bob Suburbanite who's never played a game is suddenly saying, "All of the forum trolls are royally pissed that Bill Gates is sitting on a stack of unreleased consoles and laughing maniacally. Well golly, that makes me want one of these things!!!" Quite the opposite, actually. More than likely people who haven't been hanging pictures of 360s in their Jr. High School locker for the past two ye

Re:Do you *really* think the shortage is on purpos

[ClamIAm]

I think they're trying to walk the line between "sell as much as we can" and "get as much mindshare as possible". Selling out might get you some mindshare, but it won't increase your userbase. Increasing your userbase as much as possible won't build as much hype. And we have yet to see if the hype will help in the long run (especially, say, a year from now).