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Xbox Shortage Leaves Fans Out in the Cold

Two months after its debut, the new version of Microsoft's game console remains scarce. The company could be losing its chance to grab market share before Sony releases a new PlayStation.

January 29, 2006|Julie Tamaki | Times Staff Writer

Gripping the controller of the coveted Xbox 360, Jesus Sanchez watched as the Raiders clashed with the Broncos on a high-definition flat-screen TV. The details in the "Madden NFL 06" video game looked so sharp that it was almost like seeing an actual football game.

Sanchez was mesmerized, but unfortunately for him the 360 wasn't his. He was playing a demo machine at a Best Buy store in Atwater Village because, like countless other frustrated gamers, he hasn't been able to get one of his own.

For The Record
Los Angeles Times Wednesday February 01, 2006 Home Edition Main News Part A Page 2 National Desk 2 inches; 77 words Type of Material: Correction
Xbox shortage -- Two photographs that ran Sunday with an article in Business about a scarcity of Xbox 360 game machines were incorrectly credited. A photo on page C1 showing game enthusiasts camped out in front of a store before the console's release in November was taken by Kiichiro Sato of the Associated Press, not by The Times' Ken Hively. A photo on page C5, a close-up of the Xbox 360, was taken by Hively, not Sato.

More than two months after its debut, Microsoft Corp.'s newest console remains hard to find.

To be sure, temporary shortages after the launch of a new machine are common in the video game business. But Microsoft's continued inability to meet demand for Xbox 360 has irritated customers and disappointed video game publishers, raising questions about whether the company has squandered an opportunity to grab market share before consumer electronics giant Sony Corp. releases its PlayStation 3 later this year.

For its part, Microsoft said it expected the shortage to ease in coming weeks, thanks to an additional manufacturing plant coming on line, and the balance between supply and demand should stabilize before the end of June.

June may be too late, according to some Wall Street analysts.

"Microsoft's first-mover advantage is eroding if it takes them very long to get the first 5 million boxes out," said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles. "If 4 million show up in the month of June and Sony launches in the month of June, there's not much of an advantage" for Microsoft.

Whether gamers like Sanchez, a 28-year-old art student from Santa Clarita, will forgo plans to purchase an Xbox 360 to hold out for a PlayStation 3 remains to be seen. Sanchez said his wife wanted to buy him an Xbox 360 for Christmas, but couldn't find one.

"I heard the PlayStation 3 is coming out pretty soon too, but I haven't really compared it yet," said Sanchez. He said he was waiting to hear more about the Sony console before deciding whether it was "worth the wait."

Microsoft and Sony are locked in a battle for dominance in home entertainment. The Redmond, Wash.-based software behemoth, still relatively new to the hardware scene, hopes to use its $399 console to overtake market leader Sony.

Industry observers have drawn comparisons between Microsoft's launch of Xbox 360 and the release of new gadgets by Sony, which has vast experience at manufacturing consumer electronics. It also has been compared with Apple Computer Inc., a company flying high due in large part to its line of iPod music players.

"Steve Jobs will announce a product and it will ship that day and be in pretty good supply," said Geoff Keighley a host on G4, a cable channel devoted to video games. By comparison, Keighley said, Microsoft created "an object of desire they weren't able to deliver to the vast majority of people who were intrigued."

The scarcity of Xbox 360s -- which play games, music and videos in addition to exploiting the latest in video game graphics and high-definition television -- was particularly acute during the crucial holiday shopping season. Throngs of shoppers camped out overnight in retailers' parking lots; some left empty-handed. Others sought the consoles on EBay, where more than 40,000 of them were sold in the eight days after the model's Nov. 22 launch for an average price of about $800.

"You like to have the Cabbage Patch Kids' effect where there's a scarcity, but there was just a little too much scarcity," said Frank Gibeau, general manager of North American publishing for Electronic Arts Inc., the world's largest independent game publisher.

Microsoft reported Thursday that it sold a total of 1.5 million Xbox 360 consoles in its fiscal second quarter ended Dec. 31, including 900,000 in the U.S., 500,000 in Europe and about 100,000 in Japan. Microsoft executives blamed shortages of parts for the lower-than-expected sales, but said they were nonetheless thrilled with the console's launch, noting that it was already available in 19 countries and that software for the device was selling at a nice clip.

"We're off to a strong early start," Scott Di Valerio, corporate vice president of finance and administration, said during a conference call with investors. "Coupled with the continued uncertainty of our competitors entering into the next generation, we are right where we want to be."

The third manufacturing plant scheduled to come online next month is expected to help Microsoft meet its target of shipping 4.5 million to 5.5 million consoles by the end of June. The company also said it now expected to sell 2.5 million consoles in its first 90 days on the market -- down from 2.75 million to 3 million previously estimated by company representatives.

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