Why isn't Xbox selling as well as expected?
By Martyn Williams
(IDG) -- Sony Computer Entertainment (SCEI) expects to ship 20 million PlayStation 2 consoles in the current financial year, an increase on last year's total shipments and more than double those predicted by Microsoft for its Xbox console, according to the companies.
The forecast reveals further bad news from Microsoft, which is trying to unseat SCEI as the king of the computer home-video gaming business but said last week it is currently lagging its rival.
Nevertheless, Microsoft is upbeat: "We've got a strong number two position. We feel very good about that," Microsoft's Chief Xbox Officer Robbie Bach told analysts in New York last week, according to a Microsoft transcript of the briefing.
The company expects an installed base of 3.5 million to 4 million consoles by the end of June, a little short of its initial projections largely because of lower-than-expected sales in Japan, Bach told the analysts.
Shipments in Japan have been lower than the company originally forecast. In preparation for the Japanese launch of Xbox, Microsoft shipped in 250,000 consoles and Bill Gates, its chief software architect, who officiated at the launch event in Tokyo's trendy Shibuya district on February 22.
Among the initial shipment of consoles were 50,000 limited edition machines but today stocks of the limited edition machines remain in stores, including the very store where Gates launched the console.
The company also saw a fall off in sales in Europe in the weeks after launch and in mid-April slashed around 35 percent off the European and Australian prices to boost demand.
The company has yet to announce any plans for price cuts in Japan, but Bach said he knows the company has to crack the Japan market if the Xbox is going to be successful.
"Japan is going to be a long-term investment," he said. "Japan is clearly going to be our toughest market. We've known that for a long time. We're certainly not selling as much as we'd like there."
On the Software Side
Japan is key not just because it is a major consumer game market but because it is the home country to many of the world's top game writers. A poor showing in Japan could make it difficult to attract Japanese software makers to the platform, and software, rather than hardware, is what usually sells consoles.
Gates underlined the importance of software when he launched the console in Japan.
"The key is what people experience playing the games," he said. "It all comes down to game playing."
To this end, Microsoft is both working on games itself and with software companies, and Bach predicted somewhere between 15 and 25 exclusive titles on the platform this year.
Looking ahead, Bach said the company forecasts cumulative shipments to reach between 9 million and 11 million units by June 2003, which will mark 20 months of sales for the console since it first hit the shelves in the U.S. in November 2001.
In contrast, the PS2 shipments hit 10.6 million units at the end of March 2001, after 13 months on sale, and totaled 19.6 million after 19 months, the closest figure available from SCEI with which to compare against Microsoft's forecast.
Total PS2 shipments in the year to the end of March 2002 totaled 18.1 million units -- just under double the previous year's total shipments of 9.2 million units. SCEI's latest forecast shows the market is still growing, but at a much-reduced pace. The company expects to see the strongest growth in the North American market in the coming year.
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