Xbox 360 Sales

Xbox 360 sales are not what they could be and Microsoft has only itself to blame.

The marketing of Microsoft’s next-generation video game console, the Xbox 360, may go down in marketing history as a textbook example of how to drive your customers directly to the feet of your primary competitor.

What makes the failure of the Xbox 360 launch so stunning is that it was executed by Microsoft, a company with abundant marketing savvy.

Microsoft launched their marketing campaign with a bit of buzz marketing in the form of the mysterious Our Colony web site. They continued by drip drip dripping a drop of Xbox 360 info here and a dash of Xbox 360 news there through various video game sites and techology events. Photos were leaked. The technical specifications of the box were revealed.

Soon enough they’d whipped the public into such a frenzy that they had to start qualifying some of the launch expectations: Due to their global launch, there would be shortages.

But once they announced that consumers could expect shortages, they had to deal with conspiracy theories positing that Microsoft was creating scarcity in order to amp up demand.

Not that I wouldn’t put it past Microsoft, but I never really bought the idea. Microsoft is gunning for market leader, Sony, who will likely launch their own next-generation system, the PlayStation 3, in Spring 2006. The idea of launching before Sony was to lock people in to Microsoft’s next-gen system. The Xbox 360 is also costing Microsoft more to make than their asking price; they have an obvious interest in recouping those costs in volume and in software sales, which are clearly useless if you don’t have a console with which to play them.

The reasons Xbox 360 shortages are not in Microsoft’s interests are too numerous to mention here, but for a superbly done piece on the subject, see the L.A. Times‘ Michael Hiltzik’s Golden State blog.

Not only did Microsoft screw up their launch by failing to meet demand, the stories of shortages no doubt had the effect of driving up demand through the considerable influence of Johnny expecting an Xbox 360 beneath the Christmas tree.

So what’s a desperate parent to do when they can’t get their hands on the hottest item of the season and don’t want to bid for upwards of $900 Xboxes on eBay? As Christmas approached, I noticed more and more electronics departments with only one or two Sony PlayStation Portables in stock.

You figure Dad can’t disappoint Johnny, so with no 360 to be had, the kid’s disappointment would surely be erased if he got coolest portable gaming system this season. And at a $250 price point, Dad can save a couple hundred in the process. At the end of the day, Microsoft has closed the deal for Sony.

I wouldn’t be surprised to see that PSP sales rose precipitously as a directl result of Xbox 360 shortages. Sony seems to be anticipating just such a scenario.