Xbox 360 shortage won’t get better soon

Two months after its introduction, Microsoft’s Xbox 360 is still an elusive prey for shoppers in the United States and might well remain so until spring.

The Xbox 360 is the first of three new video game systems due in the space of a year and has been hailed as an advance in home entertainment and online gaming. But the software giant’s inability to make enough of the systems to satisfy demand could hurt it in the battle for supremacy with Sony. Sony’s PlayStation 3 could arrive as soon as spring.

Microsoft “needs to get the supply-and-demand situation nailed real soon,” says John Davison, editorial director for Ziff Davis Media’s video game industry magazines. “If it drags out much longer, it’s just going to promote apathy rather than excitement.”

In the short term, prospects don’t look good. Microsoft initially hoped to have shipped as many as 3 million systems by the end of February. But by the end of the year, Microsoft had shipped only about 1 million worldwide (about 800,000 to the United States and 100,000 each to Europe and Japan), according to estimates from analyst Michael Pachter with investment firm Wedbush Morgan Securities.

The NPD Group estimates that Microsoft sold 600,000 systems from Nov. 22 to Dec. 31. In comparison, it sold 1.4 million of the original Xbox systems in the first two months of 2001. “That was a new brand, and certainly now that it’s established with a very loyal following and given the amount of hype and buzz they created, that is one barometer of what possibly could have been,” says NPD analyst Anita Frazier.

Circuit City, like many other retailers, has held off promoting the 360 in advertisements.

“We think supplies are going to remain pretty tight for the next 90 days,” the chain’s Jim Babb says.

At the Consumer Electronics Show in Las Vegas, Microsoft’s Peter Moore said the startup of a third manufacturing plant would help increase supply.

“We are making them as fast as we possibly can, and we do expect over the next three to four months that availability will get a lot better,” Microsoft Chairman Bill Gates says.