The Great Xbox Shortage of 2005
December 16th, 2005
Via Slate Online Magazine comes the story of Why you can’t find any 360s for sale.
“It isn’t the scarcity of supply itself that is puzzling. That is almost inevitable for some of these seasonal toys. In any given year, many toys will be unloved and oversupplied, but a few lucky ones will be in unexpectedly high demand. We shouldn’t be surprised any more than we’re surprised that the champion of a knockout tennis tournament won all his matches. Somebody had to.
In Microsoft’s case, the Xbox 360 can be produced only gradually, but all the demand is there at once. Plentiful supply would be possible only if Microsoft made millions of consoles in advance and stored them without releasing them, or if it built vast production lines that only ran for a few weeks—both economically unwise strategies. It makes more sense to ship the consoles as they are made—and that means gradually. The steady supply can’t match peak December demand.
So, supply shortages are a fact of life. The puzzle is somewhere else: Why don’t companies raise prices when supply is short and demand is frenzied? “
I really don’t like this article.
He treats the Xbox as the sole product in a singular market. Nintendo in the late 1980’s had a near monopoly on home consoles. And how can you even suggest that buying behavior of concert tickets is remotely the same as those of a console!? One is an event that you go to because it’s a one time live show. A console is a gateway into a product base, and one time purchase requirement into a social scene that last half a decade. Could they be any more different? I suppose we should look at how people buy bananas, too, or perhaps the supply and demand of hairspray.
Microsoft is able to spearhead the next gen market and do so right before a Christmas season. That’s a huge privilege. If they risked raising prices way passed record highs for a console launch (700 bucks for the console alone!) then they would risk losing customers by shaming themselves in the VG market.
Yes - there was enough drive for consumers to buy the 360 even at 700 bucks a pop, but you know they would have alienated a huge number of customers in the process. I’d put good money on the fact that VGamers would have scoffed at strike price of 700 bucks. It would have shamed Microsoft permanently and customers would have decided then-and-there to wait for the Sony PS3 - even if the Xbox priced dropped from 700-300 bucks before the Playstation launch. Plus - a Christmas gift of 300 something dollars isn’t absurd these days, but 700 is off the cuff. Ditto for college kids.
This is a long term battle. Video games have become more and more expensive to create, and there is so much riding on this generation of consoles for both Sony and Microsoft that losing a long-term customer base due to unpopularity is much too great of a risk, especially if it’s just to get a few extra bucks on launch day.
Also - it’s not even completely sold-out. It’s only a few weeks later and you can get a console just about everywhere in the country:
http://www.kotaku.com/gaming/xbox-360/best-buys-new-xbox-360-stock-numbers-143180.php
Dave
Comment by Della Bitta — December 16, 2005 @ 4:04 pm