Xbox 360 shortage faked to spur demand?

by Vladimir Cole { Oct 19th 2005 at 1:15PM }

Nintendo Miyamoto event line

What we're hearing about the Xbox 360 being "sold out" at certain online retailers is probably a bunch of horse poo (and the Motley Fool link below agrees), but the funny thing about product shortages is that the mere hint of a shortage is often enough to actually create the shortage.

Just for fun, let's pretend we're Microsoft. (Woo! Yahoo!) Ok, now that the excitement of being rich is over, let's also pretend that we want to sell a bunch of Xbox 360s. Here's how we "game the system" to create frenzy for our product:

Give every online retailer an initial tiny allotment so that they'll be forced to tell their customers that they've sold out of their first shipment (example)
Let the media catch wind of the "sold out" stories and amplify them (example)
Hope that consumers start to worry about getting an Xbox 360 in time for the holidays
Hope for the Xbox 360 to make the "Must-have toys for holiday 2005" lists, where editors and writers will inevitably mention shortage concerns
Maybe even plant a few Xbox 360s at crazy prices on eBay ( example)

Who us? Conspiracy theory much? It just makes too much sense for Microsoft to play the product launch like this. Heck, Sony did it with the PSP by talking about Beanie Baby / Cabbage Patch Doll shortages during their launch party for the PSP (turns out, there was no shortage after all).

The bottom line: if people were rational, you'd be able to walk into just about any store on November 22nd and obtain an Xbox 360. But all it takes is a little, good, old-fashioned FUD (Fear, Uncertainty and Doubt) to drive sales through the roof and make this rumor a self-fulfilling prophecy.

When was the last time you heard about a product shortage that actually proved to be true?

Reader Comments (Page 1 of 2)

skrati @ Dec 18th 2005 9:05PM

Well...how about the PS2...or the XBox. Both were scarce on day 1, and both had problems filling the channel during the first launch quarter.

OTAM @ Dec 18th 2005 9:05PM

"When was the last time you heard about a product shortage that actually proved to be true?"

Oil?

Actually,I remember the N64 was a beast to get,it took me and my hours of going around to finally find a place that still had them for preorder.

Needless to say me and my brothers were happy little gamers when the N64 came out. We played Mario 64 into the ground.

watership @ Dec 18th 2005 9:05PM

I had problems getting the ps2 at Launch. Various places were sold out the first day.

aegies @ Dec 18th 2005 9:05PM

um, that would be with the ps2, which was virtually impossible to get for months after it came out (and some would argue intentionally so on sony's part). so was the xbox the christmas of launch; there were several markets where they were incredibly dificult to find. the ds was a bitch to locate last christmas as well. in the last 6 years, the only systems that haven't been hard to find in the 2 month period following launch have been dreamcast, gamecube (i think, although i really wasn't looking for one when they were released either), and the psp, which has consistently been easy to find. i understand the reasoning behind the article, but i don't think enough mention is made about it being a theory of someones, instead of the revelation it's purporting to be. just my opinion.

Maxx @ Dec 18th 2005 9:05PM

I knew it ! lol Ain't I been saying it Miguel ? I've been saying it ! We all knew this shortage stuff was all a bunch of crap. And even if it was I live in Seattle and M$ isnt going to run out in their own backyard I will tell you that. Cheers.

skrati @ Dec 18th 2005 9:05PM

Maxx, they've had several shortages of the Xbox in the Seattle area - both at launch, holiday 2003, and holiday 2004, as well as a few other times where retailers here have been out. Of course the hardcore gamers can usually find one, but for the parents shopping at christmas, it can seem impossible to find, as they just hit a few big retailers then give up.

jc @ Dec 18th 2005 9:05PM

OTAM, there is not a shortage of oil...

There is a shortage of gas refinery / production plants to turn oil into gas. Ask your local congressman when the last gasoline refinery was built, and when he says 1970's... ask him why.

Wario @ Dec 18th 2005 9:05PM

DS was hard to find until Feb... PSP was readily available at any Wal-Mart... I agree with this article that the 360 will also be readily available throughout the holiday season.

soco @ Dec 18th 2005 9:05PM

MS had said before that they haven't promised any specific numbers to any retailer before, back when the first "sold out" things started happening. just recently they said they were still in talks about it.

i think this problem lies with the retailers as they're the ones who will really be making the money here.

the PSP did have supply problems. i had to wait 2 weeks to actually buy one becuase none were available in the bigger stores here on release day.

the PS2 was a case, relatively recently, where demand outstripped supply, as was the PSP, in certain markets.

a while back there were also problems with the iPod. people were having to wait a few weeks to get them shipped after ordering them from Appple. my friend had to wait 3 weeks.

SickNic @ Dec 18th 2005 9:05PM

I don't mind a claims of shortages to boost sales, as long as I don't have to go through that crap ps2 launch again. Of course, I am #1 on the preorder list at my gamestop, so I ain't scured.

corkman @ Dec 18th 2005 9:05PM

Do you people think that any megacorporation has any scruples about pulling every trick in the book to get their hardware into the homes of the masses ? hmm ? Do not be fooled into being grateful to purchase a machine that costs 400 dollars.

Its plastic and silicon.

Hey 40,000 people died last week in an earthquake. Died. 40,000.

Circ @ Dec 18th 2005 9:05PM

First, this is a non-story.

Second, the xbox and ps2 were contrained at release and everyone remembers that, you guys should too.

Third, MS is doing a global release, not a phased territory release, so they will have contraints there that no one has had to deal with before.

Fourth, news is out that sales thruput predictions were cut by UBS today by a million units suggesting that production capacity has been lower than previously expected (you'll have to work analyst complicity onto your paranoid fantasy).

Fifth, when you generically say "product shortage" you open yourself up to non-console examples of supply failing to meet demand (eg, pretty much all Apple products).

Joe @ Dec 18th 2005 9:05PM

I think its ironic to have a post like this, and then refer to FUD. FUD is caused by not having any facts, and presenting things on presumption. Consoles have a hard deadline, like most Christmas offerings...if they dont get a console out in time for the holiday, it's game over..they'll be dead in the water before they ever knew what hit them. Doesn't matter if its MS, Sony, Gizmondo, whoever. So they have to produce as many as they can for that initial rush...but they're also being pushed to work on the product as late as possible to ensure quality. How they make the decisions of when to ship, vs. pushing it back a week to make say 5,000 more or whatever..is a more interesting story. Also, shortages are very specific to areas...walmarts and gamestops in malls may run out quick, but try driving around and finding the hole in the wall game stores...you'll probably find a bundle of them there. This creates a perception of shortage where one never existed. But dont blame console makers for that, blame soccer moms :)

kingoscar @ Dec 18th 2005 9:05PM

The slim PS2 was also tough to find around Christmas time last year.

Maxx @ Dec 18th 2005 9:05PM

skrati - ok I suppose you are right about the parent thing at the holidays. But as you say us HC types can usually track one down. hehe just ask my wife how many stores I will go to when I am obesessing on something lol, At any rate that is the best thing about releasing a tad early so that all us crazys can get ours before we are compeating (sp) with Gram's.

Bri @ Dec 18th 2005 9:05PM

On #11 Corkman - I agree with you exactly

This article isn't worth consideration - we already know how loads of businesses act to push a product. Why is this relevant?

'While stocks last' - ever heard that before?
'Limited edition' - heard that?

It's all smoke and businesses have been pumping it out for years...who cares?!

Scott @ Dec 18th 2005 9:05PM

Hey, keep yelling shortage. I don't care. I'm at the top of the pre-order list for a 360 at three different EBGames. All the better to eBay with my dear.

OTAM @ Dec 18th 2005 9:05PM

Jc,I was being sarcastic. Oil isnt a product to begin with it's a resource.

Bloo (formerly Glenn) @ Dec 18th 2005 9:05PM

Corkman...

"Do you people think that any megacorporation has any scruples about pulling every trick in the book to get their hardware into the homes of the masses ?"

Of course not. To think otherwise would be silly.

"Do not be fooled into being grateful to purchase a machine that costs 400 dollars."

Who would be? If it does wind up being hard to get and you get one after that fact I would expect elation. Grateful? Of course not.

"Hey 40,000 people died last week in an earthquake. Died. 40,000."

And many more died of AIDS, hunger, murder, cancer, etc. Many people die every day in many horrible and tragic ways. That's life.

Dralt @ Dec 18th 2005 9:05PM

Looking into the past is not the way to go.

Several factors make this case special:
1) Largely automated production lines
2) 24/7 production facilities
3) Essential parts in production for several months
4) Microsoft has based their entire strategy on being able to sell as many consoles as possible BEFORE the PS3 is released

Microsoft can decide if they want a shortage at launch. I doubt they will do so, though.

Jim @ Dec 18th 2005 9:05PM

every console will eventually be "sold out" at launch.

after having read Dean Takahashi's eye opener "Opening the Xbox" I come to the conclusion that not meeting demand at launch is a very bad thing because you lose momentum. MS spent a lot of money to market their shiny new box and if they can't deliver than this is lost money.

Jeremy Wright @ Dec 18th 2005 9:05PM

While I wouldn't be surprised if there was a shortage, and I also wouldn't be surprised if this was merely a publicity stunt (happens with every Sony console release, for example)... I don't see how this is a story.

Right now we have no facts. We have no idea of the supply (to countries, retail chains (and therefore individual outlets) or individual stores). We have no idea of demand (pre-orders).

So how is this a story? We can't say it's artificially inflated because right now nobody knows what the status of any individual preorder is.

sol.. @ Dec 18th 2005 9:05PM

I don't know why sony keeps being thrown into this scam (oh wait yea i do...fanboys)..the slim ps2 WAS understocked as was the original ps2 in which i pre-ordered from ebgames and didnt get for a month or two later.

The PSP was rumored to be in short stock...due to Sony's expectations to sell one million.................................................which they didn't do.

Now me perosonally can only HOPE that this story is true, because i can then buy a 360. I don't want to pre-order because i loathe ebgames/gamestop therefore if this is true i can go buy one at a regular store without joining those pathetic souls that sit outside stores waiting to get one.

john @ Dec 18th 2005 9:05PM

this article is FUD

Mike @ Dec 18th 2005 9:05PM

I think the sold out thing is all bs.

When Xbox came out I bought one easily in Walmart, and I don't expect it to be any different. Our Walmart wouldn' t even allow us to pre-order Xbox 360 and they said they will have many. The same thing happened with Halo 2, they tried to make me worry about it and the day it came out I didn't even have to preorder it and I went to a game store and it wasn't even sold out.

I wouldn't worry about Xbox 360, doesn't matter how good the system is or how much people like it, there will always be a place where you can just walk in and buy it.

Kamalot @ Dec 18th 2005 9:05PM

Isn't that photo on the site a photo of people lining up to meet Miyamoto in NYC?

That's funny you use an image of Nintendo fans lining up to meet the creator of some of the best games ever made, and use it to promote the Xbox 360.

That's some funny stuff. :D

Squidly @ Dec 18th 2005 9:05PM

You can look at it this way. Analyst have been assuming that production in China started late August early Sept. They estimate that the factories will produce 100K units a week.

So, 10 weeks till mid Nov. equals approx. 1 million units available on the 22nd. Analysts predict that production could jump to 150K per week starting early Nov. & lasting thru the first of the year. So from Nov thru Dec. approx. 1.2 million more units could be produced. Total = 2.2million. Spread that number out over the US, Europe & Japan & you realize that it�s not such a big number.

The big obstacle here is the silicon. You sort of part manufacture, part grow the stuff. You really can not rush the process. Here in lies the bottleneck. MS will only be able to produce 360's as fast as chips are available.

Another obstacle is shipping. MS has not been shy about admitting, in their own words, that they will need to rent every available cargo jet to get the product to stores. Add in all the shipping red tape & ��.

Besides a smart company does not want a surplus of product on the shelf after the holiday season. Predicting demand is more art then science. It's financially more sound to fall slightly short of demand than above. The bonus... extending interest in the product.

Remember, after the holidays, if MS has met demand then public interest will fade quickly w/ only game releases making minimal news. This swings wide open the door for Sony to start their hype. MS wants to keep the spotlight on the 360 as long as possible while it�s the only next-gen system out.

Mephy @ Dec 18th 2005 9:05PM

Manufactured sell-outs happen all the time. And sometimes they happen by accident simply because a company has no way of meeting demand.
Xbox was one such accident... supposedly. And you can see what it does, Nintendo was made to look laughable because it could actually keep up with high demand over the holiday season, which led many to believe it wasn't selling.
The other popular way of inflating hype is sales numbers that don't factor in volume of returns... PSP, anyone?

Simply put, X360 could see a manufactured shortage to drive hype across the Christmas rush, a time when consumer pragmatism goes out the window.

Charles @ Dec 18th 2005 9:05PM

I think this site is actually more anti-xbox360... I don't remember actually reading a postive MS/xbox360 story on this site.

This is just another example. Many people have mentioned the PS2 and the original xbox along with the N64. All had proven launch shortages so joystiq didn't do too much digging, before falsely accusing MS of creating "Fake" demand for the xbox 360.

kilo @ Dec 18th 2005 9:05PM

all i know is i want one asap, because of that damned 'limited time offer' on the remote.

Matt @ Dec 18th 2005 9:05PM

Joysqtiq, 2 words: You guys are bad writers.

Since when do you know more about business than Microsoft? You don't and you won't. And I'm guaranteeing you that there WILL be xbox 360 shortages throughout the entire holiday. From what you people write on this site, it is an embarassment, it's like you don't even know anything about selling products, yet you are making lame articles. Very strange, you guys need new writers. And I mean it.

Hire somebody with "profession". Not kids from online forums that have nothing to do, but want to write articles.

GETLUV @ Dec 18th 2005 9:05PM

Matt, thats more than 2 words. Learn to count!

mike @ Dec 18th 2005 9:05PM

There most definately will be xbox360 shortages this side of the new year, it is a world wide launch (first of its kind), even HL2's launch was tough going simply because the servers failed.

It might not be the fact that theres not enough consoles made, its more the fact theres no way of getting them into stores quick enough. International release is scary and even with M$'s virtually limitless resources they still might not pull it off.

Mike

Rick @ Dec 18th 2005 9:05PM

In SF, the Xbox was really easy to find at launch. I walkd into an EBX on the launch day and picked one up with no pre-order. Most of the folks in line were MS employees dutifully buying their Xboxes, which MS would later reimburse (I found this out by talking to a MS software engineer from their Mountain View campus who was ahead of me in line). That was nothing like the PS2 launch.

Nords @ Dec 18th 2005 9:05PM

Ok Im a Video Club store management and I rent/sell game system. We received info of how many Xbox 360 we will received and the anser was only 3 for sell. So as a management I can take pre-order from customer but only 3 will received their console. And I dont know when I will received more. So I cannot say "Yeah I have more on the Lauch" because its not true I only received 3 of them.

Hope people understand our position.

Shibathedog @ Dec 18th 2005 9:05PM

Not to sound like a Jerk, but DUH.

Its pretty safe to say 99% of the time a company says theres a shortage of a product its just to generate hype and that "OH I HAVE TO GO GET ONE RIGHT NOW BEFORE THEY RUN OUT!" feeling.

Its a really common advertising tenique...

Michael Grieb @ Dec 18th 2005 9:05PM

Y'know Canada supposed to get a pretty good piece of the North America launch qty, plus the fact that M$ has stated their position is to keep consoles on a steady flow evenly across all countries. Thus, you can't send all 1,000,000 to America and send the entire production qty to Europe and Japan as they are made....this is going to be messy...just like this article!

Paul Acevedo @ Dec 18th 2005 9:05PM

This is only a theory and shouldn't be presented almost as fact. Like everyone's said, Ps2 and Xbox, even the Nintendo DS, experienced very real shortages at their launches. 360 may as well, but that doesn't mean Microsoft engineered it thusly. They only finalized the hardware a few months ago, remember?

Monsiour Jimmy @ Dec 18th 2005 9:05PM

Matt, this is a blog-style site.
'nuff said.

zalgadis @ Dec 18th 2005 9:05PM

when was the last time i remember a shortage... hmm... let's see... how about the nintendo ds, the original xbox, the ps2, the n64, the etc... video game console producers don't mean to have shortages. if they did they'd be morons and not the million/billionaires they are. development of new hardware is expensive and the first couple of batches they try to produce for sale always have a decent number of hardware failure (chips are made slightly incorrectly or ....). plus, they are trying to launch their product as soon as possible so they can have a jump on the other companies. you have to remember, if you look at the hardware specs of the 360 or any other next gen console (except the revolution cuz they aren't going very technologicly advanced... i'm sorry a "light gun" as a controller is not revolutionary. the oddysee the first video game console had one, so did nes) the consoles take forever to produce. match that general fact with the idea that the xbox 360 has a 3.2 ghz processor with 3 or 4 cores (i don't remember..) and you have to realize that currently, intel p4's just started releasing a 3.2 p4 extreme edition that is dual core plus 2 logical cores due to hyperthreading, and that chip retails over 1,000 bucks at online stores and is short at least one physical core. add in the fact that microsoft is attempting a "global launch", which got pushed back everywhere except here, and that pepsi is giving an xbox 360 away every ten minutes for 9 weeks that arrive before the release date (do the math, that's a lot of xbox 360's that gamers can't buy, thereby reducing the number available at launch by at least 9,720). so a shortage of xbox 360 consoles does not surprise me at all. i'm even positive they will have one. i pre-ordered mine awhile ago and was the fifth to do so at the store and am now being told each store is only getting 4, so i'm sol until the second shipment. add all of that in, including the fact that microsoft, i believe not positive cuz i know it's true for sony, is about to or just has started turning a profit on the original xbox (due to the high cost of manufacturing consoles quickly and trying to compete with others) and it looks like there will be a shortage, and microsoft isn't going to be going all out to get the second shipment out to the U.S. extremely quickly due to their global launch. so... do your research sir before you comment. remember, we are nerds who have nothing better to do then to go online and tell others how moronic they are because we have nothing better to do than read articles about video game systems and you have a real life.

zalgadis @ Dec 18th 2005 9:05PM

SuperDave420 @ Dec 18th 2005 9:05PM

I think there will be plenty for everybody, largely because of the automation in place.

I bet IBM has been making these box chips for at least 3 months so far. I'm sure the silicon will not lead into a bottleneck.

MS has soo much monney I bet they through a TON of it in the way of Logisitics planning.

(Randomness) @ Dec 18th 2005 9:05PM

Heres the mechanics of game distribution:

(Numbers made up for representation)

You have 5 factories making Xbox 360, for a total of 10,000 Xbox per day...

on release there are 50,000,000 people wanting a Xbox! clearly the 5 factories will not make up 50,000,000 Xbox in time for release, but its more profitable this way.

A) inflation occours when in there is more demand than there is supply.

B) And finaly, the most important detail, is once the 50,000,000 people who "WANTED" a xbox have a xbox, then demand goes down to the limit were 10,000 xboxes a day is enought to meet demand.

In short, there not going to make / furnish 500 factories just to meet a temporary demand and then have 495 factories creating surplus xbox. Its just not ecomomical to do it this way.

micro @ Dec 18th 2005 9:05PM

This is the worst article you have ever written. Not only is the information not true in this article it's downright wrong. There was a shortage of Xbox's PS2's and gameboy advances. I worked at media play during the launch for all consoles. I can also say that i had to drive an hour to get my first xbox two days after launch, the only one left in the store (Ames?). Anyways very dissapointed in this article ... you guys should hire someone who isnt a microsoft basher and actually does some research before he writes a story. Very poor.... Im going back to digg.com

lolol @ Dec 18th 2005 9:05PM

^^ Cough [fanboy] cough. ^^

Joshua @ Dec 18th 2005 9:05PM

I went to electronics Boutique near to where i live in connecticut and they now have three different shipment dates the initial one of nov. 22 then another in december and a predicted one of late january. WTF is up with that? you have to be kidding that Microsoft can not produce 120 more pre-ordered 360's after the release. Also that Electronic Boutique told me that they will not be selling any Xbox 360s to any that hasn't been on the list before release date. Any additonal comments on my comment

Mondo @ Dec 18th 2005 9:05PM

Heh, he guys are underestimating the power of the biggest company in the world.

itsmedad @ Dec 18th 2005 9:05PM

Alright lets take a few things into concideration. I am what you would call "die hard" I pre ordered several games over the years and the same conclusion happens every time. There is no shortage. I bought the first halo 2 preorder gamestop had. I was #1 at the store. I went and told my friend about it and 3 weeks later he said alright, screw it I'm in. we went to the game store and they said "we're all sold out, we've been sold out for two weeks." they had 1000 pre orders available. when launch date hit I sstood in line with my wife for 2 hours. my asshole friend strolled by with halo2 in hand and took time to make fun of us. it turns out toy's are us around the corner sold all of its presales but had 1000 "extra" the same thing happened with grand theft auto. I bought a pre order, toys r us had it on sale for months after words and never ran out. this is all market hype to scare you into buying one before its to late. do the math, xbox is in the business of making money. why would they not put enough on the market to fuel demand. if they get within 2-3 months some poeple will wait and buy the ps 3. dont believe for a second a company that has decades of experience in "releases" hasn't figured out to manipulate the system.if your one of those dweebs standing in line for hours, i'll see you online around noon, when i get home from buying mine.