February 03, 2006|By JULIE TAMAKI | JULIE TAMAKI,LOS ANGELES TIMES
LOS ANGELES -- Gripping the controller of the coveted Xbox 360, Jesus Sanchez watched as the Oakland Raiders clashed with the Denver Broncos on a high-definition flat-screen TV. The details in the "Madden NFL 06" video game looked so sharp that it was almost like seeing an actual football game.
Sanchez was mesmerized, but unfortunately for him the 360 wasn't his. He was playing a demo machine at a Best Buy store in Los Angeles because, like countless other frustrated gamers, he hasn't been able to get one of his own.
More than two months after its debut, Microsoft Corp.'s newest console remains hard to find.
Temporary shortages after the launch of a new machine are common in the video game business. But Microsoft's continued inability to meet demand for Xbox 360 has irritated customers and disappointed video game publishers, raising questions about whether the company has squandered an opportunity to grab market share before consumer electronics giant Sony Corp. releases its PlayStation 3 this year.
Microsoft said it expected the shortage to ease in coming weeks, thanks to an additional manufacturing plant coming online, and the balance between supply and demand should stabilize before the end of June.
June might be too late, according to Wall Street analysts.
"Microsoft's first-mover advantage is eroding if it takes them very long to get the first 5 million boxes out," said Michael Pachter, an analyst at Wedbush Morgan Securities. "If 4 million show up in the month of June and Sony launches in the month of June, there's not much of an advantage" for Microsoft.
It remains to be seen whether gamers like Sanchez, a 28-year-old art student, will forgo plans to purchase an Xbox 360 to hold out for a PlayStation 3. Sanchez said his wife wanted to buy him an Xbox 360 for Christmas but couldn't find one.
"I heard the PlayStation 3 is coming out pretty soon, too, but I haven't really compared it yet," Sanchez said. He said he was waiting to hear more about the Sony console before deciding whether it was "worth the wait."
Microsoft and Sony are locked in a battle for dominance in home entertainment. The software behemoth, relatively new to the hardware scene, hopes to use its $399 console to overtake market leader Sony.
Industry observers have drawn comparisons between Microsoft's launch of Xbox 360 and the release of new gadgets by Sony, which has vast experience at manufacturing consumer electronics. It also has been compared with Apple Computer Inc., a company flying high, in large part because of its iPod music players.
"Steve Jobs will announce a product, and it will ship that day and be in pretty good supply," said Geoff Keighley, a host on G4, a cable channel devoted to video games. By comparison, Keighley said, Microsoft created "an object of desire they weren't able to deliver to the vast majority of people who were intrigued."
The scarcity of Xbox 360s - which play games, music and videos in addition to exploiting the latest in video game graphics and high-definition television - was particularly acute during the crucial holiday shopping season. Throngs of shoppers camped out overnight in retailers' parking lots; some left empty-handed. Others sought the consoles on eBay, where more than 40,000 of them were sold in the eight days after the model's Nov. 22 launch for an average price of about $800.
Microsoft reported yesterday that it sold 1.5 million Xbox 360 consoles in its fiscal second quarter, which ended Dec. 31. That included 900,000 in the United States, 500,000 in Europe and about 100,000 in Japan.
Microsoft executives blamed shortages of parts for the lower-than-expected sales but said they were thrilled with the console's launch, noting that it was available in 19 countries and that software for the device was selling at a nice clip.
The third manufacturing plant scheduled to be up and running next month is expected to help Microsoft meet its target of shipping 4.5 million to 5.5 million consoles by the end of June. The company also said it expects to sell 2.5 million consoles in its first 90 days on the market - down from the 2.75 million to 3 million that company representatives previously estimated.
Julie Tamaki writes for the Los Angeles Times.
