Why it doesn’t matter where next-gen consoles are sold during the holiday season

imageEveryone agrees that there’s a shortage of next-generation console units to buy, right?  Demand is outpacing supply, right?  There’s a limited number of consoles for each platform whether it’s Xbox One or Playstation 4.  It’s a good bet that the numbers are roughly the same given that both companies launched their consoles around roughly the same time, (PS4 had a 1 week longer) have the same manufacturing capabilities, and are shipping units as fast as they can make them.

In fact, let’s just say hypothetically, each company manufactured 2,000,000 units, give or take 300,000.

So along comes a media flack that announces:

“Well, Microsoft had to ship Xbox One in 9 countries to make their 1st million units sold, whereas Sony shipped PS4 in only the US to sell their 1st million.  Clearly, Sony’s doing got better momentum & I expect them to grow faster once they are able to generate more supply.”

Excuse me, but what difference does it make what country or countries the sales come from?

Again, there were a limited, finite number of consoles available worldwide & both Microsoft & Sony sold out of the units they had available after week one.  The only difference was where each company shipped the units they had manufactured.  Sure Microsoft could have focused all their sales in the US by making the Xbox One only available in the US and ignoring Europe, but instead it made units available in 9 countries.  This was done likely with the knowledge that Xbox fans in the US would still purchase consoles later, if they couldn’t get one at launch.

A few thoughts on this:

    Those 8 other countries gamers ought to be thanking Microsoft for not ignoring them like Sony did on day one.  This of course wasn’t entirely altruistic.  Having a worldwide launch helped jumpstart Xbox One in markets in which it wasn’t as strong as competitors.
    A worldwide launch generates more buzz that a US-only one.  One might also say that given the dominant strength that the Xbox brand has in the US, the US isn’t the place for Xbox to focus their efforts, knowing that it would do exceptionally well locally anyway. 
    Anyone pointing out North America sales versus European sales are morons.  The only thing these figures tell us is how many units each company shipped to those geographies – that’s all.  Each company is selling out of all stock on hand worldwide.
    Some like highlight that Playstation 4 has sold more consoles to date, forgetting that Xbox One has been in market for only 3 weeks as of 12/14/13 while Playstation 4 has been in market 4 weeks.  33% longer.  33% more manufactured units.  33% retail sales.
    No one is mentioning that Xbox One is selling more units per week worldwide than Playstation 4.  In other words, there’s more Xbox One’s being manufactured that Playstation 4s and those units are getting shipped and sold to people now, capturing early marketshare.  Now, this is a thought worth noting because how do you figure this is possible if the manufacturing capacities are the same between Sony & Microsoft?

    The answer lies in how the consoles were designed.

One of the things that the Xbox One team did was they chose to use current generation RAM/memory a.k.a. DDR3, instead of the rarer, more difficult to manufacture GDDR5.  This eliminated a significant potential manufacturing bottleneck for Xbox One:  Instead of being constrained to the supply of GDDR5 memory available in the world, (again, GDDR5 is much more difficult to manufacture in volume while providing arguable performance benefit for games) Xbox One would be able to build more consoles and get them to market quicker (by using more readily available DDR3) than consoles that would otherwise require DDR5 like PlayStation 4.

Note that this was a lesson learned by Microsoft from the Nintendo Wii.  To this day people often forget that the winner of the last generation console wars at least on console sales, was the Nintendo Wii, selling more consoles than Sony & Microsoft combined due it’s ability to manufacture systems simply by using last gen, readily available components & parts.

Microsoft didn’t go nearly the same lengths that Nintendo did on the Wii with the Xbox One.  While it does have a state-of-the-art 8 core CPU & next gen GPU along with 8GB of RAM, 500GB of storage, Ethernet port, & Blu-ray Drive, it’s usage of DDR3 provides a manufacturing capacity edge that allows Microsoft to manufacture more consoles without being constrained by worldwide memory yields of the newer memory.

The bottom line of all of this however is that we really won’t know solidly which console comes out ahead until at least a few quarters have passed.  By then we’ll have seen whether Microsoft’s strategy of:

  • Distributing consoles outside of the US early on
  • Tooling its design for early console availability
  • Creating an entertainment console with TV integration
  • Backending Xbox One with a massive number of cloud services
  • Engineering Kinect 2 as a essential part of the console

…will have paid off.

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