How Many Xbox 360 Units Will Microsoft Ship in Q4?

Oct.27.08 | About: Microsoft Corporation (MSFT)

Obviously Microsoft (NASDAQ:MSFT) knows the answer to this one because it has already decided its manufacturing numbers. We can only guess. So let's look what happened in the last two years. In 2006 the companyy shipped just 1 million units in Q3 and then 4.4 million units in Q4. So over a fourfold increase for the holiday season quarter. Then in 2007 it shipped 1.8 million units Q3 followed by 4.2 million units Q4, just over doubling this time.

This year Microsoft has just announced a 2.2 million unit Q3, their best yet. Can it recreate that fourfold plus increase from 2006? It would give them a quarter of 9.68 million units. I think it can and here’s why:

  • The massive price drop to $199 now makes the 360 a casual impulse purchase. People will just put one in the trolley as they walk round Wal-Mart (NYSE:WMT), Carrefour, Tesco etc. Also critical is that it is now cheaper than the Wii so the many people who buy on price alone could well switch their purchase.
  • Sony (NYSE:SNE) is now very widely perceived to have lost. And the PS3 is still very expensive and is a far weaker buying proposition. Lots of people are going to switch their attentions to the 360. Especially keen gamers who already have a PS3 and who can see how much they are missing out. There are going to be a lot of households with two current generation consoles.
  • In Japan the Xbox 360 has really taken off. It is selling far faster than Microsoft expected and the company is suffering shortages as it struggles to keep up with demand. If the 360 becomes “must have” it could sell the entire 9 million units here. Seriously. The Japanese market is very fashion led and frequently winds itself into a frenzy.
  • Major revisions to Live. Pundits continually underestimate Live yet to Microsoft it is the main event. The consoles are just an enabling tool. This revision is seen by Microsoft as reinventing its whole offering. It is making the jump from gaming platform to being the most capable multimedia device on the market. With 14 million members, the Live service now has massive momentum. But still nothing compared with what it will achieve as it becomes the essential entertainment hub.
  • The recession. A lot of people will see this Christmas as their last chance for a good time before the economic realities hit home. An Xbox 360 also makes sense in a recession as it is very cheap, very high quality entertainment. So bad economic times may well actually help Microsoft.
  • Piracy. There has been a massive recent increase in Xbox 360 piracy whilst the PS3 is still largely pirate proof. The reality is that there are a huge number of thieves out there who like to steal their games for free. They see no need to contribute towards the cost of making their entertainment. So for this audience the Xbox 360 becomes the game console of choice.
  • The games. Quite simply the Xbox 360 has by far the best catalogue of games out of the current generation platforms. And playing games is what these machines are about. And when games are cross platform they generally play better on the 360. Till recently people were hoping that the Wii and PS3 would compete or even catch up with the 360 game catalogue. But now it is blatantly obvious that they won’t, the 360 is just too far ahead, Microsoft have tied up too many exclusives and it is a far better business proposition for publishers.

Looking at this I can see a potential for Microsoft cracking 10 million units in Q4. Lets hope the company is geared up to do it.

Disclosure: None