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By Carl Howe

ABC News has a good article on the supply issues with XBox 360s with a new twist -- store employees have been buying up XBox 360s and selling them on eBay before they get delivered to customers. But most interesting from my point of view was NPD Group's Ross Rubin's comment about the number of units sold:

"On one hand, this was Microsoft's opportunity to really take advantage of having the next-generation market all to themselves and not having enough product is a squandered opportunity," said Ross Rubin, director of industry analysis for the NPD Group, which tracks the gaming industry. Rubin says that with Sony's new Playstation 3 not scheduled to come out until spring, the extremely competitive console market was primed for the Xbox 360 to make a big splash.

But not having enough units to fill pre-orders, and lacking the consoles to stock stores in time for the holidays, may mean that when the PS3 is released, the 360's head start is rendered moot.

"Most estimates are under 400,000 units sold … and also consider that they'll sell some units in the first quarter of 2006," he said, "so let's say they get up to 500,000 by the time the Playstation 3 launches. I don't think that's going to be an insurmountable lead in a battle where the winner is going to be selling 20 million or 40 million units worldwide."

I think Ross's 500,000 number is very low. While I believe Microsoft is having production problems in delivering XBox 360s in volume, I don't think it's as bad as Ross makes out. I fully expect that Microsoft will deliver about 800,000 units by Christmas world-wide, and somewhere between two and five million units by the time PS3 launches. But his point is well-taken nonetheless -- that's nowhere close to an insurmountable lead, and in fact, is just a drop in the bucket compared to Sony's 100 million unit installed base.

The battle between XBox 360 and Sony's PS3 (and for that matter, Nintendo's Revolution) is still in the early innings, and just because Microsoft got the first at bat, doesn't mean they will win the game. The defect rate mentioned in the article -- 10% to 20% -- is very worrisome and could be a serious problem as we wait for Sony to retaliate in the market. Only time will tell.

But I've got to say, Blackfriars' prediction of fewer than one million XBox 360s sold this year is looking better and better the more stories I read.

Source: Xbox 360 Unit Sales Not Insurmountable For Sony, Nintendo (MSFT, SNE)