Gamers Greet Xbox Debut With Brisk Sales
Thousands of eager video game players lined up Thursday to grab the first batch of Microsoft Corp.’s Xbox console, but the software giant nonetheless faces a tough fight against market leaders Nintendo Co. and Sony Corp.
Although the Xbox debut was not marked by the same consumer frenzy that greeted Sony’s PlayStation 2 last year, stores reported solid sales of the Microsoft console, and many ran out of the $299 device by the end of the day.
The brisk sales appeared to confirm early expectations that video games would flourish as a relatively cheap form of home entertainment in a weak economy.
With Sunday’s release of Nintendo’s GameCube, U.S. consumers are expected to shell out close to a quarter of a billion dollars on video games over the next few days. By the end of the holiday season, well more than $2 billion will be spent on what was once viewed as a niche product.
That Microsoft loses an estimated $125 to $150 on each box it sells hasn’t dampened the company’s enthusiasm in hyping the game system. As a new entrant to the video game industry, the Redmond, Wash., company is spending $500 million to market the Xbox.
Microsoft is projected to lose billions over the next several years on the system, but company officials see Xbox as a vehicle for profitable sales of game software and, eventually, other forms of digital entertainment.
“It generally takes up to three years to break even on the hardware,” said P.J. McNealy, senior analyst with Gartner Inc. in San Jose. “Sony expects to break even on its PS2 business by next year, which would put them at just under two years since launching the console. It’s built into the business plan. That’s why it’s a five-year business cycle.”
This year, the dominant console will be the PS2, McNealy said. By the end of the year, Sony will have shipped more than 8 million PS2 consoles in the United States, compared with 1.1 million GameCubes and 1 million to 1.5 million Xboxes.
“This year, Microsoft is just trying to establish a foothold to seed the market for five years from now,” McNealy said.
For Stephan Felisan, a 31-year-old technology executive, it was all about immediate gratification.
A self-described hard-core gamer, Felisan woke up at 7 a.m. to pick up an Xbox he had reserved 21/2 months ago at the Electronics Boutique store in the Westside Pavilion. Felisan immediately took the box to his Hollywood Hills home and began playing “Halo,” one of the more popular Xbox games.
With the graphic quality of game systems roughly equivalent, Microsoft is hoping to differentiate its product by shipping the only console with a built-in hard drive and an Ethernet adapter to connect the device to the Internet. Sales of personal computers are lagging, and Microsoft is searching for other avenues to reach consumers.
“If you were to ask me yesterday whether I liked playing games on the PC better than the console, I would have said the PC,” said Felisan, who gave himself the Xbox for his birthday. “But now, I prefer the console. You don’t think of your PC as an entertainment system. But with the console, you’re able to sit in front of the TV in an environment where you’re accustomed to being entertained. Once they introduce online games for the Xbox, it’ll be complete.”
Despite winning over consumers like Felisan, industry watchers said, Microsoft will need to work hard to compete with veteran game companies Nintendo and Sony and spread its message to average consumers.
At the Fry’s Electronics in Manhattan Beach, the store had 40 units to sell. A few enthusiasts showed up as early as 10 p.m. Wednesday, but by the time the store began selling the units at 8 a.m. Thursday, only 29 people had shown up to claim them.
“This was lighter than I expected,” software salesman Jorge Dela Cruz said.
The 24-hour Kmart in Carson was supposed to put its initial allocation of 15 units up for sale at 7a.m. on Thursday, but only 14 people were in line by 6:45 a.m., when Del Ruiz, the electronics department manager, broke the bad news to them: The shipment never arrived. He passed out numbered tickets to those who had stood in line--some since 4:30 a.m.--and promised they could pick up their units later that day.
At the Toys R Us in Santa Monica, a crowd of about two dozen people gathered, many of whom were there to pick up an Xbox they had reserved weeks before. But some came in hopes of picking up a system that hadn’t already been allocated.
Robbie Spradlin, a store manager, said they were likely to be disappointed because the store had only two machines that hadn’t already been sold ahead of the launch date.
Even at stores that didn’t have a lot of stock on hand, the lines in many cases were so light that people such as Mark Schramm were able to stroll up minutes before distribution began and were able to get a system. Schramm, 45, got his system at Fry’s.
“This is my first game console of any kind,” he said.
Felicia Hatten, a record specialist for a community college, started the Kmart line at 4:30 a.m. because her 10-year-old, JJ, changed his mind.
“He saw a game magazine say the Xbox was better, so instead of the GameCube, I’m here to get the Xbox,” she said. “I couldn’t believe I was first in line.”
