Wednesday, February 6, 2008

Microsoft Not Making Enough Xbox 360 Elite

Microsoft released the Xbox 360 Elite, the most expensive and high end of the 360 models, in April 2007. But Microsoft can't seem to make enough of them to meet demand. There are reports that the consoles are sold-out at many retail stores and it has been sold-out on Amazon consistently since November. The shortage has gotten so bad that people are paying more than $547, a 20% premium over the $449.99 retail price, to buy a used 360 Elite.

Below is a chart of the Xbox 360 Elite prices during the past seven months. The price since November 2007 has been higher than the retail price.
Chart of Xbox 360 Elite Prices During 2007 and 2008
(Note: The big dip during October 2007 was due to some broken 360 Elites lowering the overall price. Working consoles were not selling for $250)

Is there a very high demand for all Xbox 360 consoles and Microsoft can't keep up? The charts of the Xbox 360 Premium and Xbox 360 Core are below. The charts show that the prices for the Premium and Core 360's are lower than retail price which is the normal pricing when an item is easy to find in retail stores.

Chart of Xbox 360 Pro Prices During 2007 and 2008

Chart of Xbox 360 Core Prices During 2007 and 2008

One of two things is happening:
1. Microsoft isn't making as many Xbox 360 Elites - Could the 360 Elite be much harder to make than the Core and Premium or has Microsoft just underestimated demand for the past four months? Some retailers have said they haven't received 360 Elite consoles for the past three weeks. Is it a dark sinister plot to get people to buy Xbox 360 Arcade systems and then be forced to buy a bunch of accessories?

2. Demand for the Elite is much higher than the other 360 models - The 360 Elite might be the console of choice for people who want to buy one so they are willing to pay the extra money to get one, even if the Premium and Core (now replaced by the Arcade bundle) are in stock. This must be at least partially true or the prices on the used consoles wouldn't be nearly $200 more than the other 360 models. People must think the bundled accessories and large hard drive make it that much more valuable.

Whatever is causing the shortage of 360's at retail, it has to be bad for Microsoft. The 360 is in a three way battle with the Wii and Playstation 3 and any shortages are going to hurt sales. The Wii is hard to find too, but it appears to be caused by unprecedented demand and it is popular in all three major territories. The 360 sells fewer than 5,000 consoles a week in Japan, so they only have two territories to supply. The 360 can't afford to be sold out for more than four months in it's strongest market if it is going to win the console wars.

What do you think is causing the high 360 Elite prices? Lack of supply or very high demand? And why?


Travis Hendricks said...

I would have to think this is due to production issues. I wonder if the fact that they are still suffering from some RRoD issues that it is making production hard on the higher end models. I would have to think that the Premium is still the best selling of the three SKUs so I would think the higher end models are what get whacked in production.

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