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Xbox 360 shortages, $76 per-console-loss predicted

Microsoft executive says demand for the new console will outstrip supply; analysts predict company will only charge $299 for $375 worth of hardware.


For the past several months, many gamers looking to pick up an Xbox have found the machine in curiously short supply. Today, a Microsoft executive implied that a similar drought of product may occur later with the company's next-generation game console.

Speaking to British game-industry magazine MCV, British Xbox boss Neil Thompson said demand could outstrip supply when Xbox 360 launches later this year. "I think demand is going to be phenomenal so we see that as a really difficult thing," he told MCV. "Will we execute well so retail will have good volume? Yes. But I don't think we're going to meet demand as people are going to come into this platform in a big way."

When asked for comment by GameSpot, an official Microsoft spokesperson issued the following silver-tongued response: "We're aware that demand for Xbox 360 will be at a fever pitch, and we're working with our manufacturing partners to ensure that gamers in Europe, North America and Japan will have a great Xbox 360 Christmas this year."

Meanwhile, an analyst report quoted by the Toronto-based newspaper The Globe and Mail (registration required) claims to answer another burning question regarding the Xbox 360. The tech-savvy Canadian daily cited a report by UBS Securities analysts Patrick Parr and Martin Cecchetto, which estimated that Microsoft "will pay its manufacturing partners about $375 (US) a unit and sell them to consumers for $299."

The Toronto Globe and Mail article also said that Microsoft will pay out "between $350 million and $450 million this year and between $900 million and $1.1 billion in 2006" to manufacturers of the console. Divided by the estimated $375 manufacturing price--which will eventually go down--such expenditures would mean Microsoft expects to ship around 933,000 to 1.2 million Xbox 360s in 2005, with another 2.4 million to 3.2 million going to market in 2006. Multiply those figures by the estimated $76 loss Microsoft will take on each Xbox 360, and the company could lose as much as $91.2 million and $243.2 million on console hardware production in 2005 and 2006, respectively.

However, while the analyst report bears the respectable UBS imprimatur, the figures it contains remain estimates, not official numbers. Unfortunately, that's all the public has to go on at the moment, as Microsoft won't go into the financial specifics of the Xbox 360 launch. "We do not comment on rumors or speculation," said the same spokesperson.

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