Xbox struggles, challenged by ... PS1

Despite a strong Australian launch and solid first week of trading, sales of Microsoft's gaming console Xbox are plummeting, with latest figures putting rival PlayStation 2 (PS2) ahead by nearly four to one.

According to figures from Australian IT market analyst Inform, PS2 recorded twice the number of sales as the Xbox between 14 March and 7 April. In the week ending 7 April, 5800 PS2 units and 1500 Xbox units were sold, increasing this margin to almost four to one. Even the original PlayStation console, the PlayStation One, chalked up 1800 sales in the same period.

These figures follow a strong first four days of sales, in which 9124 Xbox units were sold.

Sony Computer Entertainment Australia managing director Michael Ephraim says the PS2's success has stemmed from a both a larger range of game offerings, many of which are exclusive to PS2, and the consoles' broader entertainment capabilities.

"We've established [PS2] as a consumer electronic device that has a lot of potential in a year or two," Ephraim said. "It's not just a gaming device, it's an entertainment device."

Sony's promotional initiatives to combat the release of the Xbox in March, which included a limited edition entertainment bundle with DVD remote controller and accessories, also worked in the company's favour, he said.

The trend for PS2 in Australia has also been reflected through lacklustre Xbox sales worldwide. During the last week of March in Japan, fewer than 5000 Xbox units were sold while PS2 sales hit 100,000, creating a margin of 20 to one. Nintendo's latest gaming console, the Game Cube, registered sales of 25,000 in the same period, according to figures from Japanese research company Media Create. Since Xbox's launch in Japan on 22 February, Microsoft has sold just 165,000 consoles, a figure well short of the 250,000 units it had expected to sell by now.

Sony's Ephraim says winning over consumers in Japan is particularly important for any gaming hardware producer, as some of the world's major software developers are located there. Manufacturers need to show good results in a country to have success with developers, he said.

"This is more severe than a lack of sales," he said.

Sales of the Xbox in the US are also beginning to slow down and might not make product forecasts, the company announced at the launch, according to two Wall Street analysts keeping track of the system's manufacturing rate.

Word of the US sales slowdown came after analysts noted that Flextronics, an electronics manufacturer that makes Xbox systems for Microsoft, had recently scaled down production of the console. Microsoft's previously announced Xbox target of 4.5 to 6 million systems shipped by the end of June might be put into jeopardy as a result of this slowdown, the analysts said.

While Microsoft has admitted sales in Japan are lower than anticipated, Microsoft Australia's regional director of Xbox Alan Bowman says Australian sales are in line with expectations.

"We're happy with the way things are going," Bowman said. "We had a good launch with enormous interest, and sales have been solid. We have great confidence for the future."

Ephraim says that along with the Xbox, Sony welcomes Nintendo's latest console, the Cube, due on Australian shelves on 17 May. Unlike the Xbox, however, the new Nintendo product will be complementary rather than directly competitive with the PS2, he said.

Meanwhile, plans for the next generation PlayStation 3 have not been confirmed, Ephraim said.

"Any discussions on the PS3 are down the track," he said. "PS2 is only one year old, PS1 is still doing well. Let's worry about what's happening now."

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Nadia Cameron

Nadia Cameron

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