Friday, January 27, 2006

Assorted 360 Info and Gamestop

I downloaded the Full Auto demo for Xbox 360 yesterday.

It wasn't nearly as compelling as the demo for Fight Night 3, but it was still quite enjoyable. After I finished playing, I thought to myself: the Xbox 360 is developing an impressive collection--of demos.

I've received several e-mails recently indicating that the inventory squeeze may be lessening, even though I haven't seen any official confirmation yet. People are walking into Best Buy or Wal-Mart and getting their 360's with minimum hassle. I assume it's a combination of increased supply coupled with reduced demand, although we probably won't know for sure until Microsoft releases some manufacturing numbers.

I wrote a few days ago about lack of games post-launch. Microsoft's danger is that they wind up in this negative feedback loop where the low installed base numbers make publishers delay game development, which then reduces demand for the console, and then it goes on and on. Electronic Arts announced today that The Godfather is going to ship March 21st in the U.S.--except for the 360 and PSP versions, which will ship "before the end of 2006."


So internally, Microsoft is in full-blown crisis mode right now. They've gone from seemingly a very strong position to a floundering one in just the last four weeks. Talk about a tightrope.

Here's someone else who is in big, big trouble: Gamestop. Not because they took on a load of debt to buy out EB, and not because after the merger they have stores literally within two hundred yards of each other.

No, it's none of that, although those are significant issues.

Here's why they're in trouble: their entire business model is predicated on a mid-generation console market. Their model is tailor-made for consoles with hundreds of used titles available, and they just churn them and churn them again. There's always something to buy.

So I was thinking about this today and it hit me: they're screwed. That business model is ass in a new-generation market--there aren't nearly enough titles available to support it. So even as developers moan about current-gen demand dropping off more quickly than next-gen demand ramps up, that same mismatch is going to happen to Gamestop--it's just going to happen six to nine months later. They're going to have huge amounts of used games for consoles that no one wants anymore, and demand for those games is going to plummet. So instead of churning two or three hundred games for a console, they're going to be churning thirty or forty (at best) for a new console.

That is a different market entirely, but as far as I can tell, they're going to try to use the same business model. Those numbers aren't going to work. They're about to run face first into a wall.

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