Final Project: The Future of Microsoft Console Sales

Although Microsoft began, and flourished, as a multinational computer hardware and software organization, the company has branched into numerous markets. Among its most lucrative endeavors is the one it took into the video game industry. Games cost millions –– if not billions, in some cases –– of dollars to make, and, if all goes well, they’ll make more in profits.

But in order to do that, Microsoft, along with competitors Sony and Nintendo, has to stay abreast of the latest developments in not only hardware and software, but also communications, social trends, market research and creative developments.

And while Bill Gates and Paul Allen probably didn’t have video games in mind when they started Microsoft, they definitely do now.

Following the release of the Xbox One, Microsoft had some problems to deal with. Chief among them is the main competitor, Sony’s PlayStation 4. Not only did the latter launch several months earlier than the Xbox One, but Microsoft also sent mixed messaging with its marketing campaign for the console. Consumers were expecting an accessible machine for their living rooms, but Microsoft was having difficulties explaining the “always-online” functionalities they wanted to offer. Essentially, these would allow the console to update when it was asleep, supplement software content on a continuous level, and connect players at all times.

But again –– consumers didn’t understand Microsoft’s marketing campaign, which was laden with computer jargon and heavy-handed PR speak.

So the PlayStation 4 got off to a better start, as far as the numbers go. In 2013, the console sales showed large gaps between the three consoles (the third being Nintendo’s Wii U):

The Wii U has been available for a full year longer than the other two consoles, and it’s seriously lagging. So for Sony’s console to clearly be selling more, while Microsoft’s was only slightly above par for the lowest of the three, the company was slightly worried.

But 2014 was kinder to the Xbox One. Sales increased to the point of being next to the PS4’s, and the Xbox One actually sold more consoles per week than Sony’s machine. And, looking back at the Xbox 360 sales following price drops, Microsoft may not need to worry as much as we thought.

The chart below shows Xbox 360 sales in the years, following its 2005 release. The left axis is the number of consoles shipped, and the right shows the cumulative sales, taking console price fluctuations into account –– the Xbox 360 began with bundles priced at $400, but later decreased to $300 and below.

Based on the exponential increase in sales over the years on the chart above, the Xbox One may be poised for similar success. With first and third party games coming out for Microsoft, Sony and Nintendo, the competition will invariably continue.

But for the consumers, it’s a great time to be a gamer, and watch all of this unfold.

Data Sources: The Economist, NPD Group, Windows.

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