Microsoft cannot be pleased at all about the 360′s performance of late. Anyone who thinks this performance is ‘good’ has not been paying attention to the massive amount Microsoft has spent…

The New York Post is reporting that Microsoft is spending $500m on what it calls “a major movie-style marketing blitz” to accompany the launch of Kinect next month.

The wide-reaching campaign will touch on all manner of sectors including TV, online, print, food and drink. Partners include Disney, Nickelodeon, Burger King, ABC, Pepsi and Kellogg’s. Kinect will also take over YouTube’s home page upon its US launch on November 4th.

NYP adds that even Hollywood movie mogul Steven Spielberg has been involved in the planning.

Around 7,000 nationwide midnight openings are scheduled for the US market, with big numbers also expected to throw open their doors at midnight in the UK come November 10th.

“Kinect is the largest, most integrated marketing initiative in Xbox history, bigger than [the Xbox 360’s] launch,” general manager of global marketing communications at Xbox Robert Matthews stated.

Half a billion dollars just for marketing? And what did this get Microsoft?

Tepid sales.

NPD January 2010:

Xbox 360- 332,800

NPD January 2011:

Xbox 360- 381,000

OH MY GOODNESS! THAT IS A 48,000 UNIT INCREASE!

What co-option!

What a selling to the masses!

48,000 unit increase! Oh my!

What is not being mentioned is much of the sales is because the Xbox 360 is cannibalizing the PlayStation 3 sales. Just a year or two ago, the PlayStation 3, still after its remodel, was enjoying  a surge in sales and all the analysts could not stop getting so excited (from this fantastic site, I had to calm them down). What happened to the Year of the PS3? And Move is completely gone. Of course, in fairness to Sony, Move did not have a half billion dollar marketing budget. That marketing budget alone could be used to build, make, and launch a new console. That is the massive amount of money was spent.

Let me put this into context another way. I challenge anyone to ask a gaming analyst this question:

What if Microsoft spent Kinect’s marketing budget to buy their own product?

How many $300 Xbox 360s (that come with Kinect) would 500 million dollars buy?

Around 1,666,666 units. This is over a million and a half.

To show just how bad this is, we are going to show the actual unit numbers increase year over year (that Microsoft loves screaming from their creepy PR statements) from since Kinect was launched. And we are going to go on a limb here, give Microsoft the benefit of the doubt, and assume that Kinect was the sole reason for the year over year increase (it really is because of the 360 eating into PS3 sales, but let’s pretend that isn’t happening).

First off, here are the NPD numbers for the 360 in the United States:

NOV 819.5K 2009
NOV 1.37 million 2010

DEC 1.31 million 2009
DEC 1.86 million 2010

JAN 332,800 2010
JAN 381,000 2011

From that, here are the increases in unit sales from one year earlier.

NOV 550,000

DEC 550,500

JAN 48,000

When you add it all together, the total is around 1,148,500 increase for those three months. Seeing how Microsoft would have higher 360 sales if they took the Kinect marketing budget and blown it buying their own product (1,666,666 units), Microsoft cannot possibly be pleased with this. The purpose of a marketing dollar is to bring in more than what was spent. This isn’t happening in the slightest.

You have to understand, folks, that Microsoft fired every arrow in their quiver. They did the Xbox 360 revision. They released another Halo. They threw half a billion dollars just to market Kinect. They even invited the circus to E3 complete with a robotic elephant. And THIS was the result?

The Wii was sold out in the United States for three years. Just in December of last year, Wii sold four million units. 360′s performance doesn’t even come close to this. You’d have to add up all three previous months together to get close.

Now that you see how MASSIVE the marketing budget Kinect had and how BADLY it is turning out (if the marketing budget can purchase more of your product than you are selling, it can only be bad), I want you to listen to Microsoft’s PR for January 2011 NPD. My comments will be in red.

Riding the momentum of its biggest year ever, Xbox 360 continued to drive strong console and software sales in the first month of the new year. Sustained consumer demand for Kinect helped propel Xbox 360 as the top selling console in January. Yes, the ‘sustained consumer demand’ for Kinect is driving so much growth that hardware sales are down eight percent and software sales are down five percent. Despite Sony destroying their PlayStation 2 market, the Wii grew the market so much that hardware and software growth was through the roof and countered the PlayStation decline. At the time, however, it was never reported that Nintendo was growing the market but that “the game industry is growing like never before” while 360 and PS3 were selling way below PS2 levels.

January NPD highlights include:
· Xbox 360 sold 381,000 units in January, up 48,000 units year-over-year. (Source: NPD Group, January 2011) Co-option this is not.

· Xbox 360 is the only console platform to show year-over-year growth in January at 15 percent. (Source: NPD Group, January 2011) Growth from flat sales is nothing to cheer about. But Microsoft is hoping no one scratches behind their vanity percentages which show just how little in unit increase it is.

· Total retail spend on Xbox 360 topped $551 million, making it the top selling console platform for the 10th month in a row. (Source: NPD Group, January 2011) Who cares? It is the total customers that count.

· During the month of January, four of the top ten console game titles were for Xbox 360 including: “Call of Duty: Black Ops,” “Dead Space 2,”“Dance Central,” and “Kinect Sports.” (Source: NPD Group, January 2011) But not the top ten overall game sales. Despite that MASSIVE marketing budget giving Kinect games their cute little displays and commercials going on non-stop, these numbers are very low in order to be a co-option.

Some lingering supply constraints coupled with high consumer demand led to continued pockets of shortages at retail. Microsoft anticipates this trend to improve through February, but will continue to work with retail and manufacturing partners to expedite production and shipments. Pockets of shortage is a store here or there. Some stores are sold out of PSPs. Everyone would laugh if Sony wrote a PR saying that the PSP has continued ‘pockets of shortages’ based on a store not having PSP in their inventory. But this comment reveals where Microsoft thought that Kinect would be so successful that it would be sold out (and Xbox 360 sales would be up to 3 million in December or more). Yet, this isn’t happening in the slightest (as Kinect is easily available everywhere and in stock everywhere I see, online and retail). The reason why this part of the PR sounds so strained is because it is. There has to be much grinding of teeth at Microsoft.

Bottom line is when the going gets tough, Microsoft only has one tactic to compete: use massive amounts of money to force a market outcome. We witnessed this during the first Xbox where Microsoft blew up billions of dollars and hailed itself as incredible geniuses for making a console that sold as well as the Gamecube. We witnessed this again with the company shoving a billion dollars or so to ‘hide’ the repairs for the bungled launch of the Xbox 360 (with failing hardware, production issues, etc.).

Now, with Kinect, Microosft can only try to force  a market outcome by pumping money into it (this time, half a billion dollars in marketing for a silly accessory). And, sure enough, it isn’t working. Anyone who thinks Kinect is ‘successful’ is not paying attention to the numbers especially the half billion dollars Microsoft unleashed.

Half billion dollars for this result? And even then, the Wii still outsold them during December! I’m telling you, folks, Microsoft cannot be pleased with how this turning out. The only solace they have is just how much worse Sony’s Move performed. I still expect six months from now that ‘Microsoft Mushrooms’, like the 32X mushrooms, will begin infesting used game stores.

http://seanmalstrom.wordpress.com/2011/02/18/the-incredible-360/