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Forums - Microsoft Discussion - Why Chinese Preorders are not impressive for Xbox One

As an economist, I will have some simple assumptions to guide you through the math, and compare the Japanese figures with Chinese expectations

Assumption 1 :  Total Demand for a video game console is a function of GDP per capita (nominal as the product is sold at near or over worldwide price with the given exchange rate).

Assumption 2 : Total and especially initial Demand for a video game console is a function of the wealthier early adopters, which is particularly the case in developing countries where the median income is too low to afford a console, or its games unless they are pirated.

Assumption 3 : The gini coefficient applied on relatively homogenous increments is a good proxy to determine the percentiles of income distribution in the population.

Assumption 4 : The Japanese demand and the Chinese demand are comparable.

 

Now here are the FACTS

Fact 1 : gdp per capita china / japan = 0.1769
* Average Chinese GDP/cap is 17.69% of the Japanese one
* source : http://www.wolframalpha.com/input/?i=gdp+per+capita+china+%2F+japan

Fact 2 : population china / japan = 10.8
* Average Chinese population is 10.8 the size of Japan
* source : http://www.wolframalpha.com/input/?i=population+china+%2F+japan

Fact 3 : gini coefficients for china & japan are 0.421, and 0.249
* The income distribution in China is way more skewed (unequal) in China compared to Japan
* source : http://www.wolframalpha.com/input/?i=gini+china%2C+japan


Now the findings

Finding 1 :

The 90th percentile's income in China is 23.1% of the one in Japan
* So you can expect an average of 23.1% of demand PER PERSON.

However, because China has 10.8 times the population, there will be 10.8 times as many of that.

The expected total demand (relative to Japan) = 0.231 x 10.8 = 2.5 (roughly)


Finding 2 :

The 95th percentile's income in China is 24.7% of the one in Japan
* So you can expect an average of 24.7% of demand PER PERSON.

However, because China has 10.8 times the population, there will be 10.8 times as many of that.

The expected total demand (relative to Japan) = 0.247 x 10.8 = 2.7 (roughly)


In either case, the expected demand for China is 2.5-3 times the Japanese Demand, keeping everything else constant

Japanese Launch = 24 K (approx).
Chinese Expected Demand = 24 x (2.5 to 3) = 60 to 70 (approx)

However, one should remember that the PS4 had launched in Japan before XB1 while it has not yet launched in China, making the XB1 the only one available of the two there.

Also one should note that 24 K is a miserable number in Japan, just like 70 K is a miserable number in China! So a demand like 100-110 K, even though no slouch, is nothing to rejoice about, especially in the absence of any competition. It will just not have long legs, without piracy. $60-$100 games will never fly in China, except for a tiny minority.



Playstation 5 vs XBox Series Market Share Estimates

Regional Analysis  (only MS and Sony Consoles)
Europe     => XB1 : 23-24 % vs PS4 : 76-77%
N. America => XB1 :  49-52% vs PS4 : 48-51%
Global     => XB1 :  32-34% vs PS4 : 66-68%

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Interesting figures but I don't think the Chinese and Japanese markets are that similar. China is a market which has many rules and regulations which is not the case in Japan.



    

NNID: FrequentFlyer54

Japanese and Chinese Markets probably have lots of differences, but in many cases, many of those differences tend to cancel each other out. So although in the intricate details, things may get very CRUDE, the overall numbers may still make a lot of sense.



Playstation 5 vs XBox Series Market Share Estimates

Regional Analysis  (only MS and Sony Consoles)
Europe     => XB1 : 23-24 % vs PS4 : 76-77%
N. America => XB1 :  49-52% vs PS4 : 48-51%
Global     => XB1 :  32-34% vs PS4 : 66-68%

Sales Estimations for 8th Generation Consoles

Next Gen Consoles Impressions and Estimates

Could very well be the case. The distribution of wealth, or lack thereof, could certainly be a mitigating factor in the long run.



How much pre order have XBOX ONE in China?



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drake_tolu said:
How much pre order have XBOX ONE in China?


I believe it's in the 100-110 K range...



Playstation 5 vs XBox Series Market Share Estimates

Regional Analysis  (only MS and Sony Consoles)
Europe     => XB1 : 23-24 % vs PS4 : 76-77%
N. America => XB1 :  49-52% vs PS4 : 48-51%
Global     => XB1 :  32-34% vs PS4 : 66-68%

Sales Estimations for 8th Generation Consoles

Next Gen Consoles Impressions and Estimates

We don't have any official numbers for China so it's hard for me to say. I'll need some concrete evidence as to what the numbers are. I know MS said they are surprised with the demand but I need something more than that.



It might add up but I strongly contest your 4th assumption.



If you demand respect or gratitude for your volunteer work, you're doing volunteering wrong.

vivster said:
It might add up but I strongly contest your 4th assumption.


I don't know myself either, we'll wait and see. However, once we stipulate some kind of formulation, then it becomes easier to make changes based on the actual observations.



Playstation 5 vs XBox Series Market Share Estimates

Regional Analysis  (only MS and Sony Consoles)
Europe     => XB1 : 23-24 % vs PS4 : 76-77%
N. America => XB1 :  49-52% vs PS4 : 48-51%
Global     => XB1 :  32-34% vs PS4 : 66-68%

Sales Estimations for 8th Generation Consoles

Next Gen Consoles Impressions and Estimates

kowenicki said:
freedquaker said:
Japanese and Chinese Markets probably have lots of differences, but in many cases, many of those differences tend to cancel each other out. So although in the intricate details, things may get very CRUDE, the overall numbers may still make a lot of sense.


No they dont, they are utterly different markets.  Your 4th assumption is just wrong.

Actually, all of your assumptions can be challenged... but then they are assumptions arent they. 

Also, NOBODY knows the pre-order number.


Utterly different markets don't mean utterly different reactions in aggregate. And how do you know what the differences are and will reveal themselves? If you have better / finer information, please share with us.

Human behavior is predictable with the correct variables and magnitudes in place.  But I can tell you that the lack of an obvious announcement and the delay of the Chinese Launch are not good signs. Also please make sure to re-visit this page when numbers are finally in to see whether or not the Chinese market is all that different than Japan, given the necessary assumptions like I have provided.



Playstation 5 vs XBox Series Market Share Estimates

Regional Analysis  (only MS and Sony Consoles)
Europe     => XB1 : 23-24 % vs PS4 : 76-77%
N. America => XB1 :  49-52% vs PS4 : 48-51%
Global     => XB1 :  32-34% vs PS4 : 66-68%

Sales Estimations for 8th Generation Consoles

Next Gen Consoles Impressions and Estimates