Xbox, GameCube play well with consumers

Shoppers may be pinching pennies these days, but new research finds they apparently don't minded splurging on the two just-released video game consoles.

Margaret Kane Former Staff writer, CNET News
Margaret is a former news editor for CNET News, based in the Boston bureau.
Margaret Kane
3 min read
Consumers may be curbing their spending in some areas, but they apparently don't mind splurging on the two newly released video game consoles from Nintendo and Microsoft, according to new research.

A Goldman Sachs survey of U.S. retailers found that 73 percent had already sold out of Microsoft's Xbox and that 47 percent were sold out of Nintendo's GameCube, less than a week after the two systems were released.

The sales levels have prompted Nintendo to boost its GameCube shipments in North America. It will make an additional 200,000 units available by the end of the year, raising total shipments to 1.3 million units, the company said late Tuesday.

Goldman Sachs conducted its survey among 49 retail chain stores in large cities. The report speculated that the difference in inventory levels could be traced back to the amount of consoles the stores initially received. Microsoft was estimated to have shipped 300,000 Xbox units, less than half the number of GameCubes made available by Nintendo.

"We note that Nintendo's shipment policy appears to be staving off serious shortages," the survey said.

Toys "R" Us is well stocked with GameCube consoles, according to Goldman Sachs' research, but "it is only a matter of time before Christmas demand consumes this inventory." Wal-Mart and Toys "R" Us both lack Xbox inventory and do not know when shipments will arrive, the report said, adding that (at the time of the survey) Electronics Boutique stores had both systems in stock.

These early indicators are good news not just for the console makers. Strong sales of game machines naturally help propel sales of game titles and accessories.

The high demand for the GameCube and Xbox could turn what has already been a strong year for the game industry into a record-breaker, according to NPDFunworld, a unit of Port Washington, N.Y.-based NPD Group that tracks the toy and video game industries.

Nintendo Gamecube Unit sales for the entire market, including consoles, software and accessories, were up 12 percent through September, the company said, and console sales were up 62 percent. But the majority of sales usually take place in the fourth quarter, senior account executive Richard Ow said. Factor in two new game systems, and "a new record for the video game industry looks likely," he said.

The Sept. 11 terrorist attacks have hurt retail sales in other industries, but could be having the opposite effect on the video game industry, Ow said.

"Due to recent events, Americans may be spending more time at home, which bodes well for video game sales this holiday," he said. Game-software unit sales were up 23 percent through September, NPD found.

The interest in video games could even be a boon to other industries.

"We believe customers continue to go into stores such as Best Buy and Circuit City for the products, and, if they can not find the new gaming platforms, customers are often resorting to "alternative purchases" such as Sony's PlayStation 2 or even DVD hardware and software," wrote Gerard Klauer Mattison analyst Scot Ciccarelli.

The boom has certainly helped video game software makers, or at least their investors. Since October, shares of Electronic Arts have surged 32 percent, THQ is up 31 percent, and Activision has jumped 44 percent. Even shares of smaller companies have benefited: Acclaim Entertainment is up 90 percent since October, and Take 2 has more than doubled.