Xbox muscles in on Sony's space

By PETER GRIFFIN IT writer

Microsoft is claiming success in its first clash with Sony for the video games console market, saying it has sold 20,000 Machines since launching the Xbox in October.

But the war is far from over, says Sony, which has 125,000 PlayStation 2 consoles in homes around the country and enjoys better economies of scale than its rival.

Attractive games and machine bundles, interest-free terms and a multimillion-dollar marketing blitz by the console vendors fuelled strong sales in the run-up to Christmas.

Xbox marketing manager Wilf Robinson said the consoles had sold well, despite being stocked by fewer retailers than PlayStation 2.

Selling at about $500 each, Xboxes should swell Microsoft's revenue by up to $10 million but will contribute little in the way of profits.

Generally selling their machines at a loss or cost-price at best, Sony and Microsoft make their money from peripherals such as extra controllers, or from games - and these profits will come much later for Xbox.

Sony Computer Entertainment managing director Steve Dykes said PS2 was still outselling Xbox and beating Microsoft in the lucrative software business.

"If you add up the top 10 PS2 titles and the top 10 Xbox titles, the revenue from PS2 titles would dwarf Xbox titles. Grand Theft Auto: Vice City alone outsold all Xbox titles."

Dykes estimated that the New Zealand console market was worth more than $100 million a year. Sony had racked up sales of 28,000 in the period since the Xbox launch.

A more accurate picture of the market's value will emerge when Australian analysts Inform survey local retailers in the next few weeks.

While mindful of Xbox's strong launch, Dykes said Xbox had a long way to go to satisfy Microsoft's business plan.

"We started doing reasonable business when we reached about 75,000 consoles. Before reaching that threshold [Xbox] could fall over and not become a real format."

That fate has befallen distant third player Nintendo, which one retailer described as being "not even a blip on the radar" in terms ofsales.

Nintendo distributor Monaco would not comment on GameCube's sales in December.

Luke Naish, general manager of computer products at Harvey Norman, estimated sales of up to 3000 Xboxes across 10 outlets.

But with Xbox margins "wafer-thin", Harvey Norman was supporting the console in the hope that games titles would generate profits in the runup to next Christmas.

With Xbox throwing in three games, a DVD movie and assorted accessories with its $600 "Massive Entertainment Pack", off-the-shelf game sales had been slower than expected.

"When you're getting three games to start with, there's not the impetus to buy extra games." Naish explained.

Sony's PS2 console was launched in November 2000 priced at $1000. Aggressive pricing from Microsoft has dragged the standard price for both PS2 and the Xbox down to$500.