One of the most talked about stories in gaming circles over the past year has been the utter failure of Microsoft's (NASDAQ:MSFT) Xbox One contrasted against the surprisingly
strong success of Sony's (NYSE:SNE) PlayStation 4.
Although perfect apples-to-apples sales numbers have remained elusive, the overwhelming perception among gaming aficionados and sector analysts is that the PlayStation 4 gained an early and overwhelming lead over the Xbox One when they both launched last September and hasn't looked back.
However, Microsoft is a company of legendary tenacity. And in its ongoing efforts to expand sluggish Xbox One sales, the tech juggernaut debuted the console on China on Monday. While the move will undoubtedly drive some growth for the Xbox One, will it move the needle for Microsoft? I'm not so sure.
China, meet Xbox
The Xbox One this week became the first major video game console to officially go on sale in China in 14 years, taking advantage of the Chinese government's recent repeal of its long-standing ban on the manufacture and sale of gaming consoles. All told, Microsoft will sell the Xbox One in more than 4,000 retail locations across 37 Chinese cities.
Moving quickly into the newly opened Chinese market gives the Xbox a leg up against other leading consoles, including the PS4 and the Nintendo Wii U, an opportunity of which Microsoft has seemingly taken full advantage. Early reports suggest more than 100,000 Xbox One units were sold in its first 24 hours in China, although Microsoft has yet to confirm that figure.
This suggests big things are indeed in store for the Xbox One in the Chinese market. However, I'm still skeptical about the Xbox One's prospects there for a number of reasons.
A new, old market
First and foremost, although now legal to sell in China, Microsoft's Xbox consoles and those of its peers have long been available via a highly sophisticated black market, though at a substantial markup. The implication here is that Chinese demand for Microsoft's Xbox consoles, while possibly dampened to a degree, has always been present to some degree in Microsoft's historic shipment figures.
Another key issue that could reduce adoption, especially in the short term, is game availability. A console's value proposition is only as compelling as the game offerings that are available to support it. Unfortunately for the Xbox One, many of the system's most popular game franchises, such as Halo or Call of Duty, aren't available in China at present. For now, Chinese Xbox users will have to subsist on lesser titles such as Zoo Tycoon and Naughty Kitties.
Price could also hamper Xbox One sales. While bringing the Xbox One into mainstream, legal sales channels will likely reduce the console's average cost in China, the system is by no means a bargain. The imported Xbox One with its Kinect bundle will retail for $699 in China. That's a full $200 above its cost in the U.S. and other markets, and a significant expense in an economy in which the average consumer still makes less than $1,000 per month.
With PC and mobile gaming having developed vibrant communities in their own rights in the absence of legal consoles, the Xbox One might face an uphill battle to expand sales in this new megamarket. As we're only several days in, we'll need to wait for more official word to get a sense of the Xbox One's relative success in the wake of its China launch. Accessing a new market, especially one as massive as China's, will undoubtedly help the Microsoft console's sales on the margins. However, as Xbox One shipments likely still trail the Sony PlayStation 4 by a meaningful margin, it will take much more than a few hundred thousand shipments for Microsoft to make up the difference.
Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.