Fun with Microsoft press releases, or why XBox 360 may not be posting as big a lead as you think.

We have a game we play around the office here with Microsoft press releases. The game is, "Find the words that make the headline true." It's not always easy.

Let's start with XBox 360s. Last week, Microsoft said that it expects to sell more than 10 million XBox 360s by the end of 2006. Sounds plausible, right?

Well, sort of. Unfortunately, NPD just released their numbers for November. The outcome was pretty close to Blackfriars forecast last week:

Nintendo Wii: estimate: 600,000+, actual: 476,000
Microsoft XBox 360: Blackfriars estimate: 600,000, actual: 511,000
Sony Playstation 3: estimate: 200,000, actual: 197,000

Sounds pretty good, right? XBox 360 beat the Nintendo Wii in November with half a million units. They should be fine with the projection, right?

Well, not if you go back to Microsoft's earnings statements and notice that through September 30, Microsoft had only sold 5.9 million units according to its SEC filings. XBox 360 sales in Q3 were averaging 300,000 a month, so let's say October sales were 400,000. Adding on 511,000 for November, that brings us up to 6.8 million. Estimates are that Microsoft will sell about 1.5 to 2 million XBox 360s for Christmas. That leaves the total about a million units short of the 10 million goal.

The secret sentences in the first press release cited above that make the projection possible are the following:

That "sold" number refers to units "sold into retail," which refers to units in transit, units sitting in store inventories and machines sold to consumers.

So how can Microsoft make its stated goal? It's simple: they "stuff" the retail channel by requiring retailers to take XBox 360s over and above those they need by the end of the year.

Now some might argue that retailers won't want to take inventory they don't want this time of year. But Microsoft has a nice trump card to play here. They simply say, "Well, we have a big consumer product launch of Windows Vista and Office 2007 coming up on January 30. Those who don't take XBox 360s might have some trouble getting inventory of those products." And given that those products are pretty much guaranteed to sell in the millions of units for the year at price points of hundreds of dollars, most retailers will just take the XBoxes and call it a day.

See, isn't that a fun game? Now try playing along at home for fun and prizes. Here's an article noting Microsoft's reaction to the first few weeks of Zune sales. In response, a Microsoft spokesperson noted that they weren't terribly worried about initial sales, since they intend to sell at least a million Zunes by the end of June 2007. Ignoring the fact that Apple is selling that many iPods every 10 days (actually faster than that this time of year, but that's an average for 2006), can you find the words that make this statement especially likely? Hint: Zunes can mean today's Zune or other products under the same name.

Our point: Microsoft has a long history of using press releases to promote their product momentum in shall we say interesting ways, using words like as "fastest growing" (meaning, the number we started with was really really small) to redefining words such as "sold". It's not good marketing practice. Why? Because once consumers and press people figure out you are playing lawyer, they stop believing you and your brand. And that's more likely to do you harm than good.

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