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http://www.fo rbes.co m/sites/markro go wsky/2014/04/18/if-this-keeps-up-micro so ft-has-a-so ny-pro blem/

If This Keeps Up, Xbox One Has A Big PS4 Problem

Yes, its early. Too early f or anyone to pop the champagne corks, declare victory and stand over the other guy
with the scowl of a champion. But Microsof t MSFT -0.86% has a problem with the Xbox One in its war with the
PS4 and it had better solve it soon or else it risks having a much smaller installed base, perhaps half the size
by the holiday shopping season in 2014. As Paul Tassi wrote here in Forbes, Sony announced the sale of the 7
millionth PS4, which it turns out occurred two weeks ago. T hat led Microsof t to respond with a report of its
own claiming 5 million Xbox Ones shipped to retailers. T he caref ul observer has already caught the dif f erence
between sales and shipments, suggesting Microsof ts number is sof t.

But worse f or the Redmond, Wash. sof tware giant is the trend: Each month this year, Sony has sold nearly a
million PS4s while Microsof t has barely shipped 400,000 Xbox Ones to retail. If we assume, perhaps
generously, that Microsof ts installed base is up to 4.5 million at this point and that the channel isnt getting
stuf f ed with unsold consoles (a trip to my local Costco suggests those Xboxes are literally piling up),
Microsof t could have barely 8 million Xbox Ones in homes by year end.
Sony, by contrast, is on pace to double that total if things continue as they have so f ar in 2014. Certainly,
things could change the equation, though Dave T hier notes that even with Titanf all, the Xbox couldnt outsell
the PS4 in March here in the U.S. Everyone seems to agree the biggest issue is the $100 price gap between the
two systems, which is mostly a f unction of the decision to bundle the Kinect with Xbox One. But there is little
doubt that ill will associated with the botched Xbox launch hasnt helped matters much.
T he question is when, whether and how Microsof t will react. Its certainly not the case that the Xbox One
launch numbers are a disaster overall. But if these tepid monthlies continue, they might seem like one a year
f rom now. And there doesnt seem to be any catalyst that will alter the equation short of either a price cut by
Microsof t or, ironically, some slowing in the sales of PS4. T here, perhaps Microsof t has some room to be

encouraged. If you look at the chart, you can see a trendline f or each console which closely matches the actual
data points. While the Xbox line is getting awf ully f lat, Sonys higher line is also beginning to crest.
Microsof ts problem looks a lot less serious if the PS4 doesnt run away f rom it with a much larger installed
base too quickly. On the other hand, if it does, the question is when does it become too late f or Microsof t. And
theres an issue of whether the company should even bother. While Xbox is a hugely popular product, its not
an especially important prof it center f or Microsof t. Some have even speculated the gaming division has lost
billions over the past decade. Its easy to say, Well, Microsof t should just trim $100 of f the Xbox One and eat
a billion in losses on the next 10 million consoles but its not readily apparent new CEO Satya Nadella would
see that as a good use of corporate cash (even though Microsof t has plenty).
Still, momentum has a way of snowballing. And right now, PS4 is not only outselling Xbox One, it seems to be
outselling it by more and more as time passes. Microsof t will have to decide soon whether to do something
about that or risk also-ran status.
Follow me on Twitter. Read the rest of my Forbes posts here.