Xbox One launch night in Berlin.

NOV. 25, 2013 • As with the PlayStation 4 the previous week, Microsoft Corp.’s $499 Xbox One launch was mostly solid  marred somewhat by some reports of defective equipment out of the box. The company was pleased to announce that more than one million units of the new console has sold during the first 24 hours after its November 22 launch in Australia, Austria, Brazil, Canada, France, Germany, Ireland, Italy, Mexico, New Zealand, Spain, the United Kingdom and the United States. Not long after, however, new Xbox One owners in various markets began complaining of non-functional hard drives – accompanied by a grinding sound – preventing the operation of most standard features. Microsoft’s sole official comment on the issue has been a statement to the Gamespot website that said only a “small number” of Xbox One owners were affected, and that those who were experiencing problems could receive a replacement immediately through the company’s Advance Exchange Program. Those receiving replacements in a few days would have to return their broken Xbox One’s within two weeks, as well as accept an additional $499 charge to a credit card that will be refunded upon receipt of the defective unit.

Impact: While it is obvious that Sony and Microsoft could sell every unit of their new consoles possible to ship, we perceive Sony may be performing somewhat better. The PlayStation 4 was launched in North America only and sold 1 million units on day one. By comparison, the Xbox One launched in North America and 10 other markets – splitting all between one million units sold in 24 hours. It will be interesting what sales number will rack up when it launches the PS4 in Europe, Latin America and Australia on November 29 compared to our latest worldwide forecasts. Also interesting to note is that Microsoft has held units back from retailers to maintain stock in its own stores as a means to have stock on hand for consumers who have not pre-ordered. It is not known whether defective replacements are being taken from this stash, yet it is obvious that Microsoft is in a better position to react to angry customers than Sony, which can at best promise a replacement within two weeks. We’re sure having to charge an additional $499 to Microsoft for the pleasure will not go down well with many consumers, but at least the option is there. The other major difference is that users changing a defective hard drive inside an Xbox One voids the warranty on the system. That makes owners dependent on Microsoft for a fix. Tech savvy PS4 owners are allowed to change the hard drives in their devices, and could do so as a last resort, but we suspect the number of consumers willing to do so would be few. With more units in-channel than in any previous major console launch a visible number of dead units is to be expected. And for those consumers who ordered online, not only does their new PS4 or Xbox One have to survive shipping from Asia, the devices have the further hurdle of surviving home delivery from distribution centers by private carriers. The good news is that both Microsoft and Sony had systems in place to handle defective units and they are reacting swiftly to these early problems.