Xbox Ones are not selling as much as they expected so there are lots of offers everywhere, while the PS4 is still hard to find in some places, so it could be a good time to get an Xbox One on sale now (Microsoft said they will slow down or stop production for a while to let existing inventory go).
This is true, and the implications are absolutely massive. Basically in the personnel changeover, the very high sales in Nov/Dec, expectations were that they'd have steady demand this year. Microsoft's released data shows that they were running production of 1M/mo for 2014.
This is hugely bad for a bunch of reasons, much worse than most people realize that don't know how manufacturing expenses play out with contracted manufacturing and warehousing. Idling the lines because you now have 1M+ without even potential orders means that the previous terms with the mfgs have to be altered to compensate for the expenses related to idling. All of the personnel, maintenance, material supply, distribution, storage, etc have to be accounted for under the standards of the contracts.
There are between 900k to 1.2m in the supply chain already, 1M+ warehoused (probably more than that actually), and this becomes a hugely expensive problem.
Sales aren't going to rebound with a $450/$500 price point.
This means several things :
(1)- It will be a good while before Kinect is out of the picture because there are ~2M+ unsold XB1s with Kinect already ready to go, and strong rumors of a 1 year contract to pack them in (makes sense given manufacturing commitments are 1 year+ as standard).
(2)- Given the massive inventory and terrible sales numbers, a very sizable price cut is extremely likely. The choice is : (A)- stick with $450 or $500 and keep production idled, keeping per unit margins up but losing ever increasing market share, or (B)- try to regain competitive foothold by dropping price to $399 or less, which torches E&D margins even more with their massive advertising and infrastructure expenses. Option A basically guarantees failure on a massive scale, so option B is much more likely.
(3)- Once the inventory in channel has gotten thinned a bit AND the warehoused units have gotten really moving, new production will get ramped up again, though it's likely they'll be looking to reduce expenses any way they can so that they can not get burned at the stake when the bean-counters look at the losses associated with the Xbox.
Net losses on Xbox are insane. ~4B+ lost with OG Xbox. A rough flatline with 360 for it's time. And now many billions more in the hole with XB1.
Sony really took a risk making the PS4, as the PS3 was a massive loser as well economically. PS1 and especially PS2 made tons of money, but PS3 could easily have led them to abandon gaming.
Anyway, E3 should be interesting for damned sure. I wonder how much time and leeway the Xbox division has left to right the financial ship. The way things are going Xbox may join Zune, and Phone and Surface may head that way as well. Microsoft makes stacks of money with Windows, Office, and Server. Everything else is basically a failure of minor to absolutely staggering proportions in pure financial terms.