The gaming industry keeps failing miserably at selling its most important products

Sony’s PlayStation 5 and Microsoft’s Series X and S launched earlier this month, and it’s been a rough bunch of weeks for most people trying to get one. The pre-order situations for both next-gen consoles, in addition to Nvidia’s RTX 3000-series graphics cards, were messy to say the least, and things haven’t gotten any better now they (and AMD’s RX 6800 series GPUs) have formally launched.

This holiday, without a doubt, is the most pivotal hardware launch season the video game industry has seen in almost a decade. But for some reason, the biggest names in interactive entertainment can’t seem to solve the simple task of giving consumers an easy and straightforward way to exchange their money for a product.

Why, in the year 2020, are companies as large, experienced, and well-funded as Microsoft, Sony, Nvidia, and AMD still failing at preorders? It’s an especially puzzling question when companies like Apple, Samsung, and even Facebook-owned Oculus seem to have figured out how to properly manage expectations and sell a new in-demand device without turning it into a stress-inducing scramble.

We still have no idea how many units any of these companies intended to sell, how many they allocated to each retailer, or to what extent they plan to restock at any point this year or in early 2021. Right now, if you don’t have a confirmation email in your inbox for a new PlayStation, Xbox, Nvidia or AMD graphics card, you may not get your hands on one until well into next year. Everything is “sold out,” with little to no information on when the situation may change.

Why these companies can’t seem to competently sell their most important products is a more complex question than it seems, as it’s not explained by sheer incompetence alone. These are major brands that have been selling products for decades with long-standing retailer relationships, supply chain management expertise, and vast amounts of data to source from when trying to predict consumer demand and manage global inventories.

Yet, as we’ve seen over the past several weeks, this would not appear to be enough for console makers and major PC gaming players like Nvidia and AMD to solve the puzzle. The aftermath of preorders for the PlayStation 5 and Xbox Series X and S going live, as well as the initial wave of sales for Nvidia’s RTX 3080 graphics card online and in select stores, was nothing short of a disaster. On release day, things weren’t any better. It’s created confusion and disappointment at a time when businesses like these should be celebrating such robust consumer interest in their products.

Even Microsoft, which watched Sony and its retailer partners completely fumble the initial batch of PS5 preorders in September, had a somewhat rough go of it when the company opened preorders for Xbox Series X and Series S, although it was a far cry from the chaos of Sony’s initial batch. Microsoft prepared fans well in advance with proper timing for when Xbox Series X and Series S preorders would go live in their region, throwing shade at Sony all the while. But when the pages went live, errors and other hiccups began to skyrocket.

Many consumers reported issues securing orders from Best Buy and Target, with Xbox consoles disappearing from shopping carts and issues processing payments during crucial slivers of time before the product pages listed the items as “out of stock.” Others said the Microsoft Store was experiencing similar problems before also reporting “out of stock” messages across the entire Xbox lineup, including the new Xbox All Access subscription. Many of these problems are the same issues that plagued Sony.

Stranger still is that these companies seemed to be surprised by the sky-high demand, even though they should have been well aware. Nvidia publicly apologized for its disastrous RTX 3080 launch, saying, “We were not prepared for this level, nor were our partners.” 

The company claims its website received 10 times the traffic it did on its previous-generation launch of the RTX 20 series and that some of its 50 or so retail partners saw more interested buyers visit their websites than on Black Friday, causing all manner of issues with order processing and site crashes. 

Nvidia’s new graphics card also seemed to be uniquely targeted by automated bots run by apparent scalpers eager to turn around and flip the newly available product on eBay and other marketplaces, forcing Nvidia to go so far as to manually review orders to ensure they went to legitimate customers.

Sony apologized, too. “Let’s be honest: PS5 preorders could have been a lot smoother. We truly apologize for that. Over the next few days, we will release more PS5 consoles for preorder – retailers will share more details,” the company announced after the initial wave of preorders, which some retailers pushed live a day ahead of schedule and sold out immediately. “And more PS5s will be available through the end of the year.”

And while Nvidia’s RTX 3070 launch was a bit more orderly, PC Gamer liveblogged the AMD Radeon RX 6800 GPU launch yesterday without ever managing to see a single card in stock. There’s no word yet on whether that might change, and some angry would-be buyers are calling it a “paper launch.”

Beyond the fact that retailers haven’t meaningfully restocked those products, the most frustrating element of this fiasco is the lack of transparency. With record demand, companies like Microsoft, Sony, AMD and Nvidia could very easily implement a lottery system or any other manner of fairer preorder processes. Or they could allow retailers to disclose how many consoles they have, among other ways of helping manage consumer expectations.

For instance, the Oculus Quest 2, which went on sale September 16th and began shipping on October 13th, was initially simply backordered by about a month in the US and Canada. (It’s now available within a few days.) Instead of telling people a product is “sold out” and hoping they’ll check back at the right time without any idea when that might be, Oculus is transparent about when it expects the product to arrive and is still taking orders. Apple does the same every year when it launches new iPhones, smartwatches, tablets, and other devices.

Instead, the video game industry and its intense culture of corporate secrecy means consumers don’t know when anything will happen. Sony claimed “more PS5s will be available through the end of the year,” without offering any concrete details as to what that meant — including how many, through which retailers, and whether those units will arrive on or around launch day or perhaps weeks or months after. Microsoft did the same, saying “more consoles to be available” the day its consoles launched, without any indication of where, including whether Microsoft means limited in-store options or more consoles for online retailers. 

The primary issue at play may be one of misaligned incentives. The video game industry is fiercely competitive, and a primary motivator for even companies as large as Microsoft and Sony is getting to signal to investors, analysts, and consumers that a product is flying off the shelves and almost impossible to find. Immediate sellouts for these companies is a positive development because it means demand is higher than supply, and they don’t have to worry about producing units that sit unsold on store shelves or retailer warehouses. 

Creating a narrative of scarcity also helps build excess consumer demand, even when the intention is not to outright restrict the number of people who can buy the product. Brands like Nintendo, to which a prolonged sense of scarcity is core to its business model, are able to drive interest in products by signaling that they may be hard to find for months or years to come.

We’ve seen time and again how Nintendo would rather produce too few of an item, even a major console like the Switch or the retro-fueled NES and SNES Classic, than produce too many or try to accurately predict demand. Nintendo is even being openly blatant about the short time frame in which you can buy its new classic Mario bundle, Super Mario 3D All-Stars. You have until around March 31st, after which Nintendo will presumably remove it from its eShop, and physical cartridges will become pricey collectors’ items. 

Meanwhile, retailers just need to sell all of the units they can, and there’s not very much incentive for those companies to fix their websites or try to implement a proper digital queue when a website that works only some of the time during a mad preorder rush is sufficient to make that happen. GameStop seemingly tried a virtual waiting line with Xbox preorders, but savvy onlookers discovered its queue wasn’t even real. The company was just telling consumers not to refresh the page in hopes it would keep their servers from melting, all while an automated script refreshed the page every 30 seconds.  

Within the last several weeks, we have seen retailers open up more inventory for next-gen consoles, but we’ve also seen many bundled with additional items you likely do not want or need — or, in the case of graphics cards, only available if you buy an entire PC. Amazon, Best Buy, GameStop, Target, and Walmart don’t have a good reason to care whether they have enough units to satisfy demand — and demand is great enough that they won’t for many months and this will likely continue as we go into the holiday season. The next priority is making the most of the situation. When people keep checking back online either sporadically or in the case of Walmart let’s people know in advance when restocks are happening, each time is an opportunity for a retailer to sell other products.

Beyond the misaligned incentives is a lack of communication. We don’t know how many units these companies intended to produce, whether they will be more or less than the last console or graphics card launch, or whether that’s the result of shoddy logistics and planning or deeper issues like supply chain roadblocks and COVID-19-related manufacturing and distribution delays.

We don’t know if the companies or retailers anticipated situations like the ones that played out this past week or if they were all as genuinely surprised as they tried to sound in tweeted-out apologies. It’s hard to believe a megacorporation when they say they’re sincerely sorry you had trouble giving them money in exchange for a product. 

Nvidia is promising it will continue to manufacture and ship new RTX 3080 GPUs to its partners and that it is “increasing the supply weekly.” Yet, Nvidia’s CEO anticipates that supply for the RTX 30 GPUS will remain an issue until next year. Microsoft has suggested the Xbox Series X might be in short supply until April at the earliest.

With Black Friday a few days away, we have seen several major retailers announce that PS5s and Xbox Series X will be available for purchase on November 27th, with most exclusively selling the products online, but we don’t expect it’ll be any easier than we’ve seen previously — constantly refreshing your web browser, hoping one appears in your cart, before stock runs out for the day.

In an ideal world, this would be a solved problem, just as Apple has streamlined the process of selling as many iPhones as it can every year. But the video game industry doesn’t have much to say about how it intends to fix this, and it’s not clear these companies even care to try.

Update November 19th, 7:25PM ET: We’ve republished this post following AMD’s GPU launch, and another wave of PS5 availability, so readers can understand the ongoing situation and some of the possible reasons behind it.