The Scorpio and the The Osborne Effect

If you don't recognize the term The Osborne Effect, here's the description from wikipedia:

"The Osborne effect is a term referring to the unintended consequences of a company pre-announcement made either unaware of the risks involved or when the timing is misjudged, which ends up having a negative impact on the sales of the current product. This is often the case when a product is announced too long before its actual availability."

One company which now faces this problem is Microsoft, having announced a new powerful console -- code named Scorpio -- to be released in time for Holiday 2017.

So how do you escape the Osborne Effect?

One way is to somehow escape it by luck. You're somehow able to make an announcement that reach the specific part of the audience you want to hit, say investors, but is never widely noticed by consumers. The Scorpio press conference announcement was widely reported in mainstream news, so this seems unlikely.

Another approach could be to sow confusion. I present as evidence the following article: "Spencer: Scorpio won't do anything for you if you don't have a 4K TV" referencing a Eurogamer interview.

It's pretty obvious that this is a lie. Or misunderstanding if you're charitable. Unless Phil Spencer and his team are totally inept, the only reason for this message is to cause confusion and get people to not focus on the future device. They're saying (paraphrasing) "Please buy the One S, the Scorpio isn't for you". Walking back these statements at a later time by providing more correct (but conflicting) information only serves to further increase confusion for a while.

As I thought about this, I realized something very cynical. I realized that it is now in Microsoft's interest to have consumers confusing the Scorpio with the conveniently available "One S". If they can get the mainstream consumer to buy the "One S" thinking they're getting the new updated much faster console they heard about, they're golden.

When I consider all this, the news that the "One S" is faster than the existing XBox One takes on a different light. It doesn't matter if this is technically true or not (the difference would have to be negligible or they'd used it in the marketing for the "One S"), and while I don't think there's an actual conspiracy here, it does play into their hands by creating a false connection ("faster console") between the "One S" and the Scorpio.

If you think "no one would confuse these two clearly different consoles announced at the same time, both described as newer, better, faster with 4k support", I can tell you I have already seen the confusion on gaming forums.

Time will tell how this plays out, but if I think Microsoft have reason to worry, especially if the hype for Scorpio grows and the release slips. We're roughly 18 months out, and they probably need people to continue to buy the boxes they've already built.

While I haven't experienced the confusion myself I can understand it, especially considering that not all outlets report on such things in a completely accurate manner. And while I do think the announcement is really early, especially since they have absolutely nothing to show right now it could also end up being beneficial for Microsoft because they have way more time now to market the Scorpio and thus have the potential to build up insane hype.

It works for games, it works for smartphones, why couldn't it work for a console? If done right, letting just bits and pieces of information get out (leaked or intentional) it could really serve to pique people's interest. And by getting out ahead of it (before leaks and rumors get of hand) they can control the message. And if you can control the message just right you can sell your product to a whole lot of people before it's even in stores or available for pre-order (e.g. they've already decided in their mind that they absolutely want to buy it).

Of course if they just leave things as they are now and do nothing with it then I think an early announcement like this is likely to come back and bite them in the ass. Likewise if they do keep the momentum going but they fail to deliver in the end it could do some serious damage to their reputation, not to mention their sales numbers.

So, yeah, it's a risky move by MS. One that can potentially make or break them. I'm really interested to see which way it's gonna go.

I guess I'm not very charitable. That, or I don't think so little Phil Spencer's technical awareness to believe that he could have been that wrong about something so obvious.

This whole thread was a good write up on the situation, though.

Well i think he pretty much cleared up any confusion on the Giantbomb stream the other night. I just think they had to scramble and make do with the system being leaked and trying to predict what sony was going to say about the Neo

"Xbox hardware revenue decreased 33%, mainly due to a decline in consoles sold and lower prices of consoles sold."

A company escapes the Osborn Effect by not announcing a new, better thing when their first products is only in it boost phase.

Think about it the console industry has launched a new generation eight or nine times, the general rule is once you current device is at a very low price, has a huge install base and when they market is saturated you launch the new system. That system cannot do much damage because the current generation has the advantages of cheapness and large game libraries, but the new generation has slicker looking visuals or new bells & whistles.

Die hard Xbox 360 fans followed MS into the breach; these fans paid more, they got stuff gamers didn't need, and MS . Right or wrong, valid or not Xbox fans are feeling a bit burned that Scorpio might come out at the four year mark and was announced at the three year mark.

I'd love to talk about why Play Anywhere is the root cause of MS pushing this so fast, but that is a discussion for another thread at another time. It suffices to say MS could have perfected their closed garden PC environment first, and then waited until their next Xbox to bring it to consoles. However, they shoved it all together as fast as possible and they will get burned.

The Xbox One has been out for a while now. Declining sales is pretty natural for any console further into the life cycle. Also, increased number of used consoles means that people will pick up consoles preowned to save some pennies.

@kingbonesaw said:

It is also important to point out that while Microsoft announced the XBox One S and the Scorpio both during their E3 conference, Sony decided to not even mention Neo during theirs, so while we (collective we: gaming enthusiasts, specialized press, people that subscribe to gaming podcasts, etc) know it is coming, the rest of the public is likely not aware of its existence, which helps Sony avoid the Osborne Effect when it comes to average Joe.

I don't think microsoft meets this part of the criteria:

unaware of the risks involved or when the timing is misjudged

They new it would hurt sales, it was obvious.

Also, the 4k comment was clarified the same day. He mispoke, it happens. The S come from their naming convention last gen.

Obviously the Scorpio/Xbox One S reveals were going to have a negative short-term impact on new console sales, as everyone in the market right now who's thinking straight is waiting for either 1) Xbox One S to actually be available so they can get that, 2) Xbox One S to release and result in discounted Xbox Ones, or 3) Scorpio itself. I'm fairly amazed at how many people think so small when it comes to a behemoth like Microsoft. I can promise you MS isn't losing sleep over Xbox One hardware sales declines in a quarter. First off, in terms of solely Xbox hardware sales, I wouldn't be surprised at all if they recoup this blip entirely during the holiday season. Not only is that the time of year people typically buy such things, it's what anyone in the market for an Xbox right now should be waiting on. And as Spencer mentioned, their focus is on users, so as long as that number continues to grow along with Microsoft stock, they're happy as hell.

It's pretty weak to claim MS is trying to cause confusion when they've detailed their plans for the next year and a half for the public. Compare that to the Playstation Neo, which is supposed to release alongside PSVR this year, and yet we have no fucking idea what it will cost, what specs it has, or its release date. I'm not at all confused by what MS is doing with Xbox or what I as a consumer should do as a result. I'm very confused as to the Neo, because Sony is telling us PSVR will be here in less than three months, but is hush-hush on the console it seemingly will need to run on? At this point I'm half-expecting the PSVR to be delayed until the Neo comes out, which is looking like mid-2017 at the earliest. It seems like they're presently re-designing Neo in response to Scorpio, but it could just as well drop 17 weeks from now as initially planned, and I as a consumer who's actually in the market for a Playstation if No Man's Sky pans out has no fucking idea what I should do right now.

Sony is pulling some Apple bullshit here. I'm afraid to buy a PS4 right now because they might drop the Neo in a few weeks. Whereas I already know that I don't need an Xbox One S and may well consider Scorpio. I, for one, appreciate knowing what's on the horizon to be able to make an informed decision. If you don't buy the base Xbox One now because you're going to buy an Xbox One S or Scorpio instead, I promise MS is 100% fine with that. These consoles aren't competing against each other, they're occupying different spaces in the market. As long as you're playing games in their ecosystem, MS don't care if you're doing it on Xbox One, Xbox One S, Scorpio, or PC. The Osborne effect could happen to MS twice over the next 18 months with the base Xbox One and Xbox One S and not have a negative impact at all if people ultimately end up adopting Scorpio. Or they could very well all find their footing individually. We'll find out soon enough.