Earlier this week NPD released it's sales numbers for the videogame market for January. Let's see what it said. Wii had sold 274,000 units for first place. Nothing surprising there. What was surprising though is second place. With 269,000 units sold, the PS3 took the runner-up position from the Xbox 360, which had sold 230,000 units. The DS in January sold 251,000 for third, and in a tie with the 360 for fourth, was the PSP, also with 230,000 units sold. This isn't the only hit that Microsoft has taken this week. Announced just today, Toshiba held a press conference to formally cede the "format war" to it's competitor, The Blu-ray Disc Association. What happens to Microsoft's HD-DVD add-on now? Is there any room left in New Mexico beside E.T.?

OK, I know these events probably won't have a huge impact on the Xbox in the long run. But it's the short term that interests me. First, being outsold by Sony. It's no secret that Microsoft has had trouble keeping some of it's SKUs in stock lately. Try to find an Elite out there. You won't be able to do it. There just aren't any. Now if you search for a Pro or an Arcade, you may have some luck. The store down the street from me has plenty of each in stock. If instead, you're looking at the online retailers for an Xbox, you will apt to be confused. Amazon.com has no Xbox 360s in stock. If you want one, you'll have to order it from another retailer. I'd understand if one or two SKUs were not in stock, but all of them. Why is that?

Here's what Microsoft's David Dennis said during an interview with Next-Gen on the subject: "We saw the sales outpacing our forecasts as far back as November," he explained, "but because we had inventory built up in advance of the holiday, it really didn’t become a shortage issue until the latter half of December. The sales continued to be robust through January, so it just continued to worsen." Demand for the Xbox has been steady for quite some time now, so this could very well be the reason for not being able to find one. Although, that is not the only possible reason. Speculation has it that Microsoft may be selling through it's old stock to make room for new SKUs. What is likely, if the new SKU story is true, is that more reliable hardware has been designed and put into manufacture, thereby displacing production of all the old models. Should this be true, we could be hearing an announcement any day now from the Game Developers Conference.

OK, now the format war crap. It's over. Let's move on people. Seriously.

There has been a lot of conjecture of the possible fallout over Toshiba's move to leave the HD-DVD biz. Would Microsoft take a financial and sales hit from this loss? Would Microsoft immediately make a BD add-on drive for their Xbox 360 console? Would the PS3 benefit from this unfortunate turn of events? Short answer...Possibly. Long answer, I don't think Microsoft had as much invested in HD-DVD as Toshiba did. Sure, they made the add-on drive accessory for it. The reason I don't think Microsoft took a big hit was because of the add-on itself. Imagine what would have happened if Sony had lost. The PS3 has an internal Blu-ray drive. The PS3 would have had to remove the drive in subsequent hardware generations and add an HD-DVD drive to be competitive. Of course, by then the Xbox would have already have installed on in their hardware. I think having the drive external did a lot to insulate the 360. The PS3 with its internal Blu-ray disc drive will, of course, have some sort of an impact, but it's not as bad for Microsoft as it could have been.

Now, it has been a tough week for the Big M, but never count them out. They seem to thrive on challenge up in Redmond. Look for new hardware soon, and with it hopefully, an end to the Red Ring of Death. Microsoft has made some mistakes lately, but it has a rosy outlook. There are some great games are coming up, Live is as strong as ever, and the hardware is getting better by the day. Not to say that they shouldn't be worried, but let's wait and see what the sales numbers for February and March look like.