A well placed source of ours in Asia is confirming to us the whispers that we started to hear toward the end of E3. The parts and labor to build Kinect in the numbers that Microsoft is ordering the device in will currently cost close to $150 per unit. This is why major revisions were made to the hardware last year, including the removal of a key hardware offload chip to save money by replicating the functions of the chip in software; but rumors suggest that this has caused a bit of latency.
The price of Kinect is a cause of concern internally at Microsoft, and according to our sources it has caused battles internally over the unit. While Microsoft is now officially committed to the device, we have been told that Microsoft has not signed the final contract to build Kinect yet while they are putting pressure on suppliers and parts makers to drive the cost down. Also, the question looms on how many units Microsoft will contract for out of the gate.
Third-party developers and publishers that have titles committed to the Kinect platform are naturally concerned. One such developer, who would not officially go on the record, told us, “Look, the initial info we got from Microsoft was so positive and they projected a price point that was $100 or less. They are not going to be able to even give them away at $149 and it will die a quick death if it arrives at $199. You can bet on that!”
Microsoft has been willing to lose money before on hardware in order to make it up on the software. The real question is whether they will be willing to do that in this economy on a device that could be very problematic, in what really amounts to a significant gamble? We think that in order for Kinect to really sell, they must attract more than the causal gamer; you have to attract those who are seriously into gaming, and you can’t really do that with the slate of titles that they have coming for Kinect at release. So far, the only three serious titles that we know about for Kinect are: Fable III, Star Wars Light Saber Battles, and The Kinect version of Forza. Both the Star Wars title and the Forza title for Kinect are slated for a 2011 release, and while Fable III will use Kinect, we don’t know how much it will really use it.
With only five months until the release of Kinect, time is short and the decisions are many. Let’s hope that Microsoft gets it right, but right now it is looking more and more that the deck is getting stacked against Kinect.