Source pins Kinect manufacturing costs to $150

Source pins Kinect manufacturing costs to $150

By Rob Crossley

June 21st 2010 at 3:34PM

Publisher claims Microsoft ended up spending far more than expected on the device

Microsoft is paying around $150 in total manufacturing costs for each Kinect unit, Develop understands.

A highly-positioned, trusted source had given Develop the “$150 manufacturing cost” figure on the condition of anonymity, adding that the expenses of Kinect is a topic of concern for his company.

The news comes in the wake of rumours suggesting an internal struggle at Microsoft on the retail price of Kinect, a kit once touted to sell at £50, but now thought will cost over twice the price.

Microsoft says the company “does not comment on rumour or speculation”.

Last year a publishing source told MCV that Microsoft is “trying to get as close as possible to impulse buy” with Kinect – a plan which is looking less likely as evidence points towards a $150 retail price for the device.

Screen Digest games analyst Ed Barton said he was “not surprised” by the $150 manufacturing figure that Develop put to him.

“In pure console peripheral terms, $150 costs are expensive but the question is how much Microsoft is wiling to cut to raise market share,” he said.

“The further above manufacturing costs it is, the tougher it becomes. Especially since Microsoft is targeting Kinect to a more casual market.

“Presumably, a big portion of Microsoft’s target market for Kinect won’t have a console already, so adding in the console costs along with the camera costs, the result is starting to look a bit pricey.”

Microsoft had previously acquired Primesense, a 3D imaging company based out of Israel. The firm brought with it a number of patents and technologies for Kinect.

Barton believes that the Primesense acquisition may come into the cost equation. 

“There’s basic hardware tear-down costs,” he says, “but Kinect isn’t just a number of components, it’s also a software layer – one that is absolutely key for the whole experience.

“Kinect’s R&D costs might be sunk into the manufacturing costs, because Microsoft needed to ensure that Kinect’s basic imaging actually has a software layer that can be fed into the developer toolchain.

“These are things that require investment, and serious expertise, and would argue would have pushed the manufacturing costs of Kinect up even more”.

But Barton is confident that, with Kinect, Microsoft has a technology that can be implemented in different sectors outside of traditional gaming.

“I wouldn’t at all be surprised to see Microsoft apply the technologies elsewhere, for things like video conferencing,” he said.

“It may have been possible, in its planning, that Microsoft has decided the investment it has made into Kinect can spread across all sorts of areas beyond gaming.

“The commercial guys at Microsoft will obviously want to sell the unit at its lowest price, but the accountants will be arguing that Microsoft has to start paying for all the R&D and goods that got it to this position.

“The one thing that Microsoft has proven over the last few years, especially with its aggressive price cuts, is that the company is prepared to add pressure on itself to win market share.”