Kinect: Dead on Arrival at $150

Jesse Divnich, an analyst with EEDAR, thinks that $150 is the appropriate price for Kinect, and it seems that Microsoft agrees since the price was recently confirmed by Gamespot. But I still maintain that $150 is far too much.

According to Divnich, who dispatched his thoughts on the Kinect’s pricing via press release on Tuesday:

By examining peripheral pricing over the last five years, EEDAR feels that $150 is an appropriate price for the Kinect. Previous peripherals with mass-market appeal, such as band kits, have sold millions of units worldwide even while priced north of $150.  With band kits, however, consumers were tethered to only enjoying games within the music genre and developers restricted on future iterations by the install base of non-upgradeable band kits.
As a camera and motion sensor based device, the Kinect does not have those same limitations; developers will be able to optimize its software for years to come.  Kinect should not be viewed as a software peripheral, as most peripherals are, but rather a hardware peripheral.
Additionally, game specific peripherals have a limited shelf-life in terms of appeal; there are only so many sessions of Guitar Hero one can enjoy before game fatigue sets in. With the Kinect, however, there is the possibility of a wide array of games across a broad range of genres, potentially giving the Kinect a much longer shelf-life than a typical peripheral.

I agree with Divnich that Kinect is no normal peripheral, and that it should be seen as a hardware peripheral, and that it therefore has a potentially longer shelf-life than other peripherals like plastic instruments. But I believe that’s exactly why it should be priced as low as possible. As a hardware peripheral it should be treated as a hardware launch. Microsoft should sell it at a loss in order to keep the price low and get it into as many homes as possible (of course, they may already be selling it at a loss as well). They can then recoup the loss through the sale of games and online subscriptions.

A natural argument against this idea is that the “causal” players Microsoft would therefore be targeting wouldn’t buy more games after that initial purchase, but this argument is based on the sales of third party games on the Wii. The Xbox is different because it constantly advertises its library on the dashboard, and one of games is sure to catch the casual gamer’s interest eventually.

To support the price, Divnich pointed out the multimedia possibilities, such as gesture-based controls for Netflix, DVDs, the Zune Marketplace, and more. However, this is a very abstract concept to sell a product with. How exactly do I play games without a controller? How can I browse menus with my hands? These are not things people can easily picture outside sci-fi films. The comparisons to Minority Report may build excitement in some customers, but I think such associations are actually hurtful to the brand overall. People become instantly skeptical when told this technology resembles something from a sci-fi movie.

To assuage these doubts, Microsoft should make a huge marketing push, putting demo kiosks of the Kinect in malls like Nintendo did with the Wii. It’s not enough to simply show people playing it on late-night television or commercials; Kinect is something people must try for themselves to fully understand. EEDAR “suspects Microsoft will fine-tune their marketing strategy as the official launch date nears” but I have serious doubts about this considering their strategy thus far.

The initial trailer seemed to promise something for everyone. Yet all the games shown at E3 were distinctly aimed at families (i.e. “the Wii crowd”). Yet the recent decision to cancel future seasons of 1 vs. 100, despite its popularity, suggests that Microsoft isn’t interested in this market. Since players only needed a Silver Xbox Live account to play 1 vs. 100, this would have been the perfect game to lure that “Wii crowd” into playing more games after purchasing a Kinect. Finally, there’s the high price of Kinect itself, which is discouraging to all demographics and markets. Microsoft’s marketing strategy has been disjointed from the start.

With all this in mind, it’s reasonable to assume that customers looking at a Kinect box on a shelf, who haven’t tried it for themselves and who can’t picture the abstract gesture controls, will focus more on the price than anything else. With price as the only factor to consider, $150 is far too much to spend on an unknown property.

Divnich says “The Kinect’s success this holiday season is crucial to rekindling the energy among the casual and mainstream audience,” and I believe that’s exactly why the price is too high. If Kinect’s success is so crucial it should be priced to create demand, any price point that makes someone hesitate dooms the peripheral. At $150 I believe people will do more then hesitate, they’ll pass.