By Chris Morris, special to CNBC.com
Microsoft's ( MSFT) gesture-recognition controller, Kinect, set to hit stores this November, will launch with a price tag of $150, the company announced Tuesday. The peripheral, which will come with a copy of the "Kinect Adventures" game, is priced higher than many analysts and game industry executives were hoping for. While it says existing Xbox 360 owners are important, Microsoft said the initial push for Kinect will be to attract new customers. Accordingly, the company plans to offer a retail bundle including a new Xbox 360, Kinect controller and the "Kinect Adventures" game for $299. Games for the motion-control device, including "Kinectimals" and "Dance Central," will sell for $50. "Our focus for us, first and foremost is on the console bundle ... which we think will drive new customers into the Xbox 360 environment," said Aaron Greenberg, director of product management for Microsoft. "We're treating this like a new platform launch. What's different about Kinect is it's not just the early teach adopters who are going to line up. We're at a point in our lifecycle that we're going to see a much larger mainstream demand." While this is generally the point in the console cycle where the general public begins buying systems in bulk, this generation is notably different than previous ones. Typically, manufacturers would be talking about their next generation system at this point, whetting the appetites of the hardcore players and beginning preparations for the next phase of the industry's evolution. This time, though, there hasn't been a whisper of what's next. More importantly, though, retail prices have typically dropped much further by this time, making game systems more attractive to the mainstream audiences. $199 has traditionally been the price point where the general public becomes interested in consoles. And by the time they hit $149, there's a big buying rush. $299, even with the bundled game and Kinect controller, could be a bit more than people are willing to spend. While Microsoft has told its publishing partners it plans to sell five million Kinect units by the end of its fiscal year, analysts are skeptical it will be able to do so at this price point.
"At $150, they're not selling 5 million," said Michael Pachter, managing director of equity research for Wedbush Securities. "They think they are, but I think they're doomed." Microsoft brushes off the criticism, saying it believes the price will not be intimidating for consumer--and the inclusion of a software title that offers a variety of experiences will be an added draw.
"We don't make pricing decisions without doing our research," said Greenberg. "We talked to consumers on a global scale. What we found is for existing Xbox 360 owners ... it does present a compelling offer. There's nothing more to buy." That's different than Sony's ( SNE) PlayStation Move, a system that is comprised of three parts, which are not all sold together. For users to get the complete controller set, which consists of the primary Move controller, a secondary, but often essential, navigation controller and a camera, they'll have to spend $130. (A game is bundled in with that as well.) If two people wish to play cooperatively on the same machine, the price increases by another $50-$80. Beyond pricing, both Kinect and Move will have 15 titles supporting them at launch -- which may not be a big incentive for people who don't own an Xbox 360 or PlayStation 3 to pick one up. That's causing most independent game publishers to take a cautious stance towards the devices for now. Electronic Arts ( ERTS) is porting its latest "EA Sports Active" game to Kinect and the "Tiger Woods" franchise to Move. Several smaller publishers are working on titles as well. But many other big game makers, like Activision ( ATVI) are sitting on the sidelines until the devices have notable installed bases. Microsoft, though, remains undeterred. "We really believe this is going to be a major catalyst for our business," says Greenberg. "It will drive millions of new console sales."
| More from CNBC Apple's 'Disruptive' Strategy Targets New Rivals |
Will Mobile Lead the M&A Charge?
Stocks 'Extremely Cheap' Now: Strategist