According to inside sources, Microsoft’s Kinect will cost roughly $150 to manufacture. Apparently, the cost of the device (which featured prominently in their E3 press conference) has caused quite a bit of consternation internally at Microsoft.

Screen Digest games analyst Ed Barton wasn’t surprised by the $150 cost of Kinect. “In pure console peripheral terms, $150 costs are expensive but the question is how much Microsoft is wiling to cut to raise market share,” said Barton. “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.”

The Israeli company Primesense helped contribute to the technology behind Kinect. Barton believes that the acquisition of Primesense may contribute to the ultimate cost.

“There’s basic hardware tear-down costs, says Barton, 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.”

“Of course, Kinect may ultimately position Microsoft for entry in fields outside of gaming. I wouldn’t at all be surprised to see Microsoft apply the technologies elsewhere, for things like video conferencing,” said Barton. “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,” concluded Barton.

Source: Develop