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Kinect will sell for a profit, says Mattrick

Monday, 25th October 2010 17:48 GMT By Patrick Garratt

kinext

No loss-leading here.

Kinect will retail at a profit, Don Mattrick, Microsoft’s interactive entertainment boss, has told the New York Times.

The motion device, which is about to be the subject of an advertising campaign that will cost around $500 million, will add to company revenues for every unit sold.

Mattrick told the publication that the first Kinect prototype cost Microsoft $30,000 to build, but 1,000 workers would eventually be involved in the project.

He said that Kinect has cost “hundreds of millions of dollars” to develop, but will retailer with a margin at $150 in the US and £130 in the UK.

Microsoft’s confirmed that Kinect’s “launch portfolio” consists of 17 titles in the US and 19 in Europe.

Kinect launches on November 4 in the US and November 10 in Europe.

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30 Comments

  1. choochoo

    Day 1 buy for me and my friends u can count on me Microsoft.

    #1 4 years ago
  2. Razor

    Seems like a waste.

    #2 4 years ago
  3. choochoo

    @2 If u don’t have anything positive to say about Kinect don’t comment. Only positive comments would be appreciated lol.

    #3 4 years ago
  4. PwnedHaxor

    @3 Go Screw yourself, We’ve heard you say something positive about PS3?, Right!

    #4 4 years ago
  5. Gekidami

    And we’re expected to take Don Mattricks word on this? Seriously, Don Mattrick.

    #5 4 years ago
  6. cookiejar

    @1 lol

    #6 4 years ago
  7. AHA-Lambda

    srsly guys @1 is the absolute case where you should actually ban the fucker COME ON!

    #7 4 years ago
  8. Dark

    @3 STFU Kid.

    #8 4 years ago
  9. NiceFellow

    2 things

    1 – regular price will be $150 not margin. Margin is what you have when you deduct costs from sales price. MS would be very, very happy if the margin on Kinect was $150 per unit but it clearly won’t be (also a grammar failure in the same line. Might want to change it to “retail for $150″)

    2 – joining the dots it sounds to me like MS is going to have spent, between development and advertising, around $ 1 billion when Kinect launches. I’m assuming a margin of say $20 per unit at $150 retail, maybe $30 dollars at most unless they’ve really cut the production costs. So, that’s a lot of Kinect units they need to sell before they offset the development and marketing costs

    Just saying.

    #9 4 years ago
  10. lexph3re

    @1 and 3. Never seen bigger fanboism in my life. Do you even know why you hate anything else? Its like your hate is as justified as an Aryans hate. If you don’t want negative comments stop reading people are going to have an opinion. Just like your hate post of everything sony.

    #10 4 years ago
  11. manamana

    choochoo you are a prick – milk yourself and stop ruining this site with your utter useless comments.

    @Patrick: How about an ignore button ;-)

    #11 4 years ago
  12. OrbitMonkey

    Call me lazy, but i’m gonna wait till this can work when your sitting down :D Great concept though, will defo be keeping a eye on it.

    #12 4 years ago
  13. Psychotext

    “I’m assuming a margin of say $20 per unit at $150 retail, maybe $30 dollars at most unless they’ve really cut the production costs.”

    I just did a quick calculation on what I could buy all the parts of Kinect for at retail prices and I reckon about £56 without the costs of any custom processors (I believe there’s one on there) and packaging / manufacturing costs. It depends how much they’re giving each retailer (I’d wager a hell of a lot, which would explain why they’re pushing it)… but they’re going to be making more than $30, easy.

    #13 4 years ago
  14. DrDamn

    @13
    Not to mention profits from software, extra 360 sales, extra regular software sales to those new 360 owners, peripherals for those new 360 owners etc. Yes they will sell Kinect to make profit, but they aren’t relying on just that profit to make their money back.

    #14 4 years ago
  15. manamana

    I bet they make a lot more. As you can read at kotaku, what the iPhone is about:

    “One market research firm has estimated that the iPhone 4G costs US$6.54 to make in China.”

    if the “market research firm” is to be believed. Gaining a 60% profit margin on each hardware. I bet M$ will be somewhere around that number …

    #15 4 years ago
  16. Psychotext

    Something’s wrong there… if it was $6.54 they’d be making nearly a ten-thousand percent profit, not sixty.

    #16 4 years ago
  17. manamana

    Guess it just takes the components into account and not the assembly and the productioncosts as a whole… Hmmm, while the article states “making”…

    Maybe they must add shipping, distribution, marketing etc.?

    #17 4 years ago
  18. NiceFellow

    @13 & @14 retail will be taking a nice snip out of it. This isn’t Apple tech. I’m sure they’re making a profit, but the retailer is going to want a nice margin of the initial $150.

    Say the retailer takes $30, that leaves $120. Say MS takes $30, that leaves $90 dollars for production plus shipping and other associated costs.

    MS might be seeing more than $30 but only if production/shipping costs are a lot less than I’d imagine or if retailers were willing to take a very small cut.

    Even if MS is seeing $50 profit (which seems hugely unlikely) that’s still a ton of Kinects that have to sell just to cover marketing costs of $500 never mind development.

    MS are of course going to say each unit sells individually for a profit (they probably will) but that doesn’t mean MS is actually going to see a profit vs sunk costs anytime soon.

    Also, Pat, you’re still quoting margin incorrectly. Kinect will retail for $150 not margin.

    #18 4 years ago
  19. Bremenacht

    It’ll what for a profit?

    arf

    #19 4 years ago
  20. freedoms_stain

    @15,16,17 According to iSuppli, guys who tear down electronics and estimate the raw cost of manufacture, the iphone 4 runs $187.

    The quoted $6 and change probably refers to the cost of assembly and possibly shipping shit to-from China.

    #20 4 years ago
  21. DrDamn

    @18
    It’s not just about profit on each unit.

    #21 4 years ago
  22. Psychotext

    “Even if MS is seeing $50 profit (which seems hugely unlikely) that’s still a ton of Kinects that have to sell just to cover marketing costs of $500 never mind development.”

    Of course, but it’s a lot more complicated than that. You’ll obviously see increased 360 sales, increased xbox live subscription sales, increased live points sales, increased gaming revenue… etc etc. That’s assuming it sells any reasonable amount of course. :)

    As for development costs… well, they’re already accounted for by the divisional results so far, and they’re yet to dip back into losses.

    #22 4 years ago
  23. themadjock

    @choochoo Have you seen that latest Kinect trailer

    http://www.youtube.com/watch?v=i0Xu6EN6mlQ

    lol

    #23 4 years ago
  24. NiceFellow

    @22 remember, unless Kinect really bucks trends, that if you look at the Wii these kinds of titles/platforms tend to see lower attach rates, etc. and less online activity.

    I’ve no doubt Kinect has the potential to be profitable, but it won’t be for a while in terms of return on investment, and not at all unless it sells past a certain install base.

    Not bashing, just saying. When the Wii launched it sold at a profit, but return on investment by Nintendo wouldn’t have come until a later point.

    #24 4 years ago
  25. Psychotext

    Ironically the Wii’s attach rate was virtually identical to the PS3′s until very recently (and at one point a decent amount higher). But yes, I’d assume that casual gamers would buy fewer titles, but even so, it only takes two or three games bought by each Kinect owner to significantly increase their profitability through each Kinect sold.

    As for the Wii, I can pretty much guarantee it was profitable within the first six months. They made $600m profit in that time, and nearly $2bn over the first year.

    #25 4 years ago
  26. NiceFellow

    @25

    y’know, whatever you say, I’m factually correct in pointing out:

    1 – while Kinect will no doubt sell for a profit per unit it’ll take a while to actually make a return on investment

    2 – the article says (still) that the device will retailer for a margin of $150 which is both grammatically and factually incorrect as it will Retail for $150, margin unknown but according to the quote a positive one

    I’m not knocking Kinect but you sure seem keen to try and respond as though I am – or at least it seems like that.

    It’s new tech, which means initial margins will probably be low as production costs reduce over time, and unlike most peripheral’s it’s fairly new design/tech combination.

    Nothing wrong with that, but one quote saying each unit will sell for a profit shouldn’t have everyone (wrongly to be blunt) going oh’migod MS are going to be raking it in.

    Nintendo were raking it in although sales sure seem to have dipped recently, and to be blunt (again) Kinect needs to post some fairly hefty sales before (with the marketing budget freely disclosed plus a pretty obvious hint as to the development costs) MS are going to be raking it in via Kinect, particularly as nothing about the device screams to me they’ll see abnormally high attach rates nor big spikes in Live subscriptions driven by the launch titles.

    MS aren’t spending $500 million for nothing, though, and Kinect is clearly part of a long play not just for the 360 but to better set them up for their next console.

    #26 4 years ago
  27. Psychotext

    I care not about Kinect. I like numbers, especially sales figures, profit and the like. I’m sure you’ve seen me around here before and must have had an inkling when you saw my post. Look carefully at my posts again, they’re hardly defensive of Kinect, I simply disagree with some of your points.

    But anyway, as I alluded to, the tech inside Kinect isn’t witchcraft, or particularly expensive (you could grab it pretty much all of it between Maplin and RS Electrical). The software is complicated, but obviously the costs associated with that are already at play in the financial results. Talking of which, we’ll see the first launch related effects of Kinect in their quarterly results later this month. Should be interesting.

    As for what I said about attach rates. You think they can’t manage an attach rate of 3 (is that “abnormally high?) games for each new 360 / Kinect owner? Even Nintendo has managed 7+ for the Wii at its peak, and the 360 catalogue (not Kinect, the 360 catalogue on the whole) is significantly stronger. I’d be surprised if people don’t try a few things out before throwing it in the cupboard.

    As for live subscriptions, no, probably not, but they’ll be pushing movies, music and other assorted crap like Hulu, Netflix, ESPN, Sky etc at the casual market, HARD. Hell, maybe they’ll sell a few avatar accessories along the way too…

    You’re absolutely right about that $500m though, and as you said, looking at it as just Kinect marketing is a little limited because they’re really not just marketing Kinect, they’re marketing the entire Xbox brand.

    (Finally, yes, margin is definitely used incorrectly in this article. But Pat doesn’t understand complicated financial terms. :D )

    #27 4 years ago
  28. LOLshock94

    whatever choochoo is doing please keep it up

    #28 4 years ago
  29. Kuwabara

    im going to make a video of me crapping on kinect just for u choochoo

    #29 4 years ago
  30. Jan

    choochoo +1

    #30 4 years ago

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