Industry analytic firm DFC Intelligence has said Microsoft is going to struggle to expand beyond its core audience, even with the release of Kinect.
The firm's monthly brief focused on how Microsoft is hoping to lure the casual audience using its latest motion technology.
"The Xbox 360 clearly needs to diversify beyond the core first-person shooter audience," said the report.
"Microsoft is putting almost all its eggs into the Kinect as a way to appeal to the 'casual' consumer and expand its user base.
"Unfortunately, based on what we have seen, DFC continues to feel that Microsoft is going to struggle to expand beyond its core audience."
Why? DFC felt that, despite Kinect being a "cool technology," in practical terms it's "somewhat limited."
"There are numerous problems with this approach, but the biggest problem is Microsoft, at its core, is simply not an entertainment company. Almost every time Microsoft has tried to emulate successful entertainment products they have failed.
"We don’t know the price of the Kinect, but it is definitely not free. An Xbox 360 with a Kinect is likely to cost as much as an annual membership at the local YMCA."
Kinect is due to release this November.