Conflicting Goals

After the expensive land-grab of the original Xbox, strong voices calling for monetisation of the 360 installed base emerged, while others called for market expansion to remain the priority, recognising that the console's position is far from cemented (having been outmanoeuvred in the downstream space by Nintendo and still facing a clear threat from Sony in the upstream space). The Xbox 360 S is something of a victory for the latter camp, finally integrating previously expensive components like the WiFi adapter into the system.

Kinect, however, feels like a product designed by the latter grouping - aimed squarely at market expansion - but with a price tag slapped on it by the former, with a clear eye on monetisation. As a result it finds itself in a no-man's land, not terribly interesting to the kind of people who already own an Xbox 360 and are willing to invest further in the platform, but far too expensive for newcomers to the system. Some seriously good marketing and PR could still give it a decent Christmas, but it will have to be genuinely eye-opening stuff to overcome the challenges created by the price point.

Supporters of Kinect will point out that Sony's Move hardware, too, quickly ramps up in price when you start adding additional controllers - and they're quite right. This, however, is not a zero-sum game. Both systems could be successful. More relevantly, both could be utter failures - the existence of a significant market for either technology has yet to be proven. An error on Microsoft's part cannot be excused by pointing out a similar error on Sony's part.

Indeed, it's entirely likely that early 2011 will see price cuts for both Move and Kinect - and herein lies yet another marketing challenge laid down by the platform holders for their communications teams. If Kinect, and indeed Move, have a tough Christmas, and then cut prices sharply in the New Year, how will the companies involved prevent the stench of failure from surrounding that price point?

Priced £50 cheaper, Kinect would start to make sense - an add-on that enhanced the appeal of the Xbox 360 at a price point which didn't massively inflate the cost of entry to the platform. As it stands, Microsoft has balanced the success of its much-hyped system on a knife edge. Thankfully, there's no question about Microsoft's ability to afford an expensive failure - but after over a year of hype, a flop for Kinect would pose serious and troubling questions about the firm's entire strategy in the console market.