Kinect cost $56 to make - Report

UBM Tech Insights opens up Microsoft's new motion-control technology and prices out each of the components within.

Microsoft's full-body motion-control tech, the Kinect, was released at the beginning of the month at the $150 price point. The company had previously said that it would sell every Kinect unit at a profit, and now, it appears that margin is in fact quite large.

The Kinect's not so expensive after all, says the report.

According to UBM Tech Insights (via EETimes), who tore apart a Kinect unit and priced each of its components, the per-unit cost of a Kinect is roughly $56.

Of that figure, $17 is attributed to Israeli semiconductor company PrimeSense's "reference system," which includes microphones, processors, and cameras.

Previously, the New York Times reported that the first Kinect prototype cost Microsoft a whopping $30,000, some 200 times the price the company is selling the unit for. In that same report, Microsoft expressed its plan to sell each Kinect unit at a profit.

For a view of the Kinect's full component breakdown, check out the EETimes report.

The Kinect is Microsoft's first dive into the motion-control gaming era popularized by the Nintendo Wii. Microsoft believes it will sell 5 million Kinect units this holiday. Kinect is currently available as a stand-alone product for $150 and in Xbox 360 bundles beginning at $299.

Check out GameSpot's in-depth look at the Kinect for more on the Xbox 360 add-on.

Written By

Eddie Makuch is a news editor at GameSpot, and would like to see the Whalers return to Hartford.

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Discussion

660 comments
TheRealMantera
TheRealMantera

Why the hell even report the materials pricing other than to try and make MS look bad. I'm sure the profit after advertising/marketing, r&d, distribution, etc. is not nearly the 60+% that this article assumes. I mean c'mon guys are you somehow out to bash and damage the already declining games market from which you so shamelessly milk for a profit yourselves. How can this possibly be in your best interests. DUMB! This is like saying that a 59$ AAA title is printed on a disc that only cost .00023 cents. and therefore the game publishers are raking in a 50,000% markup. DUMB!

borne_god
borne_god

The parts cost only $56 however the programming and the amount of time spent on its success should increase the cost however not more than $100 COME ON!!!

SpiderBot007
SpiderBot007

@Son_Jazrin Wow...I never thought about it that way! You are a smart man.

Son_Jazrin
Son_Jazrin

@SpiderBot007 It's all about the profit my friend, it's not greed like many had said, It's good business. Do you think that when the Iphone was first released it was worth nearly 700 dollars? Of course not. After the necessary hype was created, they can set the price to what they want (In this case nearly 3 times the value of the parts), as hype diminishes, they'll start bringing the price down to a respectable range.

SpiderBot007
SpiderBot007

Then why the hell are we spending $150+ on a Goddamn $56 camera?

bbagnall
bbagnall

In what way is Microsoft greedy for selling the Kinect for $150? Best Buy and other stores need to take a cut because they aren't a charity. They need to feed their families too. There is also a distributor who stores the products from Microsoft in a warehouse and ships them to stores as they request orders--they take about 25%. And Microsoft needs to make a profit after spending $500 million at launch and development costs. Anyone here thinking that the price should be lower than $150 at this point is purely ignorant about business and finance. Microsoft is not greedy, they are just pricing according to economic realities.

the1stmoonfly
the1stmoonfly

@ Warhawk While I agree M$ is very greedy, things have got better with the slim model. A 250 GB HDD model with built in wireless N for pretty much the same price as the original model is a step in the right direction. As for everything beig an extra, well isnt it nice not to buy stuff you dont want and save money you dont HAVE to spend? As for Kinect, I wont be buying it till the price drops or they include hardcore games that use Kinect as well, with features like head tracking being utilised.IMO, Hardcore gaming with Kinect is going to be about adding Kinect features that really work perfectly to already well established games, and not games based solely on Kinect control. In other words, games that use the pad first, and add to the experience with Kinect support. Why they arent patching some existing games to get this off the ground and improve sales is totally beyond me.

Seankieran
Seankieran

So after selling 5 million, Microsoft will be getting $93.99 a piece? They will have made $470 million, ack! Of course it also depends on how much the difference is between the List Price of $150 and the price Microsoft is selling them to stores, but wow... Microsoft is turning into Apple with those prices!

warhawk-geeby
warhawk-geeby

Microsoft = Greedy. An you'd be a fool not to realise that. EVERYTHING for the xbox pretty much has to be bought as an extra.. and I feel sorry for anyone that is too gullable to realise that, or for anyone that continues to back them up even though deep down they know they're wrong. I'm not pointing fingers here, but considering consumers are the key to any business it's suprising how you 'fans' are treated.

parhar67
parhar67

blackace You say its microsoft and its not surprising for what they do? LOL it costs money to pay people that make the thing it costs money to advertise the thing it costs money to research and develop the thing. It costs sony 12 bucks to make a ps2 and they charge 100 for it....so sounds to me microsoft is not as greedy as the competitor.

OU_Munky
OU_Munky

Standard rule of thumb for product development...every $1 added in production cost = ~$3 at retail.

PaulGT4RC
PaulGT4RC

Kinect Adventures isnt a full game, its Demo material.. it even says that on the box! Not worth a cent as a game! But as others have said, the bare component costs is meanigless unless you are able to buy them yourself and build your own Kinect. So we all have to pay the RRP to cover all the in between costs, R&D, manufactuering, Advertising, transportation, shop staff, shop heating and lighting, rent ect. End of the day we all enjoy games and they have come a long way since the Atari 2600. Price points have always been qustioned but then if you want progress then the companies be it Nintendo, Sony or MS need to make money!

MetalZombieII
MetalZombieII

Let me preface this with the fact that MS has every right to charge as they see fit and they also have every right to make a profit, they are a business and they are in it for the money, that is what they do. That being said however, those of you calling out GS for reporting just the cost of $56 for the components and not adding in the cost of R&D, packaging, advertising etc., you are right to do so, but your comments are flawed as well. MS didn't pay retail for those components, in fact I will go out on a limb and say they probably paid less than a third of the cost of those components, because MS buys in bulk. So they could have easily put out Kinect at a lower price point and still made a tidy little profit. Also please stop adding in the cost of the pack in game, as that game is a throw away title, and does not equate to anywhere near $40 in cost. Please, stop defending MS they a not your BFF and all they care about is profit.

drummerdickens
drummerdickens

How short sighted. On top of component costs you have to consider: 1. Research and development 2. Labour costs 3. Fixed costs of machinery to manufacture the Kinect 4. Delivery costs 5. Tax Awful article that makes no sense.

pgmonkeeuk
pgmonkeeuk

A lot of gaming sites have reported this article in the same misguided fashion...et tu GS? The retail industry is a surprisingly complex world of hidden costs and kick-backs which, ultimately, is covered by the RRP so that everyone down the line can clear a healthy operating profit. Generally - Manufacturers sell to Distributors, Distributors to Traders, Traders to End Users. So by the time Joe Bloggs picks up his Kinect, he's covering everybody's costs, hence the large gap between RRP and cost of manufacture. That is the system for most retail products whether you're buying a Kinect or a loaf of bread.

kuda001
kuda001

First of all, the component cost of a single unit ($56) does not mean selling at $150 means a $94 profit. There are other costs to consider like R & D or the $400m Kinect marketing budget for example, this should be obvious. Bad GS, very bad!

Knutte79
Knutte79

[This message was deleted at the request of a moderator or administrator]

Rhino53
Rhino53

Probably because it was half-way done *looks at Eye-Toy*

Ben_500
Ben_500

ok so $56 for the unit + $40 for the game = $96, then add the cost of the motion control software which took months and months and months of testing before Beta then more testing and development during beta so that cost should also have a $ mark per unit same as the game really! Then each part may add up to $56 but there is a cost in construction, packaging, shipping + retail mark up. so really $150 is a very good price when you cost it out..

chrs_vedder
chrs_vedder

@K-Grogg you're right, the way he wrote it it was 4*30 but if you look closer, he also includes the price of the camera which in total would cost more then kinect, not sure about $200 though

joeborg14
joeborg14

Wow, well, they've come a long way from thirty grand.

KOTOR_MANIAC
KOTOR_MANIAC

the Kinect being sold for $150 is not too bad...it comes with one game and with the average price at around $40 a game...that means that the actual sensor bar is only $100-110. having to include a power converter for the old xbox's as well....so really...the actual Kinect bar is not too outrageous in it's pricing.

K-Grogg
K-Grogg

@itsnivlem I own all three so I'm not biased or anything...but how does 4x $30 come to $200? A move bundle + 1 extra controller comes to $150, the price of the kinect. Both the move and the kinect seem over priced to me, but that doesn't explain your clearly flawed math.

tsiper
tsiper

Good for M/S they rock and deserve it! I can't wait to get my kinect next month!

itsnivlem
itsnivlem

considering you only need to buy one to able to play multiplayer compared to the wii and the move where you need two controllers per person which is priced at $30 or more so basically over $200 for multiplayer and with the move you need to get a camera.

Gadrath
Gadrath

The components costs Microsoft 56$, that's just the components. A product's price must cover materials, manpower, facilities and development costs. Just like everyone else they want to make as much profit as possible. I won't be buying a Kinect until I see some decent games that involves something other than patting animals.

steven141
steven141

Not all that surprised to be honest. It's not as ridiculous as Apple though, the amount they charge is ridiculous but still, its standard to charge a lot more than te manufacturing costs.

shawise
shawise

Got it! snuck out on lunch break...."best buy"

thenephariouson
thenephariouson

Considering the R&D alone cost MS Millions, they need to recoup, simple, just in the same way as branded consumer items e.g. TV's, whereby the internals are made by the same factory although different companies slap their logo on it thereby drastically increasing their own proffits. You could open up practically any electronic item today and arrive at the same conclusion. Biggest example of this would be 'Bang & Olufsen', which are all made with Phillips internals : )

cajunstrike
cajunstrike

Agreed. Exorbitant upcharge is standard operating procedure for the vast majority of tech companies.

Paul2004
Paul2004

M$ overcharging....well thats new...not. Gotta admit im surprised at the unit cost and what they are charging, thats almost 100 bucks in profit for a sensor bar and with xmas not far off little kids are gonna be moaning about it for weeks. Its no use moaning about it tho, they always take the p with prices for accessories and insist you pay for em instead of using a cheaper version. No way in hell am i paying that much tho, thats almost as bad as their HDD costs

blacksabbathman
blacksabbathman

In all reality MS probably charges walmart or gamestop or whoever about $80-$100 per unit and then your looking at what? $3-$7 to ship it and besides the big stores ship everything themselves so really most of the profit is going to the retailer.

swamptick
swamptick

Why is this news? Because Gamespot does not hire good journalists. All they are trying to do is stir the pot.

patrick813
patrick813

when you put in development and testing and prototyping costs and everything associated with that it will still take a long time to break even. logic is a fanboy's worst enemy

dgboan22
dgboan22

300% mark up is actually pretty standard...so i dont know why people are getting so hot and bothered about this...

onthe_dl
onthe_dl

and i've had about 20 people other than myself try kinect and not one of them didn't have a smile while playing.

onthe_dl
onthe_dl

Kinect is amazing. I'm almost prestiged in cod:bo and I'm a very hardcore gamer but when I have friends over or family it's an amazing way to interact and play video games with people who refuse to play standard video games.

mrgrins
mrgrins

$150 is the retail price. That's how much it gets sold for, but that isn't how much the manufacturer makes on each unit. If all of the retail price on products went to the manufacturer there would be no reason for shippers to deliver them to stores and no reason for stores to sell them. We'd be buying everything direct from the manufacturer. I wouldn't be surprised if MS is bringing in something like $50 per unit, but it isn't anything close to $100 this article is suggesting. It'll still take a while to make back the investment (R&D, marketing, etc) even if the per-unit-profit is that high.

JochyMangual
JochyMangual

people need to chill out. most manufactured products cost a small fraction to make compared to its store price. Go bark at nike first for making $200 Jordan's that cost $12 to make. Microsoft spent a lot of money hardly for profit with the original console so if they need to make some of that back im not mad at them

carllfc
carllfc

Fair enough make a profit, but to make around $100 profit from a $150 product is ridiculous.

brad12d3
brad12d3

I could take this article seriously if they at least mentioned all the other cost associated with making the Kinect, or even mention that the same could be said about pretty much every other piece of tech out there, including the move. Instead they say things like "it appears that margin is in fact quite large. " As if MS is raking in $100 per Kinect. It's getting embarrassing that they still have this article up. I mean come on Gamespot, at least imply that there is more to the story than what is being stated out right.

shawise
shawise

I'm gonna try to pick one up today.

IceJester45
IceJester45

@lordharding, Stop making sense, please. You're being too thoughtful.

howie1926
howie1926

How is this article breaking news? Company makes profit on product they are selling!!! Shocker. It's not even that much of a profit when you factor in EVERYTHING, not just manufacturing costs.

sgt-hawkins
sgt-hawkins

yeah but gamestop has the best model, they dont make anything and then sell what they didnt make at huge profits, i saw them buy a game from someone and give them 76 cents, she told them to keep it, they then turn around and ask for ten dollars for it

Delston
Delston

Yeah, it's called business...and businesses are in business to make a profit. They do that buy selling things for more than their cost...where's the story here? Oh and everyone has the choice whether to buy or not buy.

lordharding
lordharding

The real value of this article is to demonstrate how much scope MS has to cut the price of the hardware when they have recouped R&D and marketing costs. Ultimately, all console makers make the real money on the games that run on the hardware. Kinect will follow the same price behaviour that you see consoles follow: high starting price, quick drop after early adoptors have bought in, then price drops every holiday period. Or...if Kinect is a flop...a quiet removal from the market (a la HD-DVD). That seems unlikely given the investment from MS and initial buzz around the product.

blackace
blackace

@Heshertonfist said: @blackace What you say is true but 5 million? It's a novelty and $150 is a lot to pay for a novelty, gift or not. *********************************************************** Same thing was said about the Wii. It's a gimmick or novelty. over 75 million units later, it's still selling. ========================================= @warhawk-geeby Yeah so this isn't actually a suprise.. It's Microsoft. It's what they do. ------------------------------------------------------------------------------ It's what not a surprise, because this has been happening with every company for years.

enfuego142000
enfuego142000

What a dumb article. Trying to make it sound like MS is doing something bad. I bet they really don't make any profit or very small profit on it when you count overhead and SG&A. Of course, Eddie Makuch, the 12-year-old who wrote this article wouldn't know that.