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UltimateUnknown said:

Rather than talking the big game, MS need to hit the studios and develop something which shows why Kinect is so necessary that they had to sacrifice hardware fidelity and a lower price point because of it.

They did that, and tried that.  Several launch games were supposed to make much deeper usage of Kinect then they ended up doing.

Those features were cancelled, obviously because it wasn't turning out to be a very good game.