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I think they just need to admit that Kinect is a lost cause, drop that piece of plastic out of the box and just make the console $300-$350. That way it will be very competitive with the PS4 and most people wouldn't mind buying the slightly weaker hardware for a bit lower price.

But I think M$ are too proud to just drop Kinect. They probably spent a lot in R&D for that device and now they just want to force on to consumers whether they want it or not. I don't see any 3rd party devs taking much advantage of it either.