http://www.eurogamer.net/articles/2010-11-12-kinect-parts-cost-ms-around-GBP34

If you were to go shopping for all the constituent parts of Microsoft's Kinect peripheral you'd land up with a bill for an estimated £34, according to tech analysis published today.

EE Times has reported that a teardown analysis performed by technology consultants UBM TechInsights attributes $17 (£11) of the total to Kinect's PrimeSense reference system, which incorporates the cameras, microphones and central processor.

The rest of the total is split between around 20 other parts.

"Basically, the strength of the design is the huge design win for the Israeli fabless company PrimeSense," said UBM TechInsights' Allan Yogasingam. "They've provided the most innovative portion of the Kinect with their image processor, audio and video interface."

That figure may play into the hands of all those who deemed Kinect's £129.99 launch price as too high, but don't forget that there's packaging, marketing, labour, distribution and R&D to pay for too. Oh, and a cut for the shareholders as well, ideally.

-------------------------------------------------------------------------------------------------------

I wonder how much profit Microsoft are getting from one Kinect then. That's not a terrible lot.

Well, it's the retailers that get £129 for each Kinect so Microsoft only probably gets about 90-100 from the retailers per unit. At least in the UK where £20 odd pounds would have to go to VAT alone on each unit sold. All the costs mentioned in the above post of course, and I would add the costs of producing units purely to be used as replacements and extra parts for refurbished models.

I still think though that Microsoft will still squeeze £10 profit or so per unit, but the real money will come from the games and extra live subscriptions, especially the family subscription.

quite cheap if u ask me
so MS priced kinect very high as a security and because they wanted to make tonne of money as early as possible
I m guessing, they will able to slash the price quickly if it is needed ... and still get direct money from the peripheral

I suspecty (assuming that analysis is true) that Microsoft is making a fairly healthy profit margin on the hardware, although that is not overly surprising - accessories have the highest profit margin of MS:EDD products by a considerable margin.

Also, isn't there a game bundled for that cost?

Yeah I was expecting profitable hardware.

software ist much cheaper than regular games though. I paid 44 Euro for Kinect sports. Regular games are like 59 euro or even more.

I'm sure this was the plan.

Plus the initial inflated price would help offset the alleged $500m marketing effort.

I wouldn't be surprised if Kinect kits are set at MSRP $99 by the end of next year. 

Proprietary HDDs, proprietary WiFi adapters, controllers; definitely. Those 1st two are among the most inflated in terms of supply/manufacturer's cost to actual MSRP.

Although I'm still inclined to think profitability on KInect peripherals is second to establishing it as a platform within a platform with the appropriate software sales. 

Call me a cynic, but I more or less believe the initial $149 MSRP is just an inflated price to help pay for the $500m marketing campaign. You're basically paying extra for the advertising that went into selling you the product. 

With the Sw and the obvious profit on HW (Both Kinect and new Slim) MS should make a killing this xmas.

Yeah, but it's developed at Microsoft, so the only cost is the disc and packaging and what else comes with that. That's not a whole lot.

$600 PS3 sais HI!

I think every single product in this industry has the same pricing-curve. Start expensive, get cheaper later (the direct way - cut the price, or the indirect way - add more stuff).

Somehow MS is the devil if they do the exact same thing.

And could we PLEASE get rid of this 500 million marketing stuff? There are some things to consider:

1. MS can afford this and Kinect alone will amortise this
2. It is a budget for a longer period of time
3. It is not unfair business!
4. Sony has two of the mainsponsor slots for the UEFA Champions League (Bravia and Playstation 3) for years now and was the mainsponsor for the Fifa World Cup 2010 in South Africa. That is way more than 500 million USD. Somehow I never see people saying anything against it.
   I found this:
   
   

   (2) Advertising costs:

   Advertising costs included in selling, general and administrative expenses for the fiscal years ended March 31, 2007, 2008 and 2009 were 505,462 million yen, 468,674 million yen and 436,412 million yen, respectively
   
   http://www.wikinvest.com/stock/Sony_(SNE)/Filing/6-K/2009/F3523752
   
   If this is true and I am reading this correctly, 500 million is nothing. Feel free to correct me!