Ahh, rightio. I spose being as this thread is just about component costs you're right that the game is insignificant.

Yep...thats just it.  PS1's launch made it a norm to sell consoles at a loss and since then more and more people expect this from hardware manufacturers. Nintendo has always been smart about it and have gotten a lot of slack about it in the past...

I think however that the hardware race is going to be dying down which should destroy the razorblade model...it will be all about cool new gameplay ideas, console features and games as always. The days of packing every last gigapixel and GFLOP in to a console and selling it on that merrit are done and done.

I don't think features or flaws matter here. Its all business really, supply and demand to be exact...which is proportional to competition.

Wii came out and was the only cat in town and sold a boatload at a profit.

Fastforward to 2010 and Microsoft managed to carve a unique position for Kinect, which is their greatest success with Kinect. They can sell it at 149 as it appears that no onther device/console can give the same experience as Kinect.

Sony kinda dropped the ball I think as they didn't differentiate themselves from the Wii, other than trying to sell their motion controls to a more adult crowd.

So as things stand it looks like consumer choices are:

Wii/Move VS Kinect

Hence MS can really charge whatever they want for it as no one else has convinced the public that the same experience can be bought with their console/motion controls.

As a personal opinion, 299 for xbox and kinect is a great deal. 149 for Kinect alone is not a great deal, but it isnt a rip off. Its priced just right...

It seems like we're in a sort of software and services race. Netflix, ESPN, marketplaces, game store, online gaming, music/game content subscriptions seem to be taking centre stage. To even be in such a race the razor/blade model is out as you cannot be sure of a person even buying enough profitable content to make up for losses incurred and the game play model has to be balanced against the needs of people who want to play just media files so the interface has to fit both.

Probably the best fit model for the next generation consoles is the iPad. A multipurpose device with development costs amortised over millions of devices which other smaller specialised devices cannot compete with. Its funny how people complain about the cost of an iPad when a fancy universal remote costs just as much for instance. A jack of all trades is a master of its own R and D expenditure!

Enough people don't read into posts. You're one of them.

See my later posts about IGNorance.

They never said it only costs £34 to make. Just that it costs that for the parts to build it.

With regard to the $500M marketing budget.

Quote from MS ""The Xbox 360 team created a multiyear, integrated campaign showcasing real people at the heart of the experience," said Mike Delman, corporate vice president of IEB global marketing, Microsoft. "Kinect puts consumers at the center of their entertainment, and our marketing efforts follow that same charter.""

From the following article http://www.earthtimes.org/articles/press/controller-free-games-launch-november,1506402.html

I'm of the notion that the entire razor/blade business model for game consoles is essentially obsolete. Yes, it worked in the past, but there is simply too much risk for potential late cycle payoffs unless a given platform has an overwhelming marketshare percentage.

Nintendo's success this generation is basically responsible for the shift that I fully expect to see carry over into the next generation for all platform manufacturers if anyone has actually learned anything this gen.

I still don't see this as applying to Kinect though and I expect MS to drop the price to $99 by this time next year despite the low probability that the $56 component cost will be cut under $40 in that time frame.

It's just a simple matter of what type of adoption rate they want to see. As it currently stands, there is no point in selling kits to current 360 customers at cost (factoring in manufacturing costs, packaging, shipping, etc.) since they are highly unlikely to have much floating stock through the holiday season due to high demand.

If MS wanted as many current 360 owners as possible to adopt Kinect, they would go with a $99 standalone price. Only they can't due to lack of stock/production capability relative to current demand.

But when you think about it, that $99 price is currently there in the bundles for new consumers.

Well the standalone vs Kinect bundle revenues are probably $110 vs $90 given retail margins, packaging and shipping costs. The bundle unit is with a low margin console and the standalone is a higher margin accessory. If they cut the price of the standalone to $99 they would probably make $70 or thereabouts in terms of revenue. I would suspect that it would follow a revision to the Kinect unit to simplify the internals and reduce the bill of materials to <$40 as that would also correspond with future Kinect development, Kinect 2.0 for Xbox next for instance.

Anyway if they don't release a revision the likely movement in price would be down to $119 which would still preserve their margins as well as pricing sanity with the bundle units. A 20% price cut is all that is needed to move a few people off the fence and maintain a level of sales.

First the xbox live price hike, then selling a new x360 controller instead of selling it together with the new xbox 360 S and now this?

Come on, if that's the reason, why didn't Sony sell the ps eye and the eyetoy at 100/150 USD/Euros at launch? If I'm not mistaken, they were sold at 50 USD at launch. 

Wake up, X360 people.

Oh, yeah, this is Micro$oft, greedy as always.