greenmedic88 said:
Squilliam said:
I think the point Kowenicki was making was this:
Move: Sells accessories but mostly relates to the same games that can be played on DS3. People with Move aren't buying more software that they wouldn't have otherwise purchased, for the most part.
Kinect: Sells accessories but also sells completely new software which adds to the overall revenue per Xbox 360 and increases the number of games bought measureably.
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You're overlooking the fact that each controller is profitable. I won't venture to guess how much per unit, but for a control option that can add 4 controllers to a current user like the Wii, the more they sell, the more they profit, even without selling a single software unit.
That's without even throwing in the cost of $30 nav cons because they are optional, even though the opposing argument regarding cost was typically "you have to buy two Move controllers and two Navigation controllers" which is not the reality.
I'd be surprised if any of the hardware pieces that make up Move cost a penny over $10 to manufacture.
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Im not overlooking the fact that both Kinect and Move have high gross margins. However the development cost at the release of a new product make up a significant proportion of overall costs. You have to remember that it is possible to have reasonably good gross margins on a product but still come up short from an operational cost perspective. Move was in development since 2002, on Kinect Greenburg said he felt it cost almost a billion dollars to bring to market.
As an example, not 100% accurate of course:
- 10M Kinects sold
- $400M physical cost.
- $1000M operational costs.
- $1000M revenue.
- $600M gross margins.
- $400M operating loss.
- 20M Kinects sold.
- $800M physical cost.
- $1200M operational costs.
- $2000M revenue.
- $1200M gross margins
- Break even
- 40M Kinects sold.
- $1600M physical costs
- $1600M operational costs
- $4000M revenue.
- $2400M gross margins.
- $800M profit.
Thats ignoring the other sources of revenue as well. However those other direct sources of revenue help to lower the overall operational cost burden on each Kinect device sold. Thats why selling more Kinect related games is important from a business perspective. Though Kinect did cost much more to bring to market.
Anyway remember all those times various Sony execs would say that the PS3 cost to manufacture was close to break even or even slightly profitable but when the financial results came in and they were unprofitable? Well thats because they were talking about gross margins and not operational margins. It doesn't matter if Move costs $10 to make if it doesn't cover the operational costs based off the number of units sold.