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Microsoft: Does Kinect Make Sense?

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Microsoft recently cut the price of the Xbox One.

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Microsoft (NASDAQ:MSFT) just blinked.

After watching Sony's (NYSE:SNE) PlayStation 4 consistently outsell its Xbox One, Microsoft announced on Tuesday that it was offering a new Xbox One package priced at $399 without its Kinect motion- and voice-control system.

The Xbox One launched with Kinect at $499, putting it at a $100 premium to the PlayStation 4, which did not include a motion system in the box.

Who's Playing?

The vast majority of people buying expensive consoles soon after launch are hard-core gamers who play hard-core games. And hard-core Xbox One games such as Electronics Arts' (NASDAQ:EA) Titanfall and Activision's (NASDAQ:ATVI) Call of Duty: Ghosts do not require Kinect.

Hard-core gamers like standard controllers for key genres such as first-person shooters and driving games. In fact, had Microsoft required Kinect to be used in all games, it would have faced a revolt from its customers.

Kinect exists to get casual gamers using Xbox. But nobody buying a new Xbox One is a casual gamer right now.

So Why Does Kinect Exist?

The Nintendo (OTCMKTS:NTDOY) Wii's motion-control capabilities got Mom, Dad, and Grandma playing video games, which, in turn, inspired Kinect, as well as Sony's PlayStation Move system. Anything that gets more people playing games is a good thing.

Additionally, Microsoft wants a piece of the living room.

Apple
(NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), and Google (NASDAQ:GOOG) have streaming boxes; Samsung (OTCMKTS:SSNLF) and Panasonic (OTCMKTS:PCRFY) have app-enabled smart TVs; and, of course, the console makers have their consoles.

If you're watching Netflix (NASDAQ:NFLX) or Hulu Plus, they want it to happen via their hardware. And if you're going to buy digital content, players such as Apple, Amazon, and Google want you to buy it from them.

I think to some extent, Microsoft assumed Kinect's voice controls could get nongamers more comfortable with Xbox One for entertainment purposes, thus giving Microsoft more pull in the living room. Voice controls are becoming increasingly popular in consumer electronics, so it certainly fits the current paradigm.

The removal of Kinect from the base package indicates that the nongamer has moved down the list in terms of priorities.

Xbox Live Gold No Longer Required for Streaming

However, Microsoft is lifting the requirement for a $59.99/year Xbox Live Gold subscription to access streaming apps, though I'm not sure how much mileage it gets out of that. Most Xbox One owners probably have Xbox Live Gold for online multiplayer gaming, which would give other members of the household access to apps such as Netflix.

And it's not like this is going to make a nongamer buy a $399 Xbox to watch TV and movies. There are already plenty of $99 streaming boxes that can do that.

The Bottom Line

The motion-control gaming trend may be stagnating because hard-core gamers seem pretty happy with standard control schemes. And casual gamers have no interest in expensive consoles. In fact, they've moved on from consoles altogether.

So who's left to buy these things?

Twitter: @MichaelComeau

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