Report: Kinect Only Cost $56 To Make

The Xbox 360's fancy motion-sensing camera Kinect may cost you $US149, but according to a report from UBM Tech Insights, it costs Microsoft a whole lot less.

UBM have got hold of a Kinect, torn it apart to examine each of its components then tracked how much each of them cost. What they found was that each of the cameras costs Microsoft approximately $US56, of which the single biggest expenditure is Israeli company PrimeSense's "reference system" of cameras, microphones and processor.

When Microsoft said it would be selling every single Kinect at a profit, it sure wasn't kidding.

We've asked Microsoft to comment on the report, and will update if we hear back.

Kinect's BOM roughly $US56, teardown finds [EE|Times]


Comments

    Isnt the the case with 99% of the products out there. like yeah it cost $56 to make, but how much, money went into the R & D and other associated costs.

      Then there's assembly/manufacture of the finished unit, distribution costs, marketing and advertisement costs, and I'd imagine there'd be some costs associated with electronic goods certification something or others. Then there's the markups from the point-of-sale vendors, the distributors, etc.

      So it might only cost US$56 for the parts, but I'd imagine it costs a bit more than that for Microsoft, and not all of the ~US$100 difference is MS profit.

      I was under the impression that the majority of gaming console hardware, ie the consoles themselves and perhaps peripherals such as the kinect were sold at a substantial loss. This loss is then regained through game and peripheral sales.

      I believe the Wii was the only console to not be sold at a loss, or at least a much smaller one, hence Nintendo making a lot of money off their little system.

        'This loss is then regained through game and peripheral sales.'

        Umm... Isn't Kinect a peripheral though?

      Pretty much.

      Why's it a shock? They're a business, they want to recoup losses and then make a profit so they can continue to make stuff - granted it could be cheaper but you pay $200 for other accessories (e.g. a steering wheel) or a collectors edition of some game and Kinect does so much more.

    Don't forget you're also paying for US$500,000,000 worth of advertising, too.

    Add to all the stuff mentioned above the R&D costs.

    Of course it's cheap to produce, I mean how much does it cost to press a DVD? But we're still paying 90 bucks for it.

      But that's not taking into account the money that is needed to develop, publish, export and advertise a product.

      Nevertheless, we all know that the $100 average we pay for games down under is still ridiculous.

      DVDs cost next to nothing, but you're never paying for that; you're paying for whats on the disc. A totally different example.

      Micro$oft are a shitty company that love to rip off their customers... they do it time and time again and I hate them. But even I see a need to make a profit on a peripheral that has cost you millions in marketing and research. $100 profit per unit sold isnt bad, but they still will never get close to recouping their losses. It does however set them up for a new console, which WILL recoup the losses.

        I think you threw away your credibility with the "Micro$oft." Yes, They're out for a profit but so is everyone else.

        Nintendo's been making a killing off every Wii console and has been doing it for years, yet people give them a free pass because they're all cuddly? Please. Double standards people.

        Gah...

        I $100 profit...I'm sorry but you're a idiot. If it sells for $150 in the US and it cost $56 to make then what the hell are the shops making of it!

        You lost all credability when you used the $ in Microsoft.

        MORE proable is that MSFT sell it to EB, GAME, Walmart ETC ETC at $98 or less then they mark it up. How do you think they do sales. Because they're nice guys hell no!

      LOL good point. By this silly logic games are $99.50 profit.

    If only Palestine did R&D for consumer electronics goods.

    Yes, it may cost 50-60 bucks to make, but $149 is the retail price and includes the retailer mark up, which would be what? about 40-50%? So its not realistic to think MS are makeing $100+ per unit, its probably closer to $10-$15 per unit. Most of thier profit would come from software sales wouldn't it?

      Realistically, retailer markup on the Kinect in Australia will be somewhere around 10%-15%, which is about average for most consoles and genuine accessories.

    I'm confused with the lack of Kinect bashing in these comments. I came in here expecting to have to mentioned the R&D, but... I don't need to, it's already been brought up! HAS THE WORLD GONE MAD?!

      Kotaku AU is like the Bizarro World of every other gaming site.

    In the capitalist free market, goods and services are sold at a price agreed by both parties.

    It's gay and I can't see the point in it. Maybe of Micro$oft GAVE them away?

    Just to inform everyone who think stores mark up prices to where they are making profit on the game/console/peripheral it's not true. Places like Wall-Mart, Toys' R' Us, BestBuy, Target, and GameStop make at most a 5% profit off of said products. So lets say Kinect is $159.74 the companies above make about $8 - $10.

    Remember the industry standard costs for console development is around $US 10,000,000,000.

    And it's still not in Australia! I can't wait to try it out for myself. :)

    People need to stop talking about R&D and marketing. Those are all fixed costs which would be recuperated within a year or so provided M$ internal projections are correct.
    The $149 tag is the recommended retail price set by M$ themselves. Don't forget its a competitive market and which ever retailer decides to sell at a lower retail margin gains all the customers.

    Not so true for Kinect on M$ side. They are able to set an arbitrary price as they do not have direct competition.

    I know a lot of people might see this kind of article as evidence of shady dealings by Microsoft, but I see it as a good indication that Microsoft can better support the Kinect.

    But, I think people have made some good points here in the comments about other factors Microsoft has to recoup losses for.

    One I thought of that wasn't mentioned was Kinect Adventures. There's also a cost there I'd imagine to develop the game that's included with every Kinect.

    Yes there's R&D and distribution costs. But Marketing should not be factored into the device RRP. Marketing and advertising is a bill the company foots to push it into as many homes as possible and to gain exposure.

    People who buy the Kinect aren't paying for advertising, Microsoft spends this money in the hope they can dilute the costs over future games and in as many customers.

    And no, R&D does not cost that much. If MS is to believed, the costs should be somewhere in the single digit millions over a period of several years. This does not justify a ~200% markup.

    And this isn't a mobile phone market where the carriers take a huge slice of the pie. Even factoring retail, distribution etc with a very conservative estimate, have no doubt... MS is STILL pulling massive profit with these units alone.

      A company doesn't have to 'justify' a 'markup' on it's products. A company develops and produces a product as cheaply as possible with the intent of selling it for as much as possible. That is why companies exist, that is what they do. If you can make something for 50 bucks and sell it successfully for 200, that's a great business.

      As for "Marketing should not be factored into the device RRP", how do you propose a company budgets for marketing if not from from the sales of their products?

    Simple, no one buy it for the first 4 weeks then watch the price drop like a rock.

    If you believe Microsoft's price for Kinect is "unfair" then simply don't buy one.

    A "fair" price is a price that the buyer and seller agree to. Microsoft have said they'll sell units for a specific price, and if you buy the unit then you have agreed to the price. Thus, if you buy it, it is a fair price (for you) by definition.

    There is no such thing as an "objective" fair price. "Exchange value" (i.e. "price") isn't a substance that is put into things; it comes about when people want more of something than is immediately avaliable (i.e. they will be prepared to offer other things in order to trade for it it).

    "Profit" is not exploitation. Profit is what happens when an entity takes a subjectively less-valued item (in this case the software, hardware and ideas) and turn it into a subjectively more-valued item (in this case, Kinect). What the price-differential between the costs of production and the sale price mean is that Microsoft took a bunch of materials that, by themselves, were worth $56 USD (in terms of marginal cost), and put them together in an integrated package that many customers believe is worth at least the sale price, if not more.

    Complain all you want about being "exploited" but only a few years ago, Kinect-style technology was much, much more expensive. Now, its only $149. Microsoft have made a previously-inaccessible technology into a purchase affordable by the average consumer.

    Microsoft are by no means perfect, but they aren't the salivating snarling demonic abomination that some of the comments in this thread are painting them as.

      Thankyou! A sensible voice of reason, very well put!

    But i swear the eyetoy is the same thing, only cheaper and last gen, and arent they really pushing it as "the next xbox"?

    Not much of Microsofts pricing structure makes sense. As i saw last year, if an xbox live membership was supposed to give you online, then why do people still pay full price for games, if one component is already paid for? Despite not all of the $100 being profit, i would still think a substantial amount goes to them, i.e. $50+

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