Is Microsoft Losing Money On Kinect?

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Is Microsoft losing money on Kinect? A “high-level” source from a third-party game publisher told Develop – a website – that the Kinect hardware cost Microsoft more than $150 and that they’ll be selling it at a loss.

If true, this isn’t anything new. For years, video game consoles have been sold on the Gillette razor & razor blades business model. Sony and Microsoft will lose money on every Xbox 360 and PS3, but they’ll make it up on the $10 licensing fee for every game.

We reported a few days ago a rumor that said that Kinect, being from Microsoft’s aptly named “Microsoft Research” division, was highly expensive to produce what with it’s 3D camera and skeletal tracking technology. Kinect has to be cheap enough to get a large install base to compete with Move and the Wii – but at the same time, Microsoft can’t hemorrhage money on Kinect.

Remember that Kinect won’t just stop at the Xbox 360. The “natural user interface” is expected to go places, with Windows Super Site writer Paul Thurrott saying that we’ll see Kinect support in Windows 8 – so you can use your arms to control your computer.

I know many regular readers were disappointed with Kinect’s apparent $150 price. If Microsoft is losing money on every Kinect – does that change your opinion on the price?