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Natal pricing - Is Microsoft willing to lose money to earn market share?

by: Chuck -
More On: Xbox 360 EIC Ramblings Kinect
With a new Natal pricing rumor hitting the wire today I started to wonder if Microsoft would be willing to lose money on each Natal device sold in order to gain market share and mind share on Sony and Nintendo. Keep in mind that each Natal device contains two cameras (one high definition and one near infrared) along with a few microphones (at least according to Popular Mechanics) which puts you in the $80-90 price range just to start with. Factor in circuit boards, labor, packaging, manufacturing, and marketing costs and you're over the $100 barrier without too much trouble. This certainly leads some credence to the $150 rumor yesterday but I think Microsoft wants to keep it sub $100 so it can compete with Sony's Move and the Wii.

This leads me to think that Microsoft may be willing to lose money on each individual Natal device sold in order to build a big presence in the market (much like most console makers do when they introduce new hardware). They'll make some of that money up on new Xbox 360 hardware sales (they'll probably break even on the inevitable Natal/360 bundle) but losing money on the sale of the individual cameras is a risk that Microsoft is probably willing to take to establish themselves as the alpha dog in the motion control market.

This is certainly not a new tactic on Microsoft's part and we've seen console makers do this on the hardware at the start of the life-cycle in the past (Microsoft lost over $100 on each console sale at the launch of the 360 and Sony lost at least as much on PS3 sales at launch as well). The risk is certainly worth it as this is the next big step in game and Natal could get Microsoft into the homes that Nintendo is dominating right now.

Note: This piece is done based on my own knowledge of the game industry and contains no insider information from the Microsoft MVP program. This is all conjecture and speculation.
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