A Kinect-less Xbox One Is in the Cards for 2014

It's looking like Microsoft will have to reduce the Xbox One's price if it wants to keep pace with Sony's PlayStation 4. Can Microsoft afford to keep the One and its camera together?

Jan 11, 2014 at 7:00AM

The Kinect 2.0 camera makes up a big part of the Xbox One package from Microsoft (NASDAQ:MSFT). Even though the device is no longer a requirement for using the system, as had initially been the plan, it is still tied to many of the console's defining features. The Xbox One's TV integration and browsing features greatly benefit from the addition of the 3-D camera and its built-in microphone. Some of the Xbox One's games require the Kinect 2.0 to be used as the primary input mechanism, while others make use of the technology in more supplementary roles.

The Xbox One and its Kinect 2.0 camera enjoyed strong launches in North America and Europe. The product's troubled unveiling gave reason to doubt that the $500 console would thrive in the market, but its initial sales showed that the brand still has kick. With strong support from third parties and Microsoft greatly invested in the console's success, there is little reason to doubt that the Xbox One will outsell the Nintendo (NASDAQOTH:NTDOY) Wii U several times over. What is in doubt is whether it can beat out the PlayStation 4 from Sony (NYSE:SNE). That's why Mr. Softy will be shipping a Kinect-less Xbox One in 2014.

Chasing the success of yesteryear
The introduction of the Kinect camera for the Xbox 360 was one of Microsoft's great successes in the last console cycle. Between bundles and stand-alone sales, Microsoft says it has sold over 24 million Kinects for the 360. This feat is particularly impressive because add-on peripherals typically have trouble reaching those kinds of adoption numbers.

The original Kinect came as a response to the motion-gaming phenomena that drove Nintendo's Wii console to stratospheric popularity. Microsoft's camera debuted at exactly the right time. The Wii had just begun to falter and the Xbox 360 was reaching mass-market price points. Kinect outperformed even the optimistic projections. The incredible success of the camera and the importance of appealing to casual gamers saw the Kinect 2.0 become central to the planning of Microsoft's next Xbox. Given the current console sales data, it's a move that the company probably wishes it could take back.

Motion gaming doesn't move like it used to
Motion gaming is not the massive draw that it was in the last console cycle. The casual players that it attracted appear to have lapsed. These gamers may or may not have been drawn away by cheaper offerings on mobile, but they are certainly not driving new console sales. The biggest problem facing Microsoft with the Xbox One is cost. At a price $100 higher than the PlayStation 4 and with weaker hardware, the Kinect features and Microsoft's stable of exclusive games become the reasons to choose the console over its primary competitor. The fact is Microsoft's camera is not justifying the cost it adds to the Xbox One package.

Momentum matters
November's sales numbers saw the Xbox One move approximately 910,000 units; an impressive figure, but also below what the PS4 posted by an as-of-yet unreported margin. In the UK, Sony's system moved 530,000 units in five weeks of sales, while the One managed about 364,000 units. The PS4 is said to be outselling the Xbox One in Spain by an approximate 3:1 margin. These trends will have to be reversed if Microsoft hopes to make good on its gaming investment in this cycle. Consider that the Xbox One will have very little presence in Japan and the picture of Sony establishing a substantial global sales lead starts to come together.

What about those Tier-2 and Tier-3 territories?
Microsoft wants to have some manner of presence in Asian territories, which provides another reason for a Kinect-less Xbox One being released in 2014. Homes in Asian cities tend to be smaller and more compact, which means that a living room or TV-area often lacks the space for a Kinect to function.

The six- to eight-foot distance that should separate players from the camera's sensor bar might not sound like a lot, but this actually appears prohibitive for a substantial number of Japanese gamers. If you've got an expensive piece of optional camera hardware that weighs down your console globally, you don't spend the time and resources necessary to further rework that hardware so that you can better sell it in your weakest territory. You just ditch it.

Bet ya bottom dollar
Microsoft may have adamantly stated that Xbox One would never ship without Kinect, but plans to do just that are almost certainly under way. If the company intends to stick around in the console business, it knows it can't afford to leave the One's price problem unaddressed. By the end of 2014, you're going to be able to buy Xbox One hardware at a lower price in a box that weighs about one 3-D camera less. 

Where can you find yourself a great growth investment or six?
They said it couldn’t be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he’s ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen 6 picks for ultimate growth instantly, because he’s making this premium report free for you today. Click here now for access.

Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information