Kinect hardware worth $56, according to teardown

@Fallow
Maybe you could teach an Economics class at community college.

@Fallow From an economic point of view, i'll buy this when it's 56$.

@Fallow

Actually $56 just for parts is a lot, thats more than a third of the final price. There's all the labor, assembly, QA, support, packaging, freight, and then whatever cut the merchant takes out of it.

@Juri
If everything was sold at cost, nothing would be sold. This is because nobody in their right mind would go into the business of selling or marketing products.

@Raffi256 Don't forget about the R&D budget that has got to be recouped. Microsoft likely spent several hundred million dollars over the last three or four years in R&D alone. That's got to get made up too.

Still would have preferred a $100 price tag, however.

@Raffi256 Agreed, It's the software that makes the kinect work as it does. I bet it was not cheap to develop indeed.

@Raffi256

I understand that the $56 "value" of these parts doesn't mean it actually costs $56 for Microsoft to build one - there's many additional costs that you've noted. My comment was directed at the people who are complaining that Microsoft is (probably) still making a decent profit on Kinect. I mean, god forbid a game company make a profit when it releases new hardware!

@johnjohn122

No it isn't. It's worth the price consumers are willing to pay. If I sold a pet rock for $4 million, it wouldn't be worth $4 million when no-one bought it.

@Raffi256
You forgot research, development and advertisement costs.
Those aren't free.

@blueskyv201 YES THEY ARE!...In Soviet Russia!

@Tachyonic Cargo

Microsoft did not do the R&D on Kinect. They bought the company that did the R&D, and they came in to finish it off. There were a few stories about it last year shortly after "project natal" was announced.

@Juri
Agreed and when will its price be $56?

@Fallow

I'm one of the hundred dipshits talking about economics, but at a fourth-grade level, on the Internet. Hi.

@Kanjimari

Does that also justify their overpriced hard drives and their other accessories?

@Ballistic H

Of course, They gotta spend billions on a HDD enclosure, and all that plastic... totally warrants the 200% price hike.

/S

@Ballistic H

They're not trying to corner the hard drive market, offering an Xbox SKU at a $200 price point is obviously an important part of the business and that means the difference has to be made up somewhere else (optional accessories, services, etc).

@Ballistic H Is that in any way relevant to the article or discussion at hand? Or is it a strawman argument because you can't counter what is actually presented to you?

@Kanjimari

Ya, i'm surprised with the over-all level heads of people replying to this thread. People seem to forget while they're paying a team to create this, they aren't making money. While they're coding software, they aren't making money. All this debt accumulates assuming the final product will sell X products, and then figuring how much they'd need to sell it at to recover all costs associated with the project - Then hopefully make some profit on top of it.

Can't imagine how much was lost with their HD-DVD drive ;)

@johnjohn122

Stupid is as stupid does. His arguement is valid so your comment renders you to appear as well...............anyone? ....... Bueller? Oh yeah stupid.

The thing that baffles me is that when Sony or MS make a profit (even if they do) on something, people bitch and moan. Everything Nintendo makes, they profit on and they get a free pass every time. They release a crap plastic holder for $30 in the shape of a gun that cost $2 and nobody goes on a rampage. Is it because you're just used to being dicked by them? Seriously.

Also since this isn't coming straight from MS, the most they get off of one sale is $120. It has to go through a distributor to a retailer (sans online like amazon)
See let's do a break down of how a business estimates true cost.
Parts purchased we'll say they have a good purchasing manager $50
Labor, packaging, QA testing, building costs, electricity all other factors of manufacturing $20
Shipping from overseas $5-10
Built in warranty costs (yes all businesses do this) $10

So even with modest estimates it is $90 just to make Kinect. Now factor in that it has to be sold to a distributor, that millions went to R&D and buying the tech, so add maybe another $10 to each unit (this is a very modest estimate assuming Kinect is a success). That means $100 per device.
So then again distributors and retailers have their mark up. From my experience they're probably selling each one around $120 to a distributor, distributors have their markup. So if you buy kinect as a standalone, at most MS makes $20 and this may be less, the distributor makes $10 and the retailer makes $20.

@Kanjimari Dude, you're paying 3 dollars for a loaf of bread?

@Kanjimari Shipping from China costs quite a bit. Perhaps Microsoft should ship closer to home.

@Unvrfd The Jewish rye I buy is commonly 2.99.

@GeoffSchultz fingers crossed. by that time there may actually be some decent games out too (bring on star wars)

Exactly, this "breakdown" is pointless, it's not like an average consumer could buy the hardware for $56 and expect to have a kinect. R&D is a major part of the price....

@schemp98

ifixit does these kinds of breakdowns all the time. no, it doesn't tell you the full cost of the device, but it's an interesting stat nonetheless.

@WiredKnight
Are you really trying to say $150 is the perfect price point for a slightly better eye toy?

@WiredKnight

How about the full Windows OS (major OS used in the world) at around $200?

Or how about Adobe Creative Suite 5 at around $1000?

@schemp98
R&D Applies to the product as a whole, not each and every individual unit. Thats like saying that game programmers work the same amount of time to code to every game disc individually, when in reality, they do it once and it's applied to every disc.

@Nolan North

And how do they re-coop those costs? By selling each unit at a certain price.

@This Little Man Says His Name Is
Kinect profits make the money they used to fund the development back. They pay BEFORE the product releases. And I don't understand how you got that from what I'm saying, as I'm saying they DON'T do things individually. It's mass-produced. So yes, the profit from the price point pays R&D back, but it doesn't fund it. That's done right from the beginning.

@Nolan North

R&D, mass production, and other publishing costs are all important when looking at the MSRP of any given item. I never said it funded R&D, just that it's part of the cost. I thought that was obvious, but I guess not?

If they never make back the money for R&D, they'll never make a profit and the company can't grow and make new stuff.

@Ballistic H

Um, how about them?

You think developing the most wide-spread operating system and the industry-standard creative suite doesn't require massive investments and developing expenses? How do you think they stay on top?

@WiredKnight
Exactly, so how can you include the cost of development if its a gamble in the first place? You raise the price of an item hoping the profits will cover the costs of R&D, but that doesn't mean that the cost of development should always be included in an MSRP price.

The profits will make their money back, but it shouldn't be included in the cost of MSRP when considering a product teardown.

@Nolan North

I think we're saying the same thing here. I know they don't specifically include it saying like X number of units at Y cost will cover R&D, my point was just that it's silly to think it's not considered at all when they come up with the MSRP.

less than $1 to physically make (Joytiq cut off my comment..)

@ybfelix

An OEM copy at around $100 X the number sold in the world (Or the license fee). I think it very much covered the development cost.

@ybfelix

It's because you tried to use this symbol "˂" which obviously only I am allowed to use.

@Ballistic H Of course the cost is covered, MS did not make Win7 for charity. it's just a simile

@59672
Sounds like a kit to buy from Ikea. :V

@Ryujin And hopefully by then the games for it start reviewing in that range as well.

@Lobst
It doesn't, nor does it claim to. Companies that do these teardowns are generally clear that they are evaluating hardware prices only. You can't accurately measure R&D costs between two companies. One company might spend twice as much as another discovering the same innovation, due to its skill sets, corporate process, and level of efficiency. However, you can conclude that two companies would each have to pay X$ for a particular component, based on calculable market prices.