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Microsoft Kinect shifts 10 million units, game sales remain poor

David Hughes's picture

Microsoft released the latest sales data on the Kinect peripheral, which has now sold-through 10 million units to date, an impressive number that nonetheless has some dark clouds surrounding it.

The last public reveal of the Kinect's sales success came at Microsoft's keynote at the beginning of this year's Consumer Electronics Show. At the time, Microsoft CEO Steve Ballmer revealed that his company had sold 8 million units of the device. That was later revised to be "units shipped to retail" not actual sell-through, but HULIQ speculated at the time that the company had sold-through approximately 7 of that 8 million units considering the white-hot demand for the peripheral during the holiday season. Taking that assumption as remaining valid, the latest figures (which are sell-through) show that Microsoft has managed to sell 3 million units since the beginning of January.

It is typical for sales to cool in the post-holiday period, but dropping from a rate of 2.5 million in November, 4.5 million in December to an average of 1.5 million across January and February is not the most promising sales curve for Microsoft. Though it remains to be seen whether we will get hard unit sales specifically for February 2011 from this week's NPD Group report, HULIQ's own data suggest the sales curve slopes downward in 2011 with 1.75 million in January and a mere 1.25 million in February. Demand is trending downward after the initial (and remarkable) enthusiasm for the device.

The primary reason for this is a lack of software that consumers find compelling for the device. Several titles have done well, including Dance Central and Kinect Sports, but Microsoft also revealed yesterday that only 10 million games had sold for the Kinect to date - an abysmal 'attach rate' of 1:1. Demand for the Kinect will continue to cool until new software hits the market, but even when that happens Microsoft has a lot of work to do if it wants to improve its attach rate.

That said, a strong attach rate for the Kinect is less important than traditional console launches because it is widely believed that Microsoft makes a solid profit on each unit sold. Many developers derided the $150 price point of the device, but Microsoft clearly had no appetite to take the risk of selling the hardware at a loss in a gamble to make up the difference in software license fees - especially considering the sizable investment it made in the device's R&D and marketing. Though a lower price point may have increased the attach rate enough to compensate, Microsoft's launch strategy appears to remain sound.

HULIQ will continue to track demand for the Kinect to see if the sales curve remains downward sloping. Preliminary data for March to date indicates a slight uptick in demand for the device, but sales are far from the peak seen during December and early January.

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