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Kinect will sell 25 million by 2014

Analysts also predict a 74m 360 base.

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Image credit: Eurogamer

Do analysts believe Kinect can do the business for Microsoft? Yes - by the end of 2014 they say Kinect will have sold 25 million units.

Another way of looking at that is one in three Xbox 360 owners will have bought Kinect by then, because they also believe the total console installed base will be 74 million.

That forecast was made to Eurogamer by Screen Digest analyst Piers Harding-Rolls, and his peer Colin Sebastian from Lazard Capital Markets reckons that makes sense.

"That seems like a reasonable estimate," Sebastian told Eurogamer. "Assuming that Microsoft offers price reductions over time to drive demand, and that the Xbox 360 continues to sell.

"The other key variable will be the availability of quality software, and whether third-party publishers can bring to market compelling applications for Kinect."

Wedbush Morgan analyst Michael Pachter dived deeper into those numbers. "There are 40 million Xbox 360s out there. Presumably, Microsoft will sell around 8 million a year for the next few years, so they could get up to 70 - 75 million by the end of 2014," he calculated.

But Pachter was less keen to forecast numbers overall, calling it "foolish" without information on bundles and pricing.

"Let's say that the device costs the $56 it was estimated to cost and that the cost comes down to around $30 with volume manufacture. What happens if Microsoft decides to include one with every console?" he reasoned. "Then they will sell 32 million, plus whatever they sell before the bundle. What if they cut the price to $30 and include a free game? Then they'll sell 70 million.

"It's simply too early for me to guess on Kinect," concluded Pachter. "I'll go with the 74 million Xbox 360 estimate, as that presumes sales at a constant rate the next four years, which is not a particularly bold prediction."

Microsoft is spending a fortune on Kinect advertising.

Microsoft will spend an alleged $500 million advertising Kinect this Christmas, and has already splurged some of that cash hiring out New York's Times Square for an entire evening's festivities.

So far Kinect is off to a good start, having shifted one million units in 10 days - a pace that's capable of reaching the target of five million sales by the end of 2010. Providing stocks last.

Piers Harding-Rolls lowers that Kinect estimate to 4.5 million. What's more, he reckons Sony's understated motion rival PlayStation Move will sell a "similar" amount.

"On a worldwide basis I think this makes sense," agreed Colin Sebastian. "In Japan, Move has a huge advantage, but in western markets I would give Kinect the edge."

PlayStation Move arrived a month and a half earlier in Western markets than Kinect. Japan welcomed Kinect in late October.

Michael Pachter has a radical idea. "If Sony management is smart (sometimes they are really smart, trust me), they'll bundle Move with the PS3 for free and keep the price at $299," he said.

"I can't believe that Move costs more than $40 to make (it's just a controller and a camera), and think it's probably more like $20 - $25 to manufacture. They're due for a price cut, and bundling it with the PS3 would be absolute genius.

"Of course," he added, "I thought of it and am telling you this now, just like I told you and others that Nintendo should release an HD Wii - and look where that got us."

Nintendo ropes celebrities in to advertise Wii.

What of Nintendo's Wii? It's easy to see doom and gloom when Satoru Iwata uncharacteristically jumps to the defence of Wii sales publicly on the internet but, in truth, it's the original motion-sensing console that still sets the pace - and will do even in the face of Kinect and Move this Christmas.

That's what Piers Harding-Rolls believes. "There is, of course, overlap between the types of consumer targeted by Wii and Kinect, but at this early adoption stage for Kinect many users are existing 360 owners so the impact on Wii's current decline is relatively limited," he said. "Competition between Wii and Kinect will grow over time."

"This Christmas I still expect Wii to outsell the other consoles, although significantly down on last year's record-breaking holiday period, and next year the opportunity to cut the price of the Wii could help its competitive performance."

Nintendo has famously never lowered the price of Wii. In Europe, the price even temporarily rose to offset a weak pound. Wii sales may have slumped compared to their own record-breaking past, but simply nudging the price downwards could give Nintendo the momentum it needs to compete with Kinect and Move throughout 2011.

"Hardware price cuts always stimulate demand, and I think all three platforms would benefit from a price reduction next year," Colin Sebastian advised, before recognising that "there is more urgency on the Wii given the softer selling trends this year".

"Last year, Wal-Mart drove sales of the Wii up 50 per cent in December with a $50 gift-card promotion. I'd say that a $50 price cut for the current Wii bundle would have that kind of impact on sales," Michael Pachter pondered.

"Nintendo could get back to 300,000 - 350,000 units per month in the US if they cut price by $50 (talking non-holiday months)."

What Sony's PlayStation Move can do.

Piers Harding-Rolls concluded that the "real crunch" for Kinect comes next year. By then, the initial novelty will have worn off and the success of the sensor will rely on high-quality games and experiences. And the same can be said for PlayStation Move.

At the moment, Kinect sells for a considerable £130, which includes bundled game Kinect Adventures. You can get better value for money purchasing the 4GB Xbox 360 S console with Kinect and Kinect Adventures for £250.

No doubt the initial Kinect pricing is intended to boost Xbox 360 sales, then. Does that mean a price drop for Kinect on its own is coming? "No, and they will only consider a price drop if it doesn't sell and not before the end of next year," declared Harding-Rolls. "More likely they will make attractive hardware and software bundles to drive adoption."

Colin Sebastian said Kinect demand is strong enough to hold a price-drop at bay - for now. "At this point it appears that demand for Kinect is strong enough that a price cut won't come until 2011," he said.

"We do believe that Microsoft has room to lower the price from a cost standpoint."

Kinect launched earlier this month around the world. Eurogamer reviewed the Kinect hardware as well as launch games Kinect Adventures, Kinectimals, Dance Central, Kinect Joy Ride, Kinect Sports, Fighters Uncaged and Your Shape: Fitness Evolved.

PlayStation Move arrived here in mid-September and was dissected by Digital Foundry. So far Eurogamer has appraised Start the Party, Sports Champions, Tumble, The Fight and SingStar Dance.

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