Pre-E3 positioning: Microsoft dis-Kinects, but what are the implications?

http://media.edge-online.com/wp-cont...1/Kinect-1.jpgPiers Harding-Rolls is director and head of games at analyst IHS Technology. Here, he delivers his verdict on today’s Microsoft announcements.In what is becoming a relatively common strategy of news control for consumer electronics and technology companies before major trade events, Microsoft has confirmed it will sell a standalone version of the Xbox One without Kinect at a MSRP of $399/£349 starting from June 9th, the day of its press event at E3. The company has also confirmed it will be increasing value of the free Xbox Live service by bringing entertainment apps out from behind the Gold paywall. Lastly, Microsoft has confirmed that Games With Gold will be coming to Xbox One in June and has confirmed the inclusion of Halo: Spartan Assault and Max: The Curse of Brotherhood for free.Microsoft has made a bold but sensible decision to compete on a level playing field with Sony’s PS4 as the company’s come head-to-head at E3. Ultimately the company has decided to sacrifice the necessity of Kinect to reduce purchasing friction and collapse the price differential between the two consoles. There is now a much more gamer focused edge to the Xbox One positioning, which will only help Microsoft in these opening stages of the latest console cycle.

Why drop the Kinect requirement?

Microsoft has framed the decision to sell a standalone SKU of its new console as a response to feedback from its existing and potential users – its fans – to drop the requirement of the Kinect motion and voice sensing accessory and to offer more choice. The fact is that while the Kinect functionality is nice to have, for many its value proposition does not match up to the price increment of the Xbox One over the PS4 at this point of the cycle. This has been clear to see, with PS4 outselling Xbox One in Europe strongly and to a lesser degree in its home market of USA as well. As such, the move is primarily about removing friction from the buying process for the Xbox One. The decision to shift entertainment apps outside the paywall will also help its positioning against Sony’s console: online video remains a hugely important feature in terms of device usage and consumer engagement, so having this behind a paywall is counter-productive.Microsoft has confirmed that a standalone SKU has been in the works for a number of months, although the fact that both new smaller packaging or a standalone Xbox One Kinect SKU won’t be available until the later in the year also suggests that this move has been brought forward from the end of the year. IHS believes this is a response to the strength of PS4 sales and also that E3 represents an opportunity for the company to refocus its message on the gamer and regain some sales momentum. A similar opportunity will not come again in 2014 before the holiday sales season.It’s sensible to suggest that a standalone version was always on the table and as such this is not a full strategic u-turn, although the fact that Kinect has been somewhat sacrificed at this early stage will have stung at Microsoft and may not have been possible without a change in leadership at Xbox.

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