I wanted to review my doom and gloom forecast for the Kinect to see how well Microsoft has been doing in the wake of reported Black Friday sales.

What we know

• 2,500,000 units sold thus far
• Another 2,500,000 units projected to sell by year-end
• Retail price is $150
• Hardware costs of ~$56/unit
• Marketing campaign budget of $500,000,000

If 5 million units sell by year-end that would be $750 million in gross sales excluding new XBox360 unit sales (we cannot within reason make an estimate of profitability from bundle sales with current info). Less hardware costs of ~$56/unit, that brings us to an estimated $470 million in net. Less their marketing budget Microsoft is in the hole for about ($30 million) at year-end. This seems pretty good, in my opinion.

What we DON'T know

• Retail costs (Gamestop, Best Buy, and Amazon's cut)
• Distribution costs (Shipping from the manufacturer, trucking to various retailers, etc.)
• Development costs
• Software developer support costs
• Original software development and marketing (retail packaging, boxing, print, etc; may be built into the marketing budget)

Kinect doing better than expected

Given available information - and we don't know a lot - Microsoft actually seems to be in pretty good shape. Hitting that five million units by year-end 2010 target would appear to offset most of their hardware and marketing costs, and put them in a good position to reach profitability on the Kinect in 2011. I am surprised given all the reasons I mentioned that folks - not just a few, but millions - are dropping $150 on a luxury item that has so many pre-existing requirements (Xbox 360, space to operate, games to play), but the holidays are a time of generosity, making the surprise a happy one for many gamers, I'm sure!

Good luck to Microsoft!

-Disclosure-

Opinions and speculation of and by Bozanimal are his own and not those of Gamespot.com or its affiliates. Bozanimal is not a Gamespot employee, and is not affiliated with any gaming companies in any way.

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