Paul Tassi argues, quite persuasively, that the reason Xbox One is behind the PlayStation 4 is the inclusion of the Kinect, a voice-and-motion sensor that allows users to control the console via voice commands.  He quotes analyst Michael Pachter, who says that the “reason Sony beats Microsoft is solely the price. Microsoft loses the next generation unless they cut price. If Microsoft drops its price to $399, I expect the sales to be equal to the PS4.”  Of course, as Tassi notes, dropping the price to $399 would mean substantial losses per unit sold thanks to the inclusion of the Kinect.  The IHS estimates that each Xbox One unit costs about $457 in components plus an additional $14 in manufacturing costs, bringing the total to $471 on a $499 machine. Then retailers take their cut, and various other expenses kick in, and the final picture is one of a very slim profit margin per unit sold—certainly not enough to account for all the development and R&D costs yet.  It’s enough to skate by on, but a $100 price-cut would be hugely expensive for Microsoft. The Kinect itself costs just $75 per unit, so even if the sensor hadn’t been included, Microsoft would have to charge $424 or take a $25 loss on each Xbox One sold if it were to try to price-match the PS4.  The Xbox One could have been manufactured more cheaply had it not also included the TV features that set it apart from its primary rival, allowing Xbox One owners to run their cable television directly through the system and use the Kinect to channel surf.  In other words, if Microsoft had decided to not differentiate its product whatsoever from Sony’s, they then could have matched the PS4′s price, and then the competition would have been much more fierce. But it would have also been much less interesting.  So the question becomes, did Microsoft make a mistake including the Kinect and the TV features? Or is it possible that in time these features will become selling points for the system? Will the Xbox One stand out as a more innovative, interesting platform than the PS4? Or will it simply fail to catch up?  These are questions with no immediate answer.  When I first tried out the PS4 and Xbox One, there was no doubt in my mind that the Xbox One was the more interesting system, with a more “next-gen” feel to it in ways that went beyond video games. I still enjoy using voice commands to pause my game and go to the home screen, or simply shut the thing off. But while these features are convenient and neat, they’re also pretty unnecessary. And the fact that they don’t always work hinders the experience.  Microsoft had some interesting ideas about the future of console gaming that they ditched in the lead-up to the release of the Xbox One. Clamping down on used sales of games, an increased focus on digital delivery, and an online requirement all felt like Microsoft trying to usher in its own equivalent of the PC gaming service Steam. This created some distance between the two consoles, but it also enraged consumers.  So Microsoft abandoned these ideas and is left now with a console that is very similar, if a little less powerful, to the PS4. Kinect and TV are the two things that make it stand out beyond video game exclusives.  So while a part of me does think that the Kinect may have been a bad gamble, and that TV integration seems a tiny bit archaic in the year 2013, another part of me is glad that these two systems aren’t mere doppelgangers of one another. In some ways, I wish Microsoft hadn’t abandoned all of its other policies—not because they were great for consumers, but because it would have been more interesting to see two starkly different models compete on their merits.  I’m not convinced the Kinect 2.0 is going to be the nail in Microsoft’s coffin. Losing at the outset of this console race is not the same thing as losing, and Microsoft should be able to drive prices down even with the Kinect as part of the package, though it may take sometime to do so.  Of course, I could be wrong. It may be that I simply enjoy variety; I enjoy competition between two actually different products. That’s why, even though I’m not sure Nintendo was making the best gamble with its Wii U gamepad, I was still glad to see the company continue to try different things. It doesn’t always pan out, but it’s good to see companies at least attempt to innovate. Now if Microsoft can simply take that same innovative spirit and apply it to its Xbox One games, the system could have a very real chance. It’s one thing to say price matters; it’s another when that price premium is accompanied by a compelling catalog of content.  Neither next-gen console can boast about that.  Follow me on Twitter or Facebook. Read my Forbes blog here.
Microsoft may be losing the console wars between the Xbox One and PS4, but at least they tried something different.