Microsoft Kinect price drop to $109 signals the Xbox 360′s last holiday hurrah

Two years after its debut, Kinect's price is dropped. Is it a sign of life or a quiet fade before the next generation of Xbox tech?

Want to get hardware moving? Drop the price. Microsoft’s doing just that with the Kinect. The price drop is more than just a good sales pitch though: It’s the herald of new technology.

The Xbox 360 has enjoyed an Indian summer these past two years. Microsoft’s console turns 7-years-old in November, and the technology in its guts is even older, but a slick console redesign in 2010 and the release of the hands-free motion controller Kinect later that year rejuvinated the Xbox business. It has been the best-selling home console in the US for two years running. All good things must end though, and the Xbox 360 is starting to show its age at retail. In April, Microsoft announced that global sales of the Xbox 360 were down 50% year-on-year and they haven’t recovered since. In the US alone, 360 sales were down 26 percent in July compared to 2011.

Microsoft’s been particularly canny about dropping the price on the Xbox 360 though, only recently cutting down to a $99 price point, but as part of price gouging subscriptions plans run through Best Buy and other retailers. What’s an alternative? Dropping the price of the Xbox 360’s close hardware companion, Kinect.

On Wednesday, Microsoft announced it would drop the price to $109.99 in the US. An unusual price, but one with some canny psychology behind it: Dropping Kinect to $99 would label the device as outmoded to consumers, while keeping it above $100 marks it as a discount on what’s still considered cutting edge technology.

The Xbox 360 Kinect isn’t cutting edge anymore though. It was surpassed thanks to the Kinect SDK for Windows in 2011. Microsoft’s next-generation of console technology is already out in the development wilds. An Xbox 720/Durango dev kit showed up online in July, and the same anonymous leaker posted images of the Kinect 2 running earlier in August.

The price drop for the Kinect is how Microsoft aims to bag one more holiday season of profit out of its aged hardware. It keeps the 360 price up while still luring in customers with a discount. In 2013, the Xbox 360 and this Kinect will become Microsoft’s very first budget line of game hardware.

The last hurrah comes at a good time for Microsoft too. There’s Halo 4, Call of Duty: Black Ops 2, Forza Horizon and solid Kinect games like Dance Central 3 and Fable: The Journey out this fall. It’s a good way to go out. That said, you’ll be able to get ye olde Kinect for even cheaper in less than one year.