MS is very bad at interpreting their numbers imo.
This is another case of that.
I don't think the motion control games was no longer relevant, I just think it was for the casual gamer not hardcore.
At the start of the gen, when console is expensive, the people buying them wasn't the audience that are interested in it, it's a different audiance than the end of the x360.
The 1S is nearly $200, if they could sell the Kinect for less than $150 close to $100. It would probably sell ok, If it had a couple casual games to support it.
MS should have the 1X for the ultra hardcore, and Kinect for the ultra casual. It would take them making a couple AA games themselves for it though. And get a marketing deal for a dancing game etc.
Could marketed it really well with mixer, 4 player co streams etc.