That's definitely a huge part of it. But MS would still be happy to lose money on kinect if game makers were making nice games for it.

The only game in my house that could ever utilize it was the original Dancing games from the demos. The last time I saw my daughter playing it, she was holding her phone, and using it for the sensor instead of the kinect through their integrated app.

I asked why she would do that? Just plug in the kinect and use it, don't risk dropping your phone while dancing, but that's not how she wanted to play.