The casual motion gaming craze was a fad and it has passed. If MS was banking on people spending $500 for a party game 7 years too late then they're going to be disappointed.
There's a lot of potential for the Kinect to make things better/easier. The problem is that there isn't a person in the MS office that has a care in the world about actual ease of use. I've harped on this for a while, but if we could do things like invite people to the game/party by voice without ever going into a menu that would be a huge boon. That would actually solve a very common annoyance (trying to navigate through menus to invite people to a game while playing MP, where you can't pause), but they're more interested in cool technology than actually making that technology useful.
The auto sign-in via Kinect is a perfect example. The camera can recognize you and sign you in automatically! How cool is that?! Except, in order to show that off, we're going to remove the option to just have your console sign-in for you every time it boots up, which is significantly more convenient because it means you can walk away and do other stuff while the console boots and it will still sign in for you. So not only is this new method not really that useful, it's actually less convenient than the thing we ripped away from you. But hey, it's cool!
Of course, this extends well beyond just Kinect and you have to wonder if anyone in that office has ever actually used an Xbox. For instance, how the heck did removing the battery indicator ever get approved? Was there no one in the office that said "hey guys, people probably want to know how much battery life their controller has"? Was there not also someone there to say that people would want party chat on by default. I mean, did everyone sit down and say "I really like how I have to press an extra button to chat now"?
Same thing with the friends list. "Check out all this cool new stuff and all these new animations we added!" Did no one in the office actually use it in a real world setting? Yes, that new stuff is cool, but not so cool that we want the stuff that we ACTUALLY USE on a regular basis buried 5 extra button clicks and 10 seconds of loading behind it.
It's all just so...dumb. I feel like I run into something new every day. Today I went into upload studio to combine a few clips together. They have a whole interface built for doing exactly that. Except, in order to do so you have to combine EXACTLY five clips together. Not two, three, four, or six. Five. Exactly. LOL, who the heck came up with that and how the heck did it get approved? Is there no one in the entire Xbox office that thought "ya know, maybe sometimes people will only want to combine two clips together, or three clips together, or some number of clips not equal to EXACTLY five".
It just blows my mind.