[Our own Chris Morris looks at the factors that will dictate Kinect's market prospects at launch and down the line, opining that Microsoft's holiday season looks secured -- but that it "might have screwed some of its partners in the process."]

Two months ago, when Sony’s PlayStation Move hit shelves, I wondered whether Sony had lost its mind. The device, I mentioned, wasn’t intuitive and had some alarming aesthetic issues – a combination that could hurt its chances with the mainstream audience.

Now Kinect has arrived – and while it has just as many problems as Move, it seems poised to thoroughly trounce its competitor this holiday season.

Let’s be clear: Kinect might not have that unfortunate “is it a game controller or sex toy” design, but it’s far from perfect. The lag time is frustrating, to both core and casual players.

With only one or two exceptions, the launch lineup is mediocre – and certainly not tailored to the typical hardcore/early adopter audience. It requires a significant amount of room to play. And the price is $50 higher than publisher partners were asking for.

But, you know what? None of that is going to matter.

Kinect is … good enough for now. For the mass market (which is considerably less demanding than the core gamer), the novelty of the device and the ability to give verbal orders to your electronics – in true Star Trek fashion – will be enough.

More importantly, while Microsoft might not know how to advertise its Windows software all that well, it has been nearly flawless in its marketing of the Xbox 360 and its first-party products. And with Kinect, it’s pushing things into overdrive.

A massive takeover of New York’s Times Square for the midnight launch. A partnership with Burger King that will give away a Kinect to patrons every 15 minutes for the next three weeks. An on-air endorsement (and giveaway) from Oprah Winfrey. Oprah, people!

It’s no wonder that Microsoft boosted its 2010 sales estimates from 3 million to 5 million. Or did it?

Before E3, some partners working on Kinect titles quietly mentioned that Microsoft had told them its target was 5 million. So when the 3 million figure was initially announced, it seemed low. Could Microsoft intentionally have low-balled the initial number, giving it the opportunity to grab another news cycle expressing solid faith in the device right before it went on sale? I wouldn’t put it beyond the company –- and if, in fact, they did, it’s another testament to Microsoft’s marketing savvy.

Holiday sellouts are a virtual certainty, which will earn even more free press and will likely drive demand into the first part of 2011, at least. But despite all of this, don’t expect Kinect to close the gap between Microsoft and Nintendo. The Wii has sold over 71 million units worldwide – and while it has shown signs of saturation this year, it’s a system that traditionally does quite well during the holidays (and will probably do so again this year).

What this is likely to do, though, is give Microsoft guidance on what its next step will be. If Kinect meets or exceed targets –- and developers (both internal and external) figure out what sort of software works best on it -– it could lead to a larger footprint for the device, perhaps even into consumer technology beyond the Xbox 360.

“It’s key for their entertainment and device division,” says Lazard Capital Markets analyst Colin Sebastian. “Over time, they’ll integrate other services to the platform.”

In the meantime, while Microsoft has seemingly secured itself a fruitful holiday season with Kinect’s marketing and release, it might have screwed some of its partners in the process.

Since the economy is still on shaky ground, consumers are expected to spend less on gifts this year. Gaming equipment will remain popular, but as Kinect becomes the “must have” gift, shoppers might forego buying other titles (beyond obvious blockbusters like Call of Duty: Black Ops and Halo: Reach) to get a Kinect – even if that means hitting eBay (where, yes, bids are already topping the retail price even though there are no real shortages yet).

“The purchaser of a … Kinect peripheral will have … $150 less to spend on software,” says Michael Pachter of Wedbush Securities.

What’s really going to be interesting to watch with Kinect is the tie ratio (software sold divided by installed base). The system comes with a game included. And Dance Central has already assumed the “if you buy just one Kinect game, buy this one” role. Beyond that, will consumers feel the need to expand their catalog?

Tie ratios are down across the board in the gaming industry – with Nintendo particularly taking it on the chin in the past year (dropping from 4.41 to 2.27). Will Kinect … well, connect … enough with the mass market to re-ignite software sales for that demographic? Or will it be a holiday flash in the pan that has people wondering a year from today why they fought so hard to get one in the first place?

I suspect Microsoft’s marketing team is already working on a plan, just in case.