Nintendo boss Satoru Iwata was offered the chance to sign up the device that became Project Natal - but turned it down as he didn't believe he could launch it at a mass-market price.
That's according to a top insider (and we mean top insider) at the platform holder's Japan HQ, who told us that Israel firm 3DV Systems showed an early demo of the technology to Iwata and other Nintendo bigwigs at the end of 2007.
Despite being impressed with the prototype, Iwata was reportedly unsold on it as a peripheral for Wii - leaving the door open for Microsoft to snap up the tech and its creator a year later.
"Iwata-san only ever invests in something he can guarantee will work for a Nintendo audience," the exec told us.
"3DV showed off a camera that detected motion in 3D, and had voice recognition - but Iwata-San was unconvinced he could sell it at a Nintendo price point. He also had some worries around latency during gameplay."
The new information appears to confirm 3DV's involvement in the creation of Natal, which Microsoft has never certified.
Microsoft first showed off Natal at E3 2009. - with Peter Molyneux in particular stunning the audience with boy-sim Milo.
"Honestly - I've heard Iwata describe the prototype he saw at length, and it's definitely Natal," added CVG's source.
"What we witnessed at E3 was smaller and the facial [reading] stuff had improved, but it's the same technology. We remain unconvinced Natal will deliver on the more sophisticated elements of what Microsoft is promising at the price they're aiming for."
Microsoft will no doubt internally disagree with the claims. MS has dubbed Natal a'new console' in itself. The hardware is set to launch late this year, with an expected price point of around £50.
Iwata's alleged belief that the device would be too expensive fits with recent reports that Microsoft removed a chip from Natal to save on R&D costs, whilst some prominent development figures have also questioned whether Natal will have potential latency issues.
Nintendo's Shigeru Miyamoto has previously admitted: "This type of motion-sensing camera technology has been around for quite a while. [We've] ultimately made the decision not to take advantage of what they can do."
Unsurprisingly, both Nintendo UK and Microsoft would not offer us a comment on the "speculation". (Trust us, it ain't).
What do you reckon, readers - was Iwata right to say "no" to Natal? Or will he look back on the one that got away?