Print 20 comment(s) - last by quiksilvr.. on Jul 11 at 12:55 AM

Revenue for downloads beat subscriptions for first time

Back when Microsoft first rolled out its Xbox Live network and charged gamers to play multiplayer games, many thought it was a mistake that would come back to haunt Microsoft. As it turns out, the decision to charge for Xbox Live was a great one by Microsoft making Xbox Live one of the only profitable parts of its gaming division.

Bloomberg reports that Microsoft has about 25 million users on Xbox Live as of the year ending June 30. About half those users coughed up the $50 yearly fee to play online games. With that amount of users paying for online gaming, analysts predict that Xbox Live broke the $1 billion revenue mark for the first time. 

Microsoft's Xbox COO Dennis Durkin told 
Bloomberg that revenue for downloads of TV shows and movies topped subscription revenue for the first time. Considering the $50 yearly fee multiplied by half that 25 million user number works out to $600 million, Durkins remarks suggest Xbox Live generated about $1.2 billion.

Analyst Matt Rosoff from Directions told 
Bloomberg, "Xbox Live has helped sell a lot of consoles and created a lot of loyalty. Everyone has been talking about Microsoft’s inability to innovate, but this is a pretty good example where they have innovated. They timed it just right with this one."

Despite the success of Xbox Live, many feel that Sony's PlayStation Plus offering has an uphill fight to match Microsoft's success. One example that illustrates this point is that there are 6 million gamers who play Halo on Xbox Live each month. Sony reportedly has under half that number of people playing all of its games available online each month.

Microsoft and Activision are the only two companies that are clearly successful in selling online gaming according to Activision CEO Bobby Kotick. Kotick said, "When it comes to online gaming, they’re the only significant alternative to us." Activision owns the Blizzard MMORPG World of Warcraft. Kotick also states that Activision wants a cut of the subscriptions from Xbox Live since its titles like Call of Duty are generating lots of money for Microsoft in subscriptions. He said, "We’re driving a lot of the subscription interest and certainly hours of game play."

Microsoft has continued to tweak and add to its Xbox Live service over the years to make it more appealing.  In June Microsoft offered up a Family Pack that is set to launch this November that will let users buy four memberships for the price of two at $100 per year. Microsoft did offer up bad news for gamers early this year that still played on their original Xbox consoles when it announced the discontinuation of the service for original Xbox.

With the success of Microsoft in selling online subscriptions for gaming, Sony has decided to try the same tactic. Sony announced PlayStation Plus at E3 this year. The cost per year will be $50, the same price that Microsoft charges.

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Who Won the Console War this round?
By Mitch101 on 7/7/2010 10:24:37 AM , Rating: 5
Even though Microsoft had the Red Ring issue on the first couple generations of the 360 it seems to have dominated in all the important areas. They made money early on with Console sales Only the Wii beat them early on for making money on each console sold the PS3 just started to make a profit on each one sold. They sell more games per console than the Wii/PS3. Obviously online is a cash cow to the console that the Wii missed out on and the PS3 is just starting to get into.

Im not saying the 360 is the best game console Im saying Microsoft seemed to get just about every area right for making money on a gaming console. All are great consoles and each of them has something unique/great to offer. I love playing them all. Just like I love my PC for First Person Shooters and I spent a ton of money on steam games last week. Steam seems to be saving the PC gamer from extinction.

By Hiawa23 on 7/7/2010 1:00:48 PM , Rating: 2
I own all three consoles, don't care who wins what, that nonsense is for the fanboys. I do prefer the 360 to the PS3 because of Live's online structure. I really haven't had much issue with the RROD, as my 11/2/05 360 was repaired in June08, no issues since. I recently picked up an Arcade model for HDMI, & it's clear to MS has strived to correct the issue as it was manufactured 4/10/10, the power brick if 1/2 the size of the original & it is whisper quiet. That's really all I can ask of any company, yes, the RROD should not have happened at all, but we live in the real world. I bought a 2006 Mitsu Lancer Ralliart, got the car home & both rear seat latches were faulty. They replaced em, that's all I can ask of any company. It's clear Nintendo will probably win the console console war this gen, but I rank consoles based on games bought & time of useage. I have 80 360, 15 PS3 games(exclusives only), only like one Wii game(Punchout). Online is a cash cow, & I expect that grow, Nintendo will get onboard, too. Their virtual console, I am sure has been very profitable for them.

RE: Who Won the Console War this round?
By Hiawa23 on 7/7/2010 1:05:42 PM , Rating: 2
It's funny, Sony bashed MS for charging but now they are trying to do the same with plus, & Sony & MS dismissed motion controls back in 2006, & now look what they both are trying to do with their motion controls. It's all about dollars, & each company is trying to position themselves to get more of yours. It's a tough economy right now, so not surprised, I say go get em. Seems better for all gamers..

RE: Who Won the Console War this round?
By quiksilvr on 7/7/10, Rating: -1
RE: Who Won the Console War this round?
By SPOOFE on 7/7/2010 2:04:27 PM , Rating: 3
Of all the mistakes that all consoles made, in my opinion, Sony made the least.

The funny part is that they clearly made the most; there's a reason Ken Kutaragi was tossed so soon after the PS3 debut. They've managed to make the most of it since - the price cut you mentioned worked wonders for their market share - but all the information we have about internal miscommunications at Sony fully explains why it took them years for their console to be anything but a solid "also-ran".

RE: Who Won the Console War this round?
By quiksilvr on 7/7/2010 11:22:07 PM , Rating: 2
Price was the biggest crutch. If the PS3 sold for $399 at launch like the 360 did it would be a much closer margin between the two consoles today. That was the biggest hurdle that developers were looking at as well. Why work on a console that most users don't want to buy?

But turn it around and you'll see that it isn't nearly as bad as the mistakes of the 360. Poor hardware. Proprietary and expensive accessories. Underwhelming features available on console out of the box (no HDMI port, no b/g wireless, restrictive USB memory support, etc.) Not to mention the insane work they had to do to replace over a million consoles.

Sony's biggest hurdle was price. Microsoft's biggest hurdle was the console quality and the accessories and the exchanges and the lack of functionality out of the box.

But the biggest reason why I would never buy a 360: more than 1/2 of their good exclusive games are already out on PC. What's the point? I'm not a fan of Halo 3 (Halo: Combat Evolved for PC online for life!) and Gears of War is more of a weekend rental instead of a buy. Mass Effect is on PC as is it's sequel and Lost Planet is on PC and its sequel will be on PS3.

RE: Who Won the Console War this round?
By satveeraj on 7/8/2010 12:50:19 AM , Rating: 2
No HDMI???, when the 360 was launched HDMI was unheard of so why would you pit MS for not including HDMI at the first launch??? They included it later when HDMI latched on so your point is clearly moot here.

Sony's biggest hurdle was their everlasting greed to include blu-ray when clearly there was a shortage of blu-ray diodes to begin with. With online services and content delivery getting bigger each day why did'nt Sony see that coming?

By quiksilvr on 7/11/2010 12:55:09 AM , Rating: 2
HDMI products started shipping in late 2003. Over 850 consumer electronics and PC companies have adopted the HDMI specification (HDMI Adopters). In Europe, either DVI-HDCP or HDMI is included in the HD ready in-store labelling specification for TV sets for HDTV, formulated by EICTA with SES Astra in 2005. HDMI began to appear on consumer HDTV camcorders and digital still cameras in 2006. Shipments of HDMI were expected to exceed that of DVI in 2008, driven primarily by the consumer electronics market.

You clearly have no idea what you're talking about.

By Hiawa23 on 7/7/2010 2:31:54 PM , Rating: 2
Correction, Sony bashed and continues to bash Microsoft for charging people to PLAY ONLINE. Playstation Plus is NOT required to play games online. You can still play online without paying a fee.

not really a correction, that was not my point, but okay.

By Hiawa23 on 7/7/2010 2:37:59 PM , Rating: 2
they lost billions and can't afford to sell their slim 360 for anything under $299, even though it cost them well under that price to make it.

not sure where you got this info, but please share. On second thought, meh, it's not for me to say who made the biggest blunders, all I do is enjoy the games. I enjoy the PS3 for it's exclusives, Single player games, & bluray, the 360, I enjoy all multiplatform & online, the Wii, I enjoy spending time with my daughter & her family oriented fun games. Win win as far as I am concerned.

By jvillaro on 7/7/2010 11:05:02 PM , Rating: 2
Of all the mistakes that all consoles made, in my opinion, Sony made the least. I prefer the exclusives on the PS3, I prefer the hardware, and I prefer the long term prices. I don't have to buy a charge pack for my controller, I can upgrade the HDD, I can use any Bluetooth headset and I can play Blu ray.

It sad that every PS3 fanboy always say something like that and despite all this... people still prefer the XBOX 360, RROD included. That has to mean something :)

By limitedaccess on 7/7/2010 5:20:23 PM , Rating: 2
I believe there is more tied into this generations consoles in relation to Microsoft and Sony's longterm business objectives then the gaming business aspect.

For instance, Sony no doubt wanted to push Blueray by leveraging the PS3, and this did help blueray establish itself. They also wanted to push the PS3 as a more general home entertainment system (not just a game console), and with the additions and changes to PSN, you can see that this is also somewhat gaining traction for them.

Microsoft entering the console market I still firmly believe was as much a defense move towards the Playstation as actually wanting to become a major console maker. Sony was pushing at the time that the PS3 would be more general purpose then the PS2, and I am sure Microsoft was worried about perhaps 100m+ general PS3s (perhaps running linux?) encroaching on what is their PC market. So in this sense they were successful. They likely averted PS3 dominance in the market, and are no longer losing money doing it.

Sony and Microsoft I believe had more considerations then Nintendo, who are solely focused on the gaming market.

"Can anyone tell me what MobileMe is supposed to do?... So why the f*** doesn't it do that?" -- Steve Jobs
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