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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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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.


"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook

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