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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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Imagine if...
By Aloonatic on 7/7/2010 2:55:34 PM , Rating: 1
...Apple released the xBox 360, and it all went down as it has, with the ripping people off for add ons like the wireless network dongle and rechargeable wireless controllers. Not letting people use any old 2.5" hard-drive, by only allowing their own special versions to be compatible and charging people way over hte odds for it. Charging people to play on-line even though that's pretty much the main thing you do with a console in this crazy internet age. Then to top it off, designing it so poorly that it has a massive defect rate which they initially try to cover up and deny, which you wouldn't mind so much if the poor cooling was because they had made it so quiet, but it makes a god awful racket still, and overheats???

Yep, most of you guys would be going mental, saying that only sheep bought these things because brother Jobs told them too, and how stupid would you have to be to buy more than 1 of them and be happy about it? However, as Micro Soft made the xBox 360 a lot of you guys all queue up to say, well done MS, they made the right calls...


Still, I say it to Apple, so I will say it to MS. Well done for getting so many people to part with their hard earned cash. More than once for the same thing in many cases too. Kudos.

So many parallels with Apple and their app store stuff, locking people in and trapping them into poorly performing and unreliable hardware, and the xBox 360 with live subscriptions and games that your friends play on-line locking you in to it too, so that both of you end up being ripped off and putting up with shoddy treatment, defending your companies and so on. What's even funnier, is that many of you don't see it.

RE: Imagine if...
By Hiawa23 on 7/7/2010 4:25:07 PM , Rating: 2
Yep, most of you guys would be going mental, saying that only sheep bought these things because brother Jobs told them too, and how stupid would you have to be to buy more than 1 of them and be happy about it? However, as Micro Soft made the xBox 360 a lot of you guys all queue up to say, well done MS, they made the right calls...


I am not one to bash Apple or anyone who buys their products. I don't own anything made by em, no need, & why bash anyone for spending their money on whatever they want. I did not buy my 360 because the man told me to, I don't think anyone does this. I know alot of people like to bash Apple, I am not one, I won't buy anything from em as their prices are too high for my tastes, but God Bless anyone who does. I am not a PC gamer, most of gaming takes place on the 360, so that it is what I primarily game on, PS3 2nd, & as far as I am concerned, it has had less issues than both my PS1 or PS2. I think we all agree, the RROD fiasco, shouldn't have happened, no one is happy about that. You bring up good points, big companies will try to hide things, tell us something we don't know. Here's a tip, that's not only an Apple or MS problem, but governements do the same. Not saying it's right but in the real world this is the system, big companies, government do what's in their best interests unless caught. Very simple..

“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith
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