Microsoft XBox Live has 25 million users and their revenues are likely over $1 Billion, according to a recent report by Bloomberg. The revenues are driven by their 25 million paying subscribers and their sales of videos, avatar virtual goods and extra game levels. The XBox Live service is one of the most popular gaming network services in the world, and as they introduce features like Hulu and Kinect, the plan is likely that the XBox becomes the set top box for the home.
The key statistic here is that sales of virtual goods like movies and TV shows topped subscription revenues, which Microsoft stated as $600 million for their 25 million users. This would put XBox Live at about $1.2 billion in sales last year, exceeding analysts’ estimates. This is an important revenue stream for Microsoft’s gaming division as the XBox game console doesn’t make much money.
“Xbox Live has helped sell a lot of consoles and created a lot of loyalty,” said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington. “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.”
The Bloomberg article discusses the potential of expanding the XBox Live platform to other mobile devices and music players, like Microsoft’s moderately performing Zune MP3 player. The problem there is that they don’t have a strong userbase and certainly haven’t had much success in mobile gaming at all, so they’d be entering new territory and in fact will risk muddying the XBox Live name. Right now, XBox Live is considered the premiere place to play games with other players on consoles, and they don’t want to risk that with a mediocre mobile effort.
XBox Live has been making partnerships with content companies and media distribution companies to increase their offerings on their device. Their great partnership with NetFlix means that users can easily watch movies from the device, and the rumored upcoming Hulu deal means that users will be able to watch broadcast network television, on demand, from their console.