XBox Live Virtual Goods Revenues Have Passed Subscriptions Revenues

These days, virtual goods mean social games, and we tend to forget about platforms like XBox Live or Gaia Online, who’ve been dealing with microtransactions as well. AT E3 this year, Microsoft revealed that the XBox Live transactions business is growing steadily, and sales of virtual goods like movies, music, clothes and accessories for players’ avatars have surpassed their subscriptions business.

Forbes recently analyzed the situation and estimated that XBox is making at least $625 million in revenues a year from sales of virtual goods on XBox Live. During a meeting with Dennis Durkin, chief operating officer of Microsoft’s Interactive Entertainment Business, at the E3 videogame conference, Durkin revealed to me that Xbox Live’s transactions business — including its sales of virtual goods like movies and music on the Zune Marketplace, and clothes and accessories for players’ avatars — has been steadily growing and recently surpassed its subscriptions business.

  • The Forbes analysis looked at some of the key numbers to get their estimate:
  • Microsoft has 25 million XBox Live members.
  • 56% of Live members upgraded to the paid subscription service.
  • Approximately 12.5 million subscribers.
  • Gold membership is $50 per year (this is conservative, because other memberships are more expensive per month)
  • That’s about $625 million a year.

The Forbes article goes into more detail about how this works out, and it seems to make sense. When Microsoft debuted the Avatar system, the opportunities for buying themed clothes were immediately apparent, and is apparently quite successful. This study also counts downloadable streaming movies and music as part of the virtual goods transactions, but doesn’t talk about the downloadable games that are available as well.

Another interesting idea is whether Microsoft’s close alliance with Facebook could ever pan out in such a way that players could play Facebook applications on their XBox or use Facebook Credits as currency for virtual goods. Both of these ideas have huge implications for simplifying the purchase workflow.

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