Xbox Live Raking in Over $1 Billion a Year

It’s no secret that Xbox Live is a major cash cow for Microsoft. But just how much is the company pulling down from its online gaming service? Well according to a Bloomberg report, the figures likely come in at around $1.2 billion. Surprisingly enough, the majority of that money isn’t even from the $50 annual subscription, but rather other content available on the service.

Estimates say that about $600 million of Xbox Live’s cash flow comes from subscriptions, while the remainder springs from content like TV shows and movies, downloadable game content and Avatar accessories. That’s right, enough people are paying real money for fake t-shirts and hats to make Microsoft billions of dollars. Don’t think about that too long, or else the angels will start to cry.

“Xbox Live has helped sell a lot of consoles and created a lot of loyalty,” said Matt Rosoff, an analyst at Directions on Microsoft. “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.”

A lot of people weren’t sure about Xbox Live when it launched, and industry analyst Michael Pachter even called the service “stupid” when he first heard about it. Now though, many gamers couldn’t imagine turning on their machines without Xbox Live alerting them to new messages, friends who are online and game invites. Furthermore, downloadable content has gone from being an occasional offering for a handful of games to a near fact of life for any newly launched title.

Furthermore, Xbox Live wouldn’t likely have grown into the behemoth it is today if not for all the extra bells and whistles Microsoft has included over time. Extra features on right on the dashboard like Netflix, Twitter and Facebook have helped put the service in front of people who likely wouldn’t have ever used it otherwise. So what if some people might be paying $50 a year just to watch movies instantly? They’re money is still green.

It’s unclear how much Xbox Live revenue comes from advertising, though it’s likely a substantial amount. If you asked gamers to point out one aspect of the service they can’t stand it would likely be all the ads cluttering things up. Many believe that since they’re already paying a fee to use Xbox Live (assuming they’re a Gold member) then they shouldn’t be subjected to advertisements. When you learn that Microsoft made over $1 billion with half of it coming solely from subscriptions, that makes it kind of hard to argue. Of course the harsh reality is there’s really nothing anyone can do about the ads, and from a business perspective Microsoft would be dumb not to include them.

It seems like it may be time to retire that old Internet image of Iwata and Miyamoto holding the DS as it prints money, Xbox Live might be just as effective and at a fraction of the cost. Well-played Microsoft, enjoy your piles of cash.