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June 18, 2010

Xbox Live: more cash cows than Farmville?

I saw this article linked on Facebook (how many people are saying that nowadays?  A lot!) and found it really interesting.

While everybody talks about Zynga Games and Farmville and stuff like that, you know who's raking in the money from virtual goods?  Microsoft.

According to Oliver Chiang at  Forbes:

"Microsoft's Xbox Live service available on the Xbox 360 has quietly grown its own virtual goods business -- and it is making more boatloads of money than Zynga. Currently, we conservatively estimate Microsoft to be making at least $625 million in revenues a year from sales of virtual goods on Xbox Live."

Chiang says that (doing the math) Xbox Live gets roughly $625 million dollars in subscription fees as an estimate.  A recent report said that the sale of virtual goods, whether it's game DLC, avatar clothing and accessories, XBLA games, or Zune music and movies, has overtaken the income from subscription fees.

In other words, we're talking more than a billion dollars (yes, that's with a "b") in sales, just over Xbox Live. Forget all of that other stuff, like the games themselves.
That just blows the mind.  I know it was lucrative, but I had never really put a number on it.

Now that Chiang has, I think I need to sit down.

I would love to know how much of this is Avatar stuff since the their creation.  As somebody who has sworn never to spend money on them, and who can't really understand the desire to (maybe some of you can explain it to me?), I can't imagine it taking in *that* much money.
But I can't imagine spending money on Farmville either, so who am I to talk?

"It's clear Microsoft has learned well the lessons of Zynga, that people are spending money on virtual goods. This also serves to highlight just what is at stake with Microsoft Kinect, the company's add-on to the Xbox 360 that allows users to play games and other media using only their hands and gestures. Kinect is aimed at capturing a broader audience of players for Xbox 360 and Live -- both more potential paying subscribers, but also more potential purchasers of virtual goods."

Excuse me while I go lie down for a moment.


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