One Billion Sold: Why Microsoft XBox Live Has the Best Online Strategy

A forerunner in the online-connected console market, the Microsoft (MSFT) XBox Live service earned more than $1 billion in 2009, according to Bloomberg. Microsoft has had some serious marketing issues with its upcoming Kinect and the recently-deceased Kin One and Two, but the eight-year old XBox 360 online service is now officially the one to emulate.

Dina Bass of Bloomberg:

Microsoft Corp.'s Xbox Live online video-game service probably broke the $1 billion revenue mark for the first time in the year that just ended, helped by sales of movies, avatar accessories and extra game levels.

There are a couple key ways Microsoft's online strategy wins over Nintendo (NTYDO) Wii and Sony (SNE) PlayStation 3 plans.

Simple interface: Microsoft listens to user feedback and periodically revises the storefront. The long back catalog of games is getting dense, so next week it will create a third XBox Live store iteration, Destination Arcade, which will make it easier for gamers to find the content they want.

The real strength is the ability to easily connect with others online. A gamer can purchase Halo and immediately hop online to find competitors, track progress and earn points. The Sony PlayStation Network has a comparable setup, but the Nintendo Wii requires each player to have a several digit "friend code" for the system as well as a several digit "game code" for each individual title -- and, despite promises and user complaints, has yet to revise its four-year old system.

Diversification: The XBox 360 cultivated an indie game community which not only makes it easier for diverse voices to be represented, but adds to the variety of games available on the XBox 360.

It also comes down to non-gaming content. The Microsoft XBox 360 was the first to get Netflix streaming, a handful of months before the Sony PlayStation 3 and a year before the Nintendo Wii. Microsoft just made an exclusive deal with ESPN for original programming. Meanwhile Nintendo offers virtually no non-gaming content and Sony has been narrow about what content it supports.

Microsoft has a smaller online community than Sony, but is now repping one platform, the XBox 360, versus Sony's schizophrenic platform support (PlayStation 2, PlayStation 3, PSP, PSP Go, etc.). The real showdown will happen when Windows Mobile 7 launches with the XBox Live connection.

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