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Xbox-PayPal Deal Makes More Trouble For PlayStation Network

Sony won't be relaunching the PlayStation Store until next week, but it's already running into trouble. First, its plans got leaked to the press, scuttling any chance of a stealth restart. But the big blow came when Microsoft's Xbox announced a deal with PayPal giving consumers a proven, secure alternative to PSN.

Sony is hoping that this week's return of PSN and next week's restore of the store will let it put its massive security breach behind it. But flubs with the relaunch as well as a second round of hacking are making it difficult for consumers to forget last month's theft of personal information for 100 million Sony users.
The Xbox software update is perfectly timed to make the most of that. Microsoft's Larry Hryb, better known to gamers as Major Nelson, formally announced the update on his blog:

I am happy to announce that, as a part of a new Xbox 360 System Update, we're expanding our integration with PayPal to allow US and international Xbox LIVE users to make purchases on their Xbox 360 consoles with their PayPal accounts.
Users had been able to use PayPal before this but only to buy Xbox points -- which could only be used for downloadable game add-ons. Under the new arrangement users will be able to buy everything -- including games and subscriptions.
Raise club, beat Sony
The move allowed Microsoft to very clearly show that it wasn't standing still on security issues even though its network hasn't been hacked yet. Using PayPal instead of direct credit card payments would serve as an added layer of security if the network got hacked. Add to that PayPal's reputation for having very exacting security standards and you make a compelling case for not going with PSN.

As Joe Wilcox of the game news site BetaNews put it, "PayPal is a huge addition for Xbox Live, as available on a nearly global basis (based on number of countries). I tend to use PayPal wherever possible, rather than a credit card number. Did you hear that, Sony?"

The timing of the announcement was also good for Xbox and bad for PSN.

It came on the heels of publication of a leaked memo to Sony's game developer and publishing partners. While the memo contained no damaging news, the fact that it got out only reinforced Sony's current image as a gang that can't shoot straight. In the memo, PSN content manager Jack Osorno thanked the partners for their patience and laid out a plan to do two content pushes per week to catch up with the backlog of content.
It is worth noting what wasn't in the memo: any plans for Sony may have to assist developers who were hit by the outage. Also worth noting: PSN is still not running in Japan where the government is demanding a better explanation of what security steps Sony is taking.
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