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Johnlucas ... You're missing the fact that XBox live subscription numbers are heavily inflated.

If I remember correctly, starting in 2003 every XBox was sold with a 3 month free subscription to XBox live which (when activated) Microsoft counted as an XBox Live subscription; even if users allowed it to lapse later it was still counted. With the XBox 360 XBox Live Siver accounts are considered XBox Live subscriptions; it isn't surprising that more people find value in game demos and inexpensive XBox Live Arcade games than online multiplayer.