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I will explain why I have no problem paying for Live. There are mainly two reasons.

Matchmaking - The Live infrastructure is based mainly on the idea of matchmaking. The system handles all game's requests to place a player into an online match with other players via a set of criteria. Latency, skill, etc. The TrueSkill ranking system that MS developed is a system wide ranking system that developers can leverage to enhance a gamer's online experience through gaming with comparatively skilled players. The main reason I love matchmaking is the idea of having a match. Team vs team. No jump ins. You are in a lobby with the team you know you are going to finish the match against. The party system also lends itself very well to this sort of play as you can actually form a 'team' of people and play against other 'teams' of people after every match. This is instead of playing against a randomly churning set of people that you get with the vast majority of dedicated servers based online games. The vast majority of my game time is with a party of 3 or 4 people as we hop from game to game(CoD4, Halo3, Battlefield 1943, L4D, etc. Even though several of the games I mentioned do not support matchmaking, they still offer decent online). MS even offers every developer for the system the ability to tap into their matchmaking infrastructure. XNA games included. You can browse through the XNA API on MSDN right now, if you are interested in how their system works(at least for XNA games). So their matchmaking infrastructure has to be able to handle a rather large set of matchmaking requests at any given point and be able to successfully scale to accommodate any new games developed for the system. While this is not particularly new in the world of computing, it is definitely one of the largest infrastructures for online gaming.

Ubiquity - Another very nice thing about Live(and you don't have to pay for this) is that the feature set was pretty much set in stone from the very beginning(at least since the beginning of the 360). You have 1 identity that is used throughout ALL games developed for the system. Developers are required to support certain things(achievements,etc.) and you can be rest assured that every game released for the system will comply with them. Headphones are very common and it is rare to play online without hearing someone speak(Battlefield 1943 is like a deserted town though). Some do not like this, I however, enjoy communicating with people. On the rare occasion that someone annoys me, I mute them. Other platforms seem like they have a haphazard collection of games that utilize online services. It isn't cohesive to the point where Live is. I believe this is due to the Gamertag being the glue that holds them all together. It is like having a character in an RPG that I can bring to different games. This might just be my own unique thoughts about this, but there it is.

So I guess it is the cohesiveness of Live that I enjoy playing with. Some don't think it is worth paying money for, and I can definitely see that sentiment. But personally, and I have a rather nice amount of disposable income, the very small fee is barely noticeable. Oh and I REALLY enjoy Halo 3. One of the best online experiences I have had since Tribes.