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MS will always require Live membership.

Now, will they split their services for the sake of the mass consumer who will not want to pay a fee for added functionality outside of games?

Considering the use of Netflix and HuluPlus requires the paid Live service, then MS will force it to be paid.

BUT if they truly want to compete with Apple and Google's set-top boxes, then its very likely those media based features will be free and only the higher end gaming aspects will require the yearly fees.

The latter is what I'd place my bet on.