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A lot of people subscribe for a month here and there and then cancel again. There were also many more converting to GP for $1. $8 a month per subscriber still seems on the high side.

1) Profitability will never be higher with this model, at least not for the game developers. MS gets a cut (well in the future, not taking one yet) of the revenues so for MS it will be profitable.

2) Why do all the others not count? Just because they don't have day 1 games? (some do though)

3) Price will go up to make it profitable. The current low price makes it less attractive for competitors to join in, yet when the price goes up to get out of the customer acquisition phase to profitability, others will see a chance to join in.