Just to bring this back to the original post since I'm jumping in 22 pages deep. I won't rage against your initial post but I will say that I disagree on the basic concept of online should be free. Gaming companies screwed this up from the beginning and now many of them are paying the price. If you have a service you must give it a value, all services have value and to give it away for free is simply a horrific strategy. I have to give credit to MS they woke and realized their is a cost for this service and it has really paid off for them.

I think the OP touches on an issue that XBL should innovate in order to continue its services, with competitors having caught up in quality XBL needs to make that subscription a more valuable service.

1. There can be arguments that the servers are worth having under 1st party control and there can be arguments against it. As some have mention it provides a stable platform for publishers/developers to host their online gaming portions. Though this point begs the questions: Do they want that? Are there restrictions for taking advantage of said service? Can they opt out and provide their own? If they are willing to host their own servers on other platforms, do they need Microsoft servers?

What structure is really best and does a subscription fee justify it? Is the alternative perhaps better?

2. Online gaming aside, XBL is required for none Microsoft funded services like Netflix. Unless I am mistaken. This seems more of a question of ethics. While one may see online gaming as the main draw of XBL there is no denying the importance of social and media apps like Netflix. If these applications are not part of Microsoft's server equation why are they restricted to their premium service? Without XBL, the 360's functionality is severely limited by this exclusion and a reasonable assumption is that these services are used as bait to attract and retain subscribers. This aspect of XBL should be up for change and consumers allowed the right to access in order to be competitive.

3. Provide more exclusive services that justifies and attracts subscription. If Xbox offers a good social platform, proprietary apps, or other innovative features they serve as an important bargaining chip in the consumers mind. Widely available third party software services are generally free on other platforms. To enhance XBL's value, dividing features must be offered. While this gen say cross game chat as a seminal benefit to XBL, the lines are blurring next gen and XBL will need to offer more to address the advancement of competing services.

Instead of arguing for the sake of defending your preferred platforms or your individual benefits from such and such service. Look at these points and try to determine what route Microsoft should take next gen. Will status quo be enough for them if free services like PSN is its equal? What if other services provide even more than XBL? What can XBL do to compete, add more, go free? Let's discuss.

A quick summary of what I was trying to say, rather than people thinking that i'm bashing xbox live.

Maybe you should have just worded it better.

To be honest, I don't see how Microsoft can innovate next gen to the point of justifying a subscription based service for simply for playing multiplayer online. It's competitors have more or less caught up and with the majority of the industry going free-2-play, I don't think Microsoft will be able to compete without a major change to their revenue model.

I might have been, but people seem to generally be starting to realise that Xbox live is a rip-off.

Not to mention you aren't in the minority. 70 million 360's is not a majority of the console market. XBL has been seen as a rip off by many, the service has been more of a neccessary evil to coincide with friends. 360 had the headstart, the cheaper it had the popular multiplayer games, and had the install base amongst friends. That and once people have spent the large sum to purchase a 360 they are more dedicated to the system, as in it is cheaper to purchase XBL than to switch consoles after the fact. Now i'm not saying there isn't supportive reason behind getting XBL and the games alone can be reason enough. It's just there are those that do so for other reason such as social pressures and lack of option. I'm not claiming majority of subscribers, but there are numbers.

Oh, and the "realization" is more of media acceptance to address it.

You know I just realized that hen ever we have one of these topics discussing what is "wrong" with XBL you never see anyone say anything about the online play or anything like that. Its always is about money and wanted free stuff.

As a gamer i realize that with out MS pioneering online gaming networks in the way they have that Wii U, Ps3, and Vita would not have the robust features they do as there would be no need for it with out the competition form MS.

Which is exactly why it's worth a few bucks a month to me. You don't have the issues you have with PSN or Nintendo's online offering.