I think it would be the fact that other consoles have been profitable without doing so. The margins are not that low on software. They get higher margins for 1st party and published titles, but they also get a cut on every piece of software. DLC and digital games also offer extra, much cheaper revenue streams. But on top of that MS has a premium service where they throw free things behind pay walls and display ads all over their UI.

The original Xbox cost them a lot of money. It didn't sell very well and was a large costly machine. Their first crack at it with new departments and R&D. Resonable to be in the red for it. The gamecube didn't do well either but its small size, optimization, strong 1st party software, and loyal consumer base let them make a profit on the system. The PS3 cost an outrageous amount of money for Sony to make and they still sold it at a huge loss of $240-$300 just adding to it, especially since launch sales are a big chunk at the most expensive time for them to sell them. Even after making the hardware profitable in 2009 or 2010 they have only recouped their losses overall through software, services, and accessories rather recently. Around a year I believe, mid or late 2011 or something. If they didn't manage to sell 70+ million it would have been terrible but they still brought it out.

Charging for services isn't the traditional or required method of creating a profit in the industry but it is indeed one. Steam, PlayStation, and Nintendo have all done so without and while Playstation is finding success with its PS+ service, it differs from XBL in its pay walling. I would vastly prefer MS to restructure their service to offerings towards features that cost them maintenance and not to have policies that enforce their involvement in online infrastructure in order to place things like online multiplayer as a paid XBL service. That is my understanding that MS tends to have some sort of server involvement instead of having it be up to the publisher developer to create and maintain. I'm rambling though and using old discussion points to talk about this.

People seem to be overly butthurt over the fact that there are people that would prefer to pay for xbox live rather than seek out free alternatives which could be considered lesser in some respects. If you think it's so moronic to pay and that MS are making a fortune off Live, go invest into some MS stock, because Live is here to stay, and will continue to grow over the years. The price per day works out at peanuts, which I personally don't really care much for paying, I mean you can get a subscription here in UK for about £30, that ends up at less than 10p a day. 10p. I wish I would use that to purchase a Munch bar instead I guess. Oh wait, I work, £30 is nothing.

I think it's the whole "Live is a rip off, MS are greedy pigs" is what's getting out of hand, I had PSN, it was utter crap from my experience, if I had to pay for that I would be pissed off and would likely vent on the internet about how foolish people are for paying for it when you can get something better/similar on a Wii. However, Live keeps alot of people satisfied, and is worth practically nothing by today's standards. Old song that the birds just keep on singing constantly, it was funny at first but I think now it's just getting bit annoying.

- this user was warned for this post by amp316

Well let me just point out PSN has a little over 60 million more users. But my honest opinion is that, PSN is more on a gaming experience side, as Xbox Live is probably better on entertainment purposes. But when gamers say oh XBL is better on every level. The only difference is you got a different processor, and and has twiter other minor differences like music while you play. But those little differences are not enough for me and nor anyone to pay $50 a year.

I discredited everything you just said, calling PSN utter crap. It’s uncalled for and totally false.

I don't care if people pay to play online on Live.  All I'm saying is MS will need to give more incentive like Sony does with PS+.  The people paying just to play with friends won't care and yes Live is growing in both services and members.  I'm not gonna deny that.  The main thing is if PSN has everything Live does and is a great service and is free(could change though) along with the option to pay to get discounts, early demos, timed trials, and free games next gen then it will be hard to justify paying for Live.  And like I said most people won't care, but it could potentially hurt MS if enough people take notice and quit paying for it which more than likely won't happen.  That's all I'm saying.

I think its a ripoff and I still pay for it. I HAVE to pay for it in order to take advantage of key gaming features and gameplay.

"I had PSN, it was utter crap from my experience, if I had to pay for that I would be pissed off and would likely vent on the internet about how foolish people are for paying for it when you can get something better/similar on a Wii"

And now you see why people do that to xbox live.Everyone has their own opinions though.

But MS does offer an alternative to paying for Live; it's called PSN.

Note the words "from my experience" I have had PS3 for about 3 months, other than the single player games, there really was nothing there. The multiplayer games that I have sampled were either desolate or took about 4 hours to patch, just to be put on the supposedly dedicated servers that Sony offer which still provided me with consistent DC's and lag. The UC2 multiplayer completely refused to start (Not even sure why), I found XBM clunky and annoying to use, god the worst bit probably had to be the patches, I must have burned through about 6GB worth of patches in 4 games. There is no cross-game chat, the store took a decade to load, all small quips but everything that I have noticed was a drastic comparison to something that Live offered at the time, in a much better fashion.

Granted the new dash is a pile of shit on Xbox, and the focus on the entertainment rather than gaming is lacksture, but end of the day, if I want to play FC3 while my friend plays Skyrim and another plays Minecraft, and we can still talk about the different elements/storyline/plot/events seeing as we do have similar gaming taste, I would much prefer that, and considering it only costs 10p a day just for that small luxury I don't mind paying it at all, I think you greatly underestimate the social element that Live provides, and without being a consistent user that has a significant amount of friends that play daily on there, you will continue to do so. Of course it's easier to judge something that you haven't used consistently or probably even experienced that much, just because it's easy to do so.

Really, majority of the people that seem to be anti-live are those who don't even have it, or even experienced it for a prolonged period of time.

I don't like the new direction Xbox is going in, but all I do is put the disk in, join a party with friends and chat, or go on cod, or some other multiplayer/single game that we can work on, so the "ads" which everyone keeps joking about have no significant effect on me whatsoever, or the supposedly wide range of entertainment apps on offer.

Ben you should know by now threads related to XBL won't swing in a positive direction, one way or the other, even if the service does become magically free, without any ads, with exactly the same benefits and with even free games every month, people will always find something to quip about. You might as well have started another XBL vs PSN thread here unfortunately.

Bearing that in mind, I see no reason to continue these debates further because it will just be nothing but a waste of time and serve as a catalyst towards my athritis. G'day.