You heard me right - Billions.

If you estimate that they make $20 from every Xbox Live gold account per year in profit and they have a 1/3rd attach rate for instance. It means that currently they would be making $120,000,000 in profit from the current userbase per year. Multiply that number by say 3 - that means about $400,000,000 in profit from the current userbase over the next three years.

But Xbox live gold isn't stagnant, its growing with all the multiplayer/online games coming out and the organic increase in userbase. If they add another 4 million accounts to the service by the end of the year thats another $80,000,000 added to their bottom line, bringing the total profit from just that area of the service to over $200,000,000 per annum.

Since the userbase is expected to increase to 40,000,000 consoles - and assuming that same 1/3rd attach rate with a $20 profit windfall on every one thats $260,000,000 per year using conservative numbers for final sales of the 360 and the attach rate for the gold service.

But this isn't the only windfall that they are making on live. The have Online movies/music downloads and the kickbacks ascociated. There is also downloadable content/Xboxlive arcade downloads to factor as well. Since there are three MMO games coming for the 360 this year/next year it makes sense to assume they will also be getting a kickback from the subscription service and the fact that every user must also have a Live gold account.

But heres the kicker... The money they can potentially make increases as the cost of production for the console goes down and the retail sales price follows. The windfall they make on a $200 console connected to live is much greater relative to its sales price than when they were originally sold for $400. With greater sales comes greater profit. Their incentive is to get the machine into as many hands as possible, so they should offer pretty good value on the machine itself to encourage more sales.

Don't fret, if you own an Xbox360 and you use it online this extra money will be used to buy awesome multiplayer exclusives for you to play and the increased vitality it offers to the Xbox360 will be carried forward to the nextbox. For anyone who likes the system and the what it offers can say that it offers value for money in the returns it gives gamers.

It's costing them nothing to operate this? If that was the case, I would want my money back.

this is already happening

they are already making lot of money from this

The cost for the user is $60 per year, IIRC. So Squil's figuring it's 33% profit, which isn't out of the realm of possibility, but we don't really know how much Xbox Live costs MS.

I was being extremely conservative - they could make more profit from live and they could have a much greater atach rate than I suspected.

Oh, I thought you just figured 1/3rd of 360 owners and the full cost of live as profit, sorry my mistake.

Why can't Nintendo do something like this. I would not mind paying 60 bucks a year to play online. They will have the money to run all of those servers and they could also use the money they make to improve the crappy online they have now!!!

Microsoft were very clever to implement the paid service. They will make a lot of money from it (which they need due to the money they need to make back), and considering the expense of running such a service I think it was a mistake by sony to offer it for free considering the money issues the ps3 is having. Unfortunately people wont accept them adding it in now though.

MS is a software company, so they do XBL very well (compared to hardware companies like Sony and Nintendo). Where they suck is in the POS you need to have in order to access Live.

I wish Sony and MS would go in together on a project. If MS sold the online play, while Sony made the console, we would have a better product, and both companies would make more money.

On a regular week just the arcade-games make 1.000.000 Dollar. In the week with games like "Pennys Adventures something" (What was it called? :D) They make even more money. So besides the live fee, there are 52.000.000 Dollar just with arcade. Sure the game-developers will receive money too. I don't know how the earnings are split, but MS will get a part of this cake, too.

Of course there is the video-marketplace, the themes and stuff like that. MS said, there are 2million downloads per day on Live.

Live could actually be the cash-cow for the 360.