www.Gamasutra.com recently published an article about Xbox Live Arcade sellthrough, consumers, and various other aspects of the system. Appearently, the developers are rolling in the cash, and making LOTS of cash from it.

From GamaSutra.com:

At his GameFest lecture on Xbox Live Arcade development, platform manager Mark Coates revealed fascinating stats on the growth of XBLA games, including chart-toppers Street Fighter II and TMNT.

Coates offered stats on the Xbox Live Arcade service in addition to those given out yesterday by Microsoft casual division manager Marc Whitten, which showed Microsoft predictions of 45 million downloads and more than 100 games on Xbox Live Arcade by the end of 2007, as well as a 156% average financial return over 12 months for Xbox Live Arcade titles published so far.

Coates revealed an average friend list number of 23 users, and statistics on both the top selling and most-played games currently on the service.

Looking specifically at usage in 2007, Xbox Live Arcade has seen the most players on Konami's arcade port TMNT 1989, followed by Worms and UNO. Looking at length of session, casual games rule, with Jewel Quest, Hardwood Spades and Catan ruling the category. Finally, by minutes, card games again took top honors with UNO and Texas Hold'em, followed by Worms.

Turning to sales statistics across fiscal 2007, Street Fighter II HF has taken the top slot in sales volume, besting former champ UNO, which came in second above TMNT 1989.

The same went for revenue, with Street Fighter ranking first, followed by Worms and PC port DOOM. By conversion rate, card games UNO and Texas Hold'em were outpaced by TMNT 1989.

Coates also revealed that the average conversion rate was 18 percent across all titles, before showing sales volume over time.

Showing a classic long-tail trend, Coates noted that the first two months of Xbox Live Arcade titles only account for around a third of its sales, with revenues continuing to come in at a steady pace over the following year.

Finally, looking at Xbox Live Arcade as a whole, the service has seen steady growth in both number of purchasers and purchases themselves, showing marked spikes at the introduction of regular Xbox Live Arcade Wednesday updates, and during Konami's double-header weekend as it put both Castlevania: Symphony of the Night and TMNT 1989 on the market.

Coates' comments came as part of a broader session on developing games for the Xbox Live Arcade service, which Gamasutra will later report in greater depth.

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 IMO, Microsoft really has a trojan horse with this system. If a developer, on average, is having 3-5% of it's sales 12 months into it's products lifecycle, this is incredibly good. Not only this, profits are near infinite - the product never leaves the XBLA service system. A 156% return on profits is pretty dang good in a year - it seems that it's not a great returning investment as quickly as a hard-copy, but in the end, is a far more secured, guarenteed investment.

Neat. Its good to see them succeed in this area since I feel MS created it somewhat. I mean the XBL spearheaded this whole downloadable game thing on consoles and I love it. I can say with almost certainty that I will buy more downloadable games this gen from PSN XBLA and Wiiware than I will from retail outlets.

I'm really hoping Microsoft gets rid of it's fee... information like this just proves the Microsoft doesn't need to charge a users fee.

Also on a side note articles like this couldl push Pirates vs. Ninjas unto the Xbox Live...

Good point.  I'm sure other potential developers of Xbox Live games would appreciate this as well as it would give them a larger userbase.

To me this looks like Microsoft's biggest area of success in their entire game business. 

Excellent insight to XBLA.

No question XBox Live is successful. I personally have 35 games from it... And look forward to new releases every Wednesday.

Microsoft needs to market it better though. This is one of the ways they can get the casual gamer as most of these games are of the "Pick up and Play" variety. And they need to encourage more companies to make new content for XBLA rather then just converting existing stuff. Like Sierra is doing with Switchball...

I can see why people want the Live service for free, but I think as time goes on you will find that all the console vendors will have to charge a fee (or spam you with advertising all the time) for use if they match all of the services that are provided through Live. It is not a cheap system to run and maintain (I would like to see what it takes to run a network gaming service for 7 million + users, and make sure performance and security stay as high as possible). The numbers above aren't talking about XBL profits, they are talking about XBLA... I would venture that they are just barely breaking even or losing some money on Live as a service.

Clearly a success story for Microsoft, and good on them for pushing this digital distribution thing first, but I wish there were more raw numbers here!

Waiving the fee for gold memberships really wouldn't change the profits for developers on XBLA games, nor garner a whole lot more sales for them. Afterall, it's free to go online and get the games. Just can't multiplay them on the net.

But Im sure at some point MS might drop the fees, or lower the fees if Nintendo and Sony wind up having decent services for free.