I think they are going to make more revenue, eventually they might even reach 1 billion in profits. The trend is more games being sold via xbox live, the next xbox (yes there will be one) might offer a service like steam does on the pc. Onlive probably flops and with a steam like service you would still own the games and could play them offline.

Untill then, the popularity of xbla will grow, the originals will decrease in sales but the most growth will be seen in the dlc department. GTA4 is one of the first good examples how DLC should be handled and more games will follow that example. (just notice how much companies like lionhood/bethesda/bioware are talking about DLC, besides that map packs for fps games are standard and sell extremely well).

GTA4 alone will be a big part of the cake. Total DLC sales will probably reach 3/4 million (with the next DLC included), thats 60 to 90 million alone. One games gives you almost 1/10 of the annual expected revenue. I know there wont be games like GTA4 every year, but DLC will be important for every blockbuster game, gamers will expect DLC and they want to pay for it, if it offers enough for their money.

Well, congrats MS. Thats smart business

Great. Maybe they'll invest some of it in some fucking studios already!

Microsoft paid 1 billion in 2007 to pay for the RROD 360's so no it doesn't go towards broken consoles, get your facts straight.

Wow that is serious money.

Yeah. The Xbox needs more 1st party games or it will be slayed by the PS3.

New IP's, and they should make Age of Empires IV soon for the X360.

Also compared to games that are sold at retailers there are other cost reductions that makes Xbox Live revenues more profitable.

Much lower shipping costs
Little revenue going to retailers
Less physical product that needs to be produced WiiFit, Rock Band and Guitar Hero require more product to physically be produced. Xbox Live cards and points cards are cheap plastic/paper cards. And most once subscribed simply use a credit card and never buy from retailers.

Said this before Xbox Live is like MS releasing a new blockbuster like Halo 3 every year.

I don't mind spending money on Live. So many things to choose from. Go Microsoft!!

You are beginning to see the gradual shift of revenue from retail to online. People will spend an increasingly large share of their gaming purchases in DLC and downloadable games.

As long as they charge a yearly fee, XBox Live will always have more online revenue than PS3 or Wii. If they have 10M gold members, that is $500M in yearly subscription costs.

Wow, that # is staggering. Congrats to our new Overlords!!