thedeparted
06-21-2010, 10:55 AM
Zynga has made a splash with hit Facebook games like "FarmVille" making boatloads of money primarily through sales of virtual goods. But in this new virtual gold rush, a more traditional competitor has been overlooked by many: the videogame console. Microsoft's Xbox Live service available on the Xbox 360 has quietly grown its own virtual goods business -- and it is making more boatloads of money than Zynga. Currently, we conservatively estimate Microsoft to be making at least $625 million in revenues a year from sales of virtual goods on Xbox Live.
During a meeting with Dennis Durkin, chief operating officer of Microsoft's Interactive Entertainment Business, at the E3 videogame conference, Durkin revealed to me that Xbox Live's transactions business -- including its sales of virtual goods like movies and music on the Zune Marketplace, and clothes and accessories for players' avatars -- has been steadily growing and recently surpassed its subscriptions business.
Just how much does its subscriptions business make then? Let's break it down. Microsoft has said that it has 25 million Xbox Live members worldwide. Last year, the Seattle Pi revealed that about 56% of Live members had upgraded to the paid subscription service, Gold. If we conservatively say half of members globally are subscribers, that's 12.5 million paid subscriptions. A Gold membership is $50 a year. (There are monthly and quarterly plans that are priced at $8 and $20 respectively too; these break down to a higher per-month cost than the annual fee, though.) Taking the $50 a year price multiplied by the 12.5 million paid subscribers, that comes out to Live making $625 million a year in subscriptions.
And now, Live's virtual goods business has surpassed that, says Durkin.
In context, Zynga has a revenue run-rate this year of about $600 million, according to Business Insider. Of course, Xbox's Lives virtual goods offering is more diverse than virtual cows and crops. Besides movies, music and avatar accessories, the online service also sells other all-digital content like download-able content packs (such as extra levels or scenes that extend a big title) and even bite-sized games through Xbox Live Arcade.
Xbox Live's success not only shows that videogame consoles represent a market with huge potential for virtual good sales, it also shows the strength of Microsoft's hybrid model: combining subscriptions and virtual goods sales. In total, that's around $1.25 billion a year. In other words, Xbox Live is killing it.
Sony has realized this too and followed suit: its PlayStation Network service has been free to all console owners, but at its E3 press conference on Tuesday, Sony announced a new subscription service with premium content and services, PlayStation Plus. Like Xbox Live, PlayStation Plus will cost $50 a year.
It's clear Microsoft has learned well the lessons of Zynga, that people are spending money on virtual goods. This also serves to highlight just what is at stake with Microsoft Kinect, the company's add-on to the Xbox 360 that allows users to play games and other media using only their hands and gestures. Kinect is aimed at capturing a broader audience of players for Xbox 360 and Live -- both more potential paying subscribers, but also more potential purchasers of virtual goods.
:wub: nearly a billion revenue in a year and that's not even factoring in sub money, good god MS struck gold
During a meeting with Dennis Durkin, chief operating officer of Microsoft's Interactive Entertainment Business, at the E3 videogame conference, Durkin revealed to me that Xbox Live's transactions business -- including its sales of virtual goods like movies and music on the Zune Marketplace, and clothes and accessories for players' avatars -- has been steadily growing and recently surpassed its subscriptions business.
Just how much does its subscriptions business make then? Let's break it down. Microsoft has said that it has 25 million Xbox Live members worldwide. Last year, the Seattle Pi revealed that about 56% of Live members had upgraded to the paid subscription service, Gold. If we conservatively say half of members globally are subscribers, that's 12.5 million paid subscriptions. A Gold membership is $50 a year. (There are monthly and quarterly plans that are priced at $8 and $20 respectively too; these break down to a higher per-month cost than the annual fee, though.) Taking the $50 a year price multiplied by the 12.5 million paid subscribers, that comes out to Live making $625 million a year in subscriptions.
And now, Live's virtual goods business has surpassed that, says Durkin.
In context, Zynga has a revenue run-rate this year of about $600 million, according to Business Insider. Of course, Xbox's Lives virtual goods offering is more diverse than virtual cows and crops. Besides movies, music and avatar accessories, the online service also sells other all-digital content like download-able content packs (such as extra levels or scenes that extend a big title) and even bite-sized games through Xbox Live Arcade.
Xbox Live's success not only shows that videogame consoles represent a market with huge potential for virtual good sales, it also shows the strength of Microsoft's hybrid model: combining subscriptions and virtual goods sales. In total, that's around $1.25 billion a year. In other words, Xbox Live is killing it.
Sony has realized this too and followed suit: its PlayStation Network service has been free to all console owners, but at its E3 press conference on Tuesday, Sony announced a new subscription service with premium content and services, PlayStation Plus. Like Xbox Live, PlayStation Plus will cost $50 a year.
It's clear Microsoft has learned well the lessons of Zynga, that people are spending money on virtual goods. This also serves to highlight just what is at stake with Microsoft Kinect, the company's add-on to the Xbox 360 that allows users to play games and other media using only their hands and gestures. Kinect is aimed at capturing a broader audience of players for Xbox 360 and Live -- both more potential paying subscribers, but also more potential purchasers of virtual goods.
:wub: nearly a billion revenue in a year and that's not even factoring in sub money, good god MS struck gold