Xbox Live five years on – what's next?

Xbox Live five years on - what's next?Microsoft’s Xbox Live has come a long way since it launched in November of 2002. Xbox Live started out as a multiplayer gaming network, but today the 8 million users with Live accounts do much more than just play games. Users can download movies and television shows, chat with friends, and more. Even Microsoft now describes the service as a “comprehensive unified online entertainment network”. Marketing-speak at its finest, but it’s true – Xbox Live is a key component of Microsoft’s connected entertainment vision. In this post we look at the state of Xbox Live today, and explore some of the ways Microsoft will likely enhance it in the future.

Connected consoles are big business

XBox 360According to research recently released by IDC and IDG Entertainment, the market for subscriptions, downloadable content, and advertising created by services like Xbox Live is red hot, up from $133 million in revenue in 2006 to over $580 million in 2007. The program manager for games research at IDC, Billy Pidgeon, had this to say:

“By the end of 2007, over 31 percent of online capable video game consoles in North America will be in active online use by 14 million online console gamers.”

With an impressive market share of almost 60% already, Xbox Live is well-positioned to take advantage of future growth in connected consoles. Game software revenues still dwarf that of online content, but increasingly it’s the connected games that consumers want.

Downloadable content today, digital distribution of entire games tomorrow

Halo 3Downloadable items like the recently announced Halo 3 Heroic Map Pack are making headlines on Xbox Live today, but all signs point toward the downloading of entire games stealing the limelight in the future – the not too distant future, that is. As part of it’s press release celebrating Xbox Live’s fifth anniversary, Microsoft shared the following:

Starting on Dec. 4, all Xbox LIVE members will receive a free system update with a host of new features and enhancements. Included in this update will be the launch of Xbox Originals, which, for the first time, will enable consumers to download and own full Xbox games, such as Halo, Psychonauts, Crimson Skies: High Road to Revenge and Fable, among others, directly to their Xbox 360.

In other words, Microsoft is taking a gigantic leap into the world of digital distribution. Xbox Live members will be able to snag Originals games for 1200 Microsoft Points and play them without the need for a disc.

This is really important news, for two reasons. Firstly, it means that Microsoft could conceivably make the entire Xbox/Xbox 360 catalogue of games available for purchase through Xbox Live. Backwards compatibility has always been one of the key reasons for the success of the Windows operating system, and with Xbox Originals, Microsoft has stated loud and clear that they value backwards compatibility on the Xbox too.

Secondly, the digital distribution of games will have a huge effect on game publishing in general. Perhaps Xbox Originals is exactly the catalyst needed for the digital distribution of new releases to catch on. It’s a win-win for consumers and publishers: consumers don’t even have to leave the house to get the latest games on their consoles, and publishers can effectively stretch the viable life of a game from months to years.

Not to mention that removing the need for a physical disc will save Microsoft millions of dollars that they currently spend supporting disc replacement programs.

Everyone is a game publisher

XNA Game Studio 2.0If you think the distribution of games on Xbox Live is limited to companies with lots of money, you’d be right… at least for now. Not everyone can create a game and stick it up on Xbox Live for download today, but Microsoft is working to change that. On Monday the XNA team announced the launch of XNA Game Studio 2.0 (Beta):

This Beta release is your chance to try out the new features available in , including support for Visual Studio 2005, multiplayer support over System Link and LIVE, and many more features and enhancements, many suggested by you, the community members.

There�s even a multiplayer-enabled starter kit you can use to familiarize yourself with multiplayer programming in the XNA Framework.

Slowly but surely, Microsoft is putting all of the pieces in place. The Xbox console is a very controlled, safe environment, and I’m sure Microsoft wants to be extra careful to ensure it stays that way (indeed it actively polices Xbox Live, banning consoles that break the rules). Adding network support to XNA Game Studio is major step, however.

It’s not hard to imagine what the XNA Creators Club could morph into. A repository of user-created games, perhaps with it’s own blade in the Xbox 360 dashboard seems reasonable. Maybe Microsoft would even take the most popular community created games and help them turn a profit.

Beyond games

XBox Live MarketplaceXbox Live really started to move beyond games with the launch of the dedicated Marketplace blade in the Spring 2007 update to the Xbox 360 dashboard. Through the Video Marketplace, users can purchase and download full-length movies and television shows. While the service is currently only available to users in the United States, Microsoft announced earlier this year plans to launch the Video Marketplace in Canada and Europe by the end of 2007. The company announced at the same time that the Video Marketplace had brought in $125 million in revenue.

Live television will be part of the same experience. As we’ve noted in the past, the Xbox 360 plays a key role in Microsoft’s IPTV strategy. The console acts as a Media Center Extender, and will eventually support IPTV itself as part of Microsoft Mediaroom. Originally intended for a holiday 2007 release, Microsoft recently confirmed that IPTV support on the Xbox has been delayed, probably until next year.

What about music? It’s not immediately obvious, but in a way, Xbox Live already offers music via the Zune. Both services are powered by the same backend network, and Microsoft is moving toward integrating them further. Here’s what Microsoft’s J Allard said in a recent interview:

Today we have Xbox live for $50 a year. We have Zune Pass at $15 a month. We don�t have a rationalized premium version yet. Fast forward a little bit, and you can image a menu like DirecTV. There is basic, there is enhanced, there is movie pack and NFL Sunday ticket.

Microsoft PointsOne account, one payment process, multiple types of entertainment – that’s the goal. Consider one of my favorite cartoons, The Simpsons, as an example. The Simpsons is a popular entertainment brand that includes the television show, a blockbuster movie, a video game, and a soundtrack (among other things). Xbox Live is the first service that could deliver all four to me via a familiar, unified experience. It’s a powerful concept, and it’ll happen sooner than you think.

Live anywhere

If Xbox Live is about integrating games, movies, television, and music then Live Anywhere is about taking that integration and making it available across platforms and devices. The scenarios here are endless. You can imagine purchasing Tetris on your Xbox, and playing it on your Windows Mobile device on your way to work. Or how about purchasing an album on your Zune that a friend shared with you wirelessly, and then listening to it as you play Halo 3 together.

One account across all services and platforms (via Windows Live ID). One payment technology (via Microsoft Points). One friends list, and the ability to chat using text, audio, and video across platforms and devices. Cross-platform gaming. These are just a few of the things a full rollout of Live Anywhere will make possible.

A social network for entertainment

Social networking is all the rage these days, with Facebook making headlines for massive valuations. There’s no reason that social networks need to be limited to the web browser, however. In fact Robbie Bach, president of the Entertainment & Devices division at Microsoft, recently described Xbox Live as a social network:

It’s expanded from being a gaming service to . . . an entertainment service with a social network. We have now expanded into the world of movies and TV shows. It’s become a much broader place for people to experience entertainment.

True, yet the social networking features of today’s Xbox Live are still very much limited to games. Friends can view one another’s gamerscores, achievements, reputation ratings, and can send invitations to play games. The only non-game related social networking feature is support for Windows Live Messenger which enables users to chat with one another on the console.

Microsoft could turn Xbox Live into a really powerful social network. Bach suggested that Microsoft was exploring how to do just that:

When you look longer term, there are places where we can expand the social spaces and the content that people have access to. There are new aspects of how people interact with each other that we want to explore.

Users can share recently played games today, but why not recently watched movies or television shows? Or a list of favorite artists and albums? How about swapping playlists? Finding other users who like the same shows you do? A social network based on Xbox Live would make all of these things possible. A social network based on Live Anywhere, that is not tied to the console, would be even better.

Perhaps the killer feature of a social network built on Live Anywhere would be presence. You could be connected to the network via your Xbox, computer, Zune, and Smartphone at the same time, and the network would know when and where you’re available. No one else can do that.

Xbox Live around the world

If there is one aspect of Xbox Live that Microsoft definitely needs to improve upon, it’s the worldwide availability and consistency of the service. Xbox Live is currently available in just 25 countries, which isn’t many compared to some of Microsoft’s other products. Windows XP Starter Edition was sold in 139 countries, for instance. More importantly, the Video Marketplace is only available in the United States. Even after Canada and Europe are added, there’s still a significant number of regions that won’t be supported.

The consistency of the service across regions has been called into question too, with South African Xbox Live members in May posting a petition protesting the lack of local support for Xbox Live. Additionally, the content available in each region varies greatly, and there is very little if any local content offered via Xbox Live.


Microsoft is already in a leadership position with Xbox Live, and the company shows no sign of slowing down. Surely the billions of dollars that Microsoft is investing in new datacenters around the world isn’t just for Windows Live. The infrastructure improvements will likely benefit Xbox Live too, supporting the distribution of games, movies, television, and music available via the service.

With a strong foundation in place, the next five years for Xbox Live look exciting indeed.

last100 is edited by Steve O'Hear. Aside from founding last100, Steve is co-founder and CEO of Beepl and a freelance journalist who has written for numerous publications, including TechCrunch, The Guardian, ZDNet, ReadWriteWeb and Macworld, and also wrote and directed the Silicon Valley documentary, In Search of the Valley. See his full profile and disclosure of his industry affiliations.

9 Responses to “Xbox Live five years on – what's next?”

  1. Victor says:

    In my opinion xbox is the best console of the new generation… The only problem is that 3 red lights isue.. man that sux!
    Have you seen that game with a bug that gives you easy 1000 game points?
    It’s a game called Avatar. Here is the video demonstrating how the bug is done:
    Nice uh? I will rent this game asap! 😀

  2. Mack D. Male says:

    Where’s the fun in getting 1000 points for nothing?! 🙂

  3. scratt says:

    M$ need to get on the case with regards to XBox Live being truly global.
    They also need to honour warranties for the XBox all over the world, not just in territories where they may get sued by consumers.
    Until then my vote is with the South Africans. Gold Membership is a joke unless you are based on the American continent.

  4. R says:

    Microsoft does deserve some credit for the experience that they are trying to give thier users. I mean sure, we can always go on about the red rings after every press release but they are doing some things right.

    *achievement unlocked*

  5. mike says: already delivers games and videos digitally in a unified experience. Live is a little late to the party.

  6. CroniAggression says:

    It would be cool if they had they’re own Xbox live radio stations. I know you can stream from the computer or the hard drive butl I’m sure they could do it easy. I don’t know 5-10 bucks a month, lots of stations, commercials about upcoming Xbox live events or special offers in market place. I mean why the hell not?

  7. Matt D. says:

    Xbox Live will allow Microsoft to build up a war chest that will last until they are able to create a competent operating system (or until Sony/Nintendo catch up to them in the U.S.)

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