Xbox Live - Operation Overlord

Microsoft (MSFT) has been taking flak for their several hundred million dollar investment in Xbox Live, a service that for $12 a month allows users of the console to gain access to sophisticated online gaming capabilities. There is also continued criticism of the building losses within the home entertainment division.

People seem to underestimate the level of investment needed to build a beachhead into the home and the potential return it might bring. Think of the preparations that went into Operation Overlord (D-Day June 6, 1944) - an equivalent effort will be necessary to make the digital home a reality.

An upcoming magazine article clearly shows that Sony sees the Xbox Live service as a threat and is moving to one-up Microsoft. This seems to be a pattern by Sony (SNE) - the PS3 has always been positioned as technically superior (Cell Processor, Blu-Ray drive) and now they claim the online capabilities will be ‘better than Xbox live’. Looking at this article it is clear that Sony views Xbox Live as a threat equal to or larger than the Xbox 360 hardware itself. And I’ll save all of the anti-Sony readers a need to comment on this post by agreeing they need to put-up-or-shut-up with a launch date.

There are now 3.2M Xbox Live subscribers ($50 a year to join) who also can pay extra for new content. $150MM a year in revenue doesn’t even begin to cover the massive investment Microsoft has made in this service ($250MM last year to upgrade Live for Xbox 360), and it is but a small fraction of the $5