Microsoft's Xbox Live online video-game service probably broke the $1 billion revenue mark for the first time in the year that just ended, helped by sales of movies, avatar accessories and extra game levels.
Microsoft says about half the service’s 25 million users paid an annual fee to play games online like “Call of Duty: Modern Warfare 2” in the year ended June 30. That would be about $600 million. Sales of products like movie and TV show downloads topped subscription revenue for the first time, Dennis Durkin, Xbox’s chief operating officer, said in an e-mail.
The remarks suggest the business generated more than $1.2 billion in sales last year, exceeding analysts’ estimates. Success in online gaming is crucial for Microsoft because the other products in this unit include the barely profitable Xbox game console and mobile-phone software that’s losing ground to Apple Inc. and Google Inc.
“Xbox Live has helped sell a lot of consoles and created a lot of loyalty,” said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington. “Everyone has been talking about Microsoft’s inability to innovate, but this is a pretty good example where they have innovated. They timed it just right with this one.”
Durkin declined to give more detailed results for the service, and Redmond, Washington-based Microsoft doesn’t break them out when it reports earnings. Sarah Friar, an analyst at Goldman Sachs Group Inc. in San Francisco, estimates Xbox Live had sales of $1.1 billion in the past fiscal year, up from $800 million a year earlier. Subscriptions for the premium service are $50 a year.
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