Microsoft has announced that as of November 1st they are increasing the cost of membership for their XBOX Live service by 20%, meaning that a one-year membership will cost $60 rather than $50. All other membership types including monthly, three months, and memberships in other countries have all seen the same increase.

My question? Is it greed of recouping for 8 years of constant investment and improvement without a single price hike? Probably some of both – but let’s take a look at some of the upside of XBOX Live:

• XBOX Live is the de facto standard for console online gaming. Sony now has the Playstation Plus system that has been praised, whereas the Wii is pretty much a no-show for general online gaming.
• XBOX Live offers the best multiplayer matchmaking and online gameplay ever seen on a console (still lags behind free PC online gaming, but that is another story!)
• XBOX Live has continuously added infrastructure and entertainment services that are included with the Gold membership without increasing cost. Some of this stuff includes Netflix streaming, Twitter, and Facebook integration
• XBOX Live has added ESPN integration since E3 in June, with thousands of available on-demand and live game options.
• XBOX Live has upcoming Windows Phone 7 integration
• XBOX Live has always had a free ‘Silver’ edition which tracks achievements, allows voice chat from the menu system, and allows users to buy stuff through the XBLA system.

But what about where it really is no different from anyone else … or offers LESS value?

• Sony’s Playstation Network and Nintendo’s Wii feature entertainment integration including Netflix streaming, Twitter, and Facebook integration. Nintendo and Sony do it for Free, whereas you must be a Gold XBOX Live member for these benefits.
• Sony has constantly invested in infrastructure and adding requested features such as Trophies and voice and video chat.
• Sony offers free multiplayer matchmaking.
• Nintendo’s friend code system is cumbersome, but offers free multiplayer matchmaking.
• XBOX Live ‘Silver’ doesn’t allow for multiplayer matchmaking
• Sony’s new ‘Playstation Plus’ adds free full game trials, actual fully free bonus games each month, special discounts at the PSN Store and so on.

Sony has priced the Playstation Plus at $50 a year, though I would expect it to follow Microsoft’s lead on pricing with a lag time to benefit from being less expensive for a few months.

Forbes, in addition to spending way too much time justifying Microsoft’s move (and downplaying Sony’s offering), details the cash flow advantage:

For Microsoft, the modest price increase is a smart move, because it’s a way to capitalize on its increasingly popular online network, with around 12.5 million Gold members (and another 12.5 million non-paying Silver members). Xbox Live’s total revenues are already impressive: it has passed the $1 billion mark from both subscriptions and sales of virtual items like movies, music, games and avatar accessories. Xbox Live’s 12.5 million Gold members currently garner about $625 million a year, as I calculated a while back. But at $60 a year now, those Gold members could potentially contribute $750 million a year in revenue. Given the more than $625 million in sales of virtual items, total yearly revenues of Xbox Live could now reach around $1.4 billion.

Penny Arcade has weighed in on the matter with a comic:

There is no doubt about what I said initially, that “XBOX Live is the de facto standard for console online gaming.” They came to the console game party determined to make serious inroads, and they did it with integrated online gaming – that have made the right choices and greatly enhanced the user experience through the years. Even when the XBOX 360 launched nearly 5 years ago PC gamers laughed at the inferior console multiplayer experience, but in that time tremendous progress has been made – and Microsoft’s XBOX Live has led the way at each step.

So in a way it is easy to say they deserve to be rewarded for this progress. Yet at the same time that is simply the way things work – if anything, when you look at mobile technology and broadband infrastructure in general, we are getting more than ever and paying far less. In that light this increase looks like a money grab that is being orchestrated to occur at a time when Microsoft is at the height of power and people look at the situation as depicted in the Penny Arcade comic.

But there is another cool thing about XBOX Live – when you renew the membership, you are adding time to your account. Also, membership cards are available as gift cards in stores, where they are frequently on sale. In fact, there is a sale right now at Walmart.com, where you can buy a 12 month card for $39.54!

As I said, they stack, so if you bought 3 cards you could increase your member ship for 3 years for the same cost as 2 years of membership under the new pricing. So if you are an XBOX Live Gold member and love the service, stay a member and reward Microsoft for the great service they have done for cnsole gaming … but head to Walmart.com now to do it at a price that rewards your consumer smarts!

Do you subscribe to XBOX Live? Sony’s Playstation Plus? What are your thoughts on the pricing?

Source: Major Nelson’s Blog