Xbox Live Arcade is a hit...

[Paco]

or at least it's showing some promising potential...

February 9, 2006 - Flip on your Xbox 360, log onto Xbox Live and you're more likely to find your friends playing Geometry Wars and Zuma than Perfect Dark Zero or Madden NFL '06. Microsoft's Xbox Live Arcade service, which offers users the option to download classic-style games -- usually for a small fee -- has become the platform's sleeper attraction. And according to Microsoft bigwigs and third-party publishers alike, the service is shaping up to be more than a means to keep players glued to their systems. It is, in fact, proving to be a valuable alternative revenue stream that requires both very little investment and even less upkeep.

At the DICE 2006 summit in Las Vegas, Nevada, this week, we had the chance to schmooze with several sources representing big-name third-party publishers, and everyone we talked to was in agreement that Xbox Live Arcade (XBLA) is flexible and -- dare we say it -- profitable. Sources intimately familiar with Arcade's model say revenues are on the rise as more and more users log on and download.

Microsoft is aggressively encouraging external XBLA support by actively propositioning third parties about porting their classics and by offering an attractive pricing model. Publishers tell IGN that model is generously divided between two different structures. Third parties who port their classics over to XBLA take home 70% of all profits -- the remaining 30% going to Microsoft. Meanwhile, the company that Bill Gates built purportedly has developed an internal group whose sole purpose is to take over the responsibility of porting publishers' classic games. If Microsoft handles the port, the company takes 40% of XBLA profits, leaving the remaining 60% to third parties. Either way, small-level developers and big-name publishers win.

Microsoft has so far shied away from announcing official XBLA sales figures, but a publisher told us that Geometry Wars, one of the biggest titles to hit the service, has sold more than 60,000 copies. This figure could not be verified by Microsoft. Nintendo, whose next generation console -- codenamed Revolution -- is set to offer a similar service when it debuts later this year, may be playing catch up to Microsoft from day one. Publishers tell us that more than 30 XBLA titles from various third parties have already been submitted to Microsoft and that the company has them queued up and ready for release. These efforts are likely to trickle out at a rate of Microsoft's choosing, providing users new reasons to play with their 360 and Microsoft and its partners new and growing streams of revenue.

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It's nice to see one aspect of the 360 being well received. I hope Street Fighter II does well so Capcom considers more of their classics for Arcade. It'd be nice to see more original content as well.

MS is being really aggressive. Porting games for free, then letting the developer have 60% of the profits! Why wouldn't a developer or publisher want their old games on Arcade?

Speaking of Live Arcade, there are two rumors that EGM recently published. One is that Bungie's next game is an Arcade game and will release sometime this spring. The second rumor is that full Xbox games will be available for download at some point in the future.