- New charges for online extras are sharply raising the price serious video gamers pay for Xbox 360 games, a profitable move by Microsoft Corp. , but one that could alienate some fans.
With more than 6 million users, Microsoft's Xbox Live online network has become the key feature distinguishing the Xbox 360 from rival Sony Corp.'s PlayStation 3 and Nintendo Co. Ltd.'s Wii.
More than 3 million Xbox Live subscribers pay a $50 annual fee that allows them to play games online against one another. About 3 million more use the service without an annual subscription, taking the total to more than half Xbox users.
Through Xbox Live, players can buy maps for fighting terrains and other add-ons that are indispensable to serious gamers, usually at a cost of $10 each. Such add-ons used to be free most of the time and the additions can raise a game's cost to $80 or even $100 over its life span .
"The (downloadable maps) are very profitable for us," said Tony Key, vice president of marketing for UbiSoft Entertainment SA, whose Tom Clancy-themed shooters such as "Rainbow Six" and "GRAW 2" are among the most popular games on Xbox Live.
"If you're a 'Rainbow' guy and you don't have the maps, then you can't play a match," said Key, referring to online competitions. "I doubt there will ever be a Clancy game without the Xbox Live component any more. It's now a key part of the game's DNA."
Games such as UbiSoft's "Rainbow Six Vegas" and Activision Inc.'s "Call of Duty 3" can cost as much as $25 million to make, but extra game levels and maps are extremely cheap to produce, by comparison. Key said they required only about 10 percent of a game's development staff.
Maps and other content are also profitable for Microsoft.
Wedbush Morgan analyst Michael Pachter estimates Microsoft charges a royalty rate of 30 percent for most downloads. That means that, for a $10 download, Microsoft gets $3, while the publisher pockets $7.
Pachter estimates the entire downloadable game content market is currently valued at $200 million, compared with $19 billion for overall game software sales last year, but he points out the additional sales have much higher profit margins.
"It's like building an extra room in a house," Pachter said. "It's nowhere near the cost of building the house."
But pricing the downloads is a tricky science that many game publishers, including Microsoft, are still figuring out as they try to balance profit with the risk of alienating gamers who might feel they are being taken advantage of.
Microsoft was criticized by many gamers after the May 3 release of a map download to its popular alien-blasting game, "Gears of War," which has sold more than 3.7 million copies worldwide since its November release.
The first map pack was released for free months earlier and generated more than 1.5 million downloads. The new download included several new battlegrounds online users could fight on during multiplayer matches, but this time they cost $10.
Mark Rein, vice president of "Gears" developer Epic Games, said in an interview on video game Web site 1up.com that the studio would have preferred to give away the maps, but Microsoft, which published the game, decided to charge for it.
This set off angry complaints from fans who felt Microsoft was taking advantage of them. Epic declined to comment for this article.
Microsoft Xbox Live group product manager Aaron Greenberg said few gamers complained about the add-on features and that the charge helped Microsoft recoup the cost of developing games and running the expensive online service.
"We are like the complaint department. We hear from the small minority that are not happy," he said.
Third-quarter revenue at the entertainment and devices division dropped 18.7 percent to $947 million, with an operating loss of $330 million, compared with a loss of $438 million a year earlier. Microsoft shipped 500,000 Xbox 360 consoles during the quarter.
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