There seem to me a lot of misconceptions about what XBox Live really is, especially in comparison to the free PSN, so as a software engineer, so for the 7 of you who will probably read this, I thought I'd go into some detail about where exactly your $50 is going towards.
Let's discuss, for a minute, the free-on-release XBox Live Arcade game "Aegis Wing". You may or may not know that this game was written in 3 months by 3 Microsoft interns. What's interesting about this?
This free, intern-created game includes a 4 player co-op mode with an entire matchmaking and leaderboard system.
Why do you think this is possible? The answer to that question is the same as the answer to "Where does my $50 a year go?"
When you pay for XBox Live, you are essentially funding the development of future multiplayer games for the 360. You aren't just paying to play online. You're paying to support the entire online framework that developers can take into when they make games for the 360.
That's why nearly every game for the 360 - from intern-written XBLA games to huge multi-million dollar blockbusters - have some sort of online component, be it full multiplayer functionality or some sort of online leaderboard. Microsoft has made it incredibly easy for developers to tap into this system, because Live handles all of the things like matchmaking, skill ranking, etc. Developers no longer have to implement that system themselves, which saves them both time and money.
This will become even more apparent when the XBox Live Community Games platform rolls out later this year. Many of these amateur games built using the XNA development kit will likely have multiplayer support - something I doubt we'd see without the $50 a month paid by the Gold subscribers.
Just take a look at this list of XBLA arcade games and note how many have multiplayer. ALL of them have some sort of online leader board - but also, note the number that have multiplayer as well:
http://en.wikipedia.org/wiki/List_of_Xbox_Live_Arcade_games
In a day and age where people are willing to pay $15 a month to play ONE game online, $50 a year doesn't seem too hard to swallow in order to ensure nearly every game I play on my 360, be it in DVD form or as downloaded content, has a multiplayer element. But I've been gaming long enough to remember dozens of games I played thinking "This is awesome - but why can't I play with friends?" Hopefully, this is becoming a thing of the past. Who wouldn't want a multiplayer X-Com game?
Now, many of you may not care, which is fine. If you just want to play a few - or no - games online, then the free PSN probably has everything you probably want.
I didn't mention things like in-game invites and messaging, a unified friends list, etc. Because, while these are all great features, the PSN will likely soon have all of these for free. But even so, Sony lacks Microsoft's experience in software engineering - just as Microsoft clearly lacks Sony's experience in creating hardware. This is why XBox Live has been created from the ground-up as not just a multiplayer system but an entire online gaming infrastructure and community.
I love feeling like almost every 360 game I play is, in some way, shape, or form, a community experience - and it's that way because it's so easy to add online functionality to a 360 game. As a programmer myself, I see the power behind that and am more than willing to pay $50 a year to support that sort of system.
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Importantly is the security feature because every thing on live is made to provide safe access, this is the reason what casuing pain to some studios like Bungie and turn 10 for their content upload but never the less even after huge amount of uploads and saves very few complaints are there. Also the downloads are proper never had a download which didnt worked. But you are paying for this so its important you get these privleages but also such type of moderation requires cost.
The cost I can say is not very high since thats the charge for internet for a 2 month duration and I pay it for a year of Live, my cable costs me much more than that. Also the video downloads and free stuff are now increasing hopefully your point will not be spended on naything buying a games in just some time. Good that 360 comes with a 2 month Live silver for free.
Taking all of this into consideration, it's the end consumer experience that matters the most of all, and while Live is the best online service around, it still isn't $50 a year better.
Of course, about every 360 owner on this site will tell me it is worth the cost so I guess it's just me. I only have a Silver membership now, not because I can't afford Gold, just that I don't like paying for things that should be free, or at least at a lower cost. Just my opinion though.