Recent results give Microsoft a compelling defense for the always-online Next Xbox

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The Xbox 360 may be near the end of its career, but Microsoft’s entertainment business is doing just fine. The NPD Group announced on Thursday that the Xbox 360 took the number one spot in March, its 32nd straight month at the top.

March was a capstone on an all around solid quarter for Microsoft, as evidenced by the company’s latest earnings report. On the whole though, Microsoft is in a bit of tough spot. Total revenue rose to nearly $20.5 billion over the first three months of 2013, up from just over $17.4 billion the previous year. Income, however, actually fell, dropping from nearly $6.4 billion to just over $6 billion. R&D spending, the manufacturing push behind the Surface tablet, and struggling Windows 8 sales are hurting the company’s bottom line this year.

The Entertainment & Devices Division, home of the Xbox 360, is doing excellent though. Revenue from that group came in over $2.5 billion, a 56-percent increase over last year, and a 33-percent increase in video game-based earnings alone. All told, Microsoft sold 1.3 million Xbox 360s between January and the end of March. “We saw transactional revenue grow roughly twice as fast as member growth this quarter,” said Microsoft.

Most impressive, and most illuminating about the company’s future plans, is the growth of Xbox Live. The Xbox 360-centric online service grew 18-percent over the past year, with 46 million members worldwide. With worldwide sales of approximately 75 million consoles, Microsoft has finally reached a point when significantly more than half of its console audience is using Xbox Live. The year-on-year growth is impressive enough, but consider the long term numbers. In December 2010, there were only 25 million registered Xbox Live members. Five years after the console first released, Microsoft was able to nearly double its networked audience.

What’s it all mean? It means that Microsoft has a compelling argument to make in defense of an always-online Next Xbox. The company can point to the Xbox 360’s audience and note that more than half of console owners have joined Xbox Live, so naturally they’re already online. There won’t be that big a change.  

That argument doesn’t paint the whole picture, of course. Just because Xbox Live has 46 million members, that doesn’t mean that all of them are always connected to Live while using the console. There are likely many dormant, but Microsoft does have data to make a case. It won’t be making that case until June, though. “Xbox continues to be at the center of our living room strategy,” said the company, “E3 is only a few months away, and we look forward to sharing more shortly.”

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