Microsoft coins $1.2 billion on Xbox Live

Microsoft has one high-profile non-Windows related consumer success, that being the Xbox 360 and Xbox Live.

Analysts now report that the Xbox Live aspect of the console raked in a cool $1.2 billion last year, up $400 million from the year earlier, and that for the first time the majority of this sum is from online purchases rather than subscription fees, indicating the various marketplaces associated with the console has caught on with owners, beyond just paying for online game play.

“Xbox Live has helped sell a lot of consoles and created a lot of loyalty,” said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington. “Everyone has been talking about Microsoft’s inability to innovate, but this is a pretty good example where they have innovated. They timed it just right with this one.”

Windows Phone 7 is set to be the first time Microsoft is extending its Xbox Live universe to other parts of the ecosystem, with the device having access to the compelling social network around game play, and also the 800 Xbox Live Arcade games being easily portable to the handsets.

With the iPhone (and especially the iPod Touch) rapidly challenging old handheld stalwarts like the Nintendo DS Microsoft should consider pushing the Xbox Live angle much harder that it is at present, and certainly work at bringing its most compelling feature –  multi-person online game play – to the handset as soon as possible.

Read more at Bloomberg here.