During the Bill Gates keynote address at the Consumer Electronics Show in Las Vegas yesterday, Microsoft announced that over half of all Xbox 360 owners are using the console's Xbox Live service. If this is true, the company has increased the usage of Xbox Live service tremendously from the estimated 10% usage rate for the original Xbox.
Careful, though, because these statistics are tricky. Here are some factors to take into account in interpreting this stat:
- THE EARLY ADOPTER FACTOR. Because of product scarcity issues that we've blogged about extensively, only those who were willing to go to great lengths to obtain an Xbox 360 were successful at getting one this holiday season. The average consumer does not camp out overnight for a console. The average gamer doesn't pay $700 for a $400 console on eBay. As a result, the earliest owners of Xbox 360s are significantly demographically different from the millions more that will end up owning an Xbox 360 by the end of 2006. Early adopters are significantly more likely to sign up for Xbox Live than is the average consumer. We think that Xbox Live is a tremendous differentiator for the Xbox 360, but expect this penetration rate to fall as more mainstream consumers finally obtain Xbox 360s.
- THE SHINY NEW TOY FACTOR. Because the Xbox 360 is a brand new toy, no verdict on Xbox Live has been crystallized yet. Consumers are still trying it out, still assessing it, and still actively trying to determine if it's worth it. It'll be interesting to see how many of these early users choose to pay for the service for a year or more.
- TRIAL ACCOUNT FACTOR. How many of those 50% users are using Xbox Live Silver (the free version)? How many of those customers are signed up to Xbox Live Gold on a trial 30-day basis? It's too early to tell how many of these people will convert to paying members. It's not fair to compare the percentages across the two systems until the Xbox 360 has seasoned a bit.
What we're encouraging here is healthy skepticism with regards to overly simplistic data trotted out to prove success. As noted above, we're extremely excited about the Xbox 360 service and can't wait to see how it evolves over time.
[Update: fixed minor punctuation issue.]
[Update: eliminated extra word "arcade" from first paragraph.]
