<b>E3 2004</b>: Microsoft extends Live with video chat, game downloads

The capabilities of the Xbox Live service are set to be extended once again later this year, with new video chat functionality and the ability to download arcade style games being announced at Microsoft's pre-E3 conference.

The new abilities were announced by Microsoft vice president J Allard at the conference, and are expected to be rolled out on the service later this year - although exact timescales aren't known, and it took almost a year for the new Xbox Live features discussed at last year's E3 to appear in the form of the Xbox Live 3.0 "Tsunami" upgrade.

Xbox Live video chat is a similar idea to Sony's recently announced Eye Toy: Chat system, and will allow video conferencing over the service using USB cameras, along with a number of fun features such as the ability to send music. It's not clear whether the USB camera will also be used in games, as Eye Toy is, or if it's solely designed for video conferencing.

The Xbox Live Arcade, perhaps more interestingly, will be the first time that players will be able to download standalone game content from the Live service - with small games such as arcade classics Galaxian and Dig Dug, card games including Poker and Bridge and popular web games like Bejeweled being made available to Live users.

The Xbox Live Arcade is being backed by major players in the "small game" market including PopCap, GarageGames and uWink, but once again, details are thin on the ground - most notably, it's not clear how much these games will cost. More information should emerge ahead of the launch of the Arcade service in autumn.

The bulk of the discussion at Microsoft's conference was all about Live - from EA's support of the service, through these new features and demonstrations of the Live multiplayer in Halo 2. The company is focusing heavily on its strength in the online arena - the conference opened with a video lampooning Sony's efforts in the online gaming space - a risky move, given that only a small fraction of console users are playing online games, but one which the Redmond-based giant seems determined to see through to its conclusion.