Xbox Live estimated annual earnings: $1.2 billion

Microsoft's Xbox Live online gaming service appears to be earning the company in excess of $1.2 billion.

While Forbes published similar statements last month, financial network Bloomberg has coaxed Dennis Durkin, Xbox’s chief operating officer, into reiterating that revenue from downloadable add-ons, movies and other content now exceed that of Xbox Live's paid subscriptions.

Based on earlier revelations that 56 per cent of the 25 million Live users paid $50 for Gold level access in 2009, Microsoft is likely to be earning in the region of $625 million from subscriptions alone.

If other Live revenue - also including avatar customisation and classic game re-releases - does indeed exceed that, total earnings from the service will be greater than $1.25 billion.

Microsoft will not report its 2010 fiscal results until later this month, but Goldman Sachs analyst Sarah Friar suggested to Bloomberg that the technology firm's operating income for the year ending June 30 will be $1.04 billion, six times greater than the previous year.

She also estimated that total Xbox Live sales for 2008 would have been around $800 million, and that the amount of Live revenue recouped after production costs is around 65 per cent.

With Xbox hardware notoriously taking several years to turn a profit, Live's burgeoning success may well be key to Microsoft's continued investment in gaming.