Xbox Live Media Outsells Subscriptions

Microsoft’s (s MSFT) Xbox Live subscription gaming service has most likely topped $1 billion in sales for the first time ever, according to a report in BusinessWeek. Perhaps more importantly, the majority of that revenue didn’t come through subscriptions, but from the sale of movies, TV shows and other content on the service.

About half of all 25 million Xbox 360 owners pay $50 a year to subscribe to the Xbox Live service, pegging subscription revenue at about $600 million a year. And, according to an email that Microsoft COO Dennis Durkin sent to BusinessWeek, Microsoft is making more money from sales of media on its Xbox Live service than it’s making through subscription revenue. As a result, BusinessWeek estimates that Xbox Live pulls in at least $1.2 billion anually.

The growth of Xbox Live revenue comes as the company is trying to position the Xbox 360 not just as a gaming console, but as a digital media hub. As a result, Microsoft was one of the first consumer electronics companies to add Netflix (s NFLX) streaming video, and has been growing the amount of available third-party content ever since. Microsoft recently announced it was adding live sports content from ESPN (s DIS) to Xbox Live, and the new Hulu Plus subscription service will be available through Xbox Live early next year.

But Microsoft isn’t the only company with a gaming console pushing video. The Nintendo Wii can access Netflix content, and in the UK there’s also a version of the BBC iPlayer that runs on the device. Sony (s SNE) has been aggressively growing the content that is available on the PlayStation 3 (PS3) and PlayStation Network as well. That includes adding Netflix and Hulu Plus content, as well as live video from Major League Baseball. Sony is also pushing its PlayStation Network content onto other devices, including its handheld gaming system the PlayStation Portable (PSP).

Related content on GigaOM Pro: ESPN Leads the Way Over the Top, But Will Others Follow? (subscription required)