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MadSkillz · Level 39: Paper Luigi **Posts:** 12975 **Timestamp:** Mon Aug 24, 09 7:52 PM

Microsoft Corp’s Xbox 360 and Sony Corp’s PlayStation 3 are locked in a battle to control entertainment in the living room beyond video games, a competition that is only growing more intense with the increasing popularity of digital distribution.

The two rivals have tens of millions of users, making them well-placed to capitalize if a critical mass of consumers begins to move toward a single “digital hub” that offers a buffet of media, including movies, TV shows, music and games.

The all-in-one hub has been touted for years as the future of home entertainment, but consumers have been slow to change, still opting to play their content on a variety of devices.

Although analysts caution that it is still early in the game, they say Microsoft --- which had a four-year head start -- is leading Sony, with steady revenue from paying subscribers and a strong slate of content deals, including partners such as Netflix (NFLX.O) and Facebook.

Although the companies do not provide sales data for their entertainment networks -- Xbox Live and the PlayStation Network (PSN) -- Jesse Divnich, an analyst with EEDAR, said sales have more than doubled year-to-date. He expects their combined revenue to top $1 billion in 2009, with Microsoft well ahead.

“We’re seeing the video game systems try to take control of our living room by offering all the different services and entertainment needs we have, all in one box.”

Xbox Live and PSN both offer movies, shows and videos, on top of game downloads. Neither offers music downloads, although users can play songs from their libraries.

Xbox Live Gold members pay $50 a year for additional goodies, including online multiplayer gaming and Netflix access. PSN offers online gaming for free.

But Microsoft has over the years amassed a dedicated group of gamers, said Wedbush Morgan analyst Michael Pachter, who estimates 11 million people pay for Xbox Live Gold.

“Microsoft made it simple -- do online games, then move that online game player into watching movies and the next thing you know he’s going to be tuning in to Internet television. They’ve been very smart about it.”

David Cole, founder of research firm DFC Intelligence, said the PlayStation 3’s Blu-ray player broadens its appeal, but he said people are still mainly buying consoles for games.

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