What?
So do you actually have anything or are you gonna keep dancing around it until I maybe shutup?
I'll try to break down the argument. None of us have real numbers, so you'll have to go with a theoretical. Not all customers are made equally. MS may be attempting to force lower value customers into become high value customers. Here's my example:
Customer A: Internet Connection
-Purchases System (Low Revenue, at least until late in system life)
-Purchases Retail Games (Revenue)
-Purchases downloadable retail games (High Revenue)
-Purchases XBLA titles (High Revenue)
-Subscribes to XBL (High Revenue)
-Buys map packs and other DLC (High Revenue)
-Uses movie rental services (High Revenue)
-See ads (High Revenue)
Customer B: Not connected to the Internet
-Purchases System (Low Revenue, at least until late in system life)
-Purchases Retail Games (Revenue)
-Purchases XBLA titles when they are compiled on disk (Revenue)
I believe your argument is that both customers provide revenue. This is true. The number of revenue streams available to Customer A is much greater than B, but if B provides revenue, why would you cut them out of the equation? Consider this...
Marketing and development budgets are finite and must be geared in certain directions. Looking at the two customers, revenue is much more easily derived from Customer A than B, or at the very least there is much more opportunity to derive revenue from Customer A. Looking at the numbers, you see that X% (or whatever number) is Customer A, but they make up far more than that percentage in your revenue. As is obvious, you want more Customer A's. There are two ways to build that customer base. 1.) Market and develop services that appeal to Customer A to pull in more Customer A's and promote more spending among that existing base, or 2.) Turn Customer B's into Customer A's.
On the first, it might not seem to apply here as even if you decide to spend 90% of your money on products and services that can only be used by Customer A, Customer B can still provide their basic revenue stream. Additional investment and development doesn't benefit Customer B, nor does it allow MS to get more money from them. But there is no reason to cut them off.
On the second, the situation is different. While Customer B's provide revenue, if you could turn them into Customer A's, you'd be making a lot more money. If you force online connectivity, two things are likely to occur; 1.) You'll lose some percentage of Customer B's who do not have an internet connection and will not get one and therefore lose this revenue, and 2.) Some percentage of Customer B's will make the additional effort to get online and therefore become Customer A's. IF a large enough percentage of Customer B's become Customer A's, the additional revenue from these new Customer A's may well overcome whatever it lost from the Customer B's that you couldn't force into becoming Customer A's. Did you lose market share? Yes, but now per capita your customers are spending more money, and you're therefore making more money overall with fewer customers.
It's ultimately a gamble as to whether you can force enough Customer B's to get an internet connection and become Customer A's. That's the economic argument. It isn't a surefire way to make more money, but it's a calculated gamble.
