The first half (the second focuses on NiWiFi, which we'll get to shortly) of the most recent DFC Intelligence brief looks at the implementation of the Xbox 360's Live Marketplace. The Marketplace, as envisioned, is a hub of potential commerce.

In some ways, the DFC thinks the Marketplace outshines the actual console. Essentially, they wonder if after all of this advancement in technology with the Xbox 360, its most advanced feature is actually its forward-thinking Marketplace? Strangely enough, it could be. At least conceptually, the Marketplace is offering something radical and different to gaming in the home. Will it catch on? Will Microsoft supplement the Marketplace with content people actually want to pay for? Admittedly, the prospect of episodic content in video game distribution is pretty enticing to me, at least.

What about you, 360 owners? Are you guys finding use for the Marketplace? Is there stuff you want to grab for your 360?

The complete DFC Xbox 360 report is after the jump [Warning: It's long.]

Xbox 360

DFC Intelligence has long believed that Xbox Live has come the closest to approximating what mass market online gaming will look like. It is simple, fairly clean, and allows rich(er) media interaction than most computer online games through the extensive use of headsets. It is easily the most successful cohesive online gaming service ever offered on a console.

With the Xbox 360, Xbox Live is about more than just playing online games. Digital distribution is now a key focus through what is called the Xbox Live Marketplace. Live Marketplace enables, through the purchase of prepaid cards or the use of a credit card, the purchase of all types of content including whole games right through the Xbox Live interface. In short, it creates a digital distribution outlet for smaller game developers as well as for other types of media producers. The service could even be used to download digital music and movies.

The basic concept is not a revolution by any stretch of the imagination. iTunes has been making a go at digital distribution for some time. Casual games, like those offered on the Marketplace, have been offered in downloadable form for years. What makes the Microsoft offering different is the integration between the various components of the package to form a platform for digitally distributed content: microtransaction ecosystem, hardware, and digital distribution delivery network.

Microsoft is releasing prepaid "point" cards for use with Marketplace at all its normal retail locations. While you'll be able to buy any number of points with a credit card, the retail point cards will initially only be offered in one denomination, 1600 points for $20, in other words, $1 = 80 points. Casual games will be offered from around 400 points ($5) to 1,200 points ($15), with most popular games like Bejewled at 800 points ($10). Pictures, logos and screen saver backgrounds are available in a wide range of prices, from 20 points ($0.25) to around 200 points ($2.50). There will also be downloadable demos, trailers and music videos, many of which are free. The prepaid cards have the key advantage of not requiring a credit card and can make a good gift purchase. While we might associate prepaid cards with limited functions like international phone calls, this is a true retail-based online payment offering. Of course, how fast consumers will take to this new game concept remains to be seen.

In North America, the challenge has been building a microtransaction system to handle payments under $5. To some extent, Xbox Live Marketplace overcomes some of that challenge. If Microsoft is successful is gaining traction with its payment platform, it could really change the way people think about purchasing game, add-on, and other content. Instead of buying games in large $50 chunks, other types of purchase options become available. While this might seem far-fetched, when iTunes enabled consumers to purchase single songs instead of whole albums, it changed a 50 year old established pattern of production and consumption. In comparison, interactive entertainment seems like an adolescent industry. In Korea, consumers were used to paying-to-play MMORPG like Lineage. Then Kart Rider came along with a revenue model based on microtransactions. The game quickly became one of the most popular in Korea, helping Nexon to projected revenue of $250 million in 2005.

The Live Marketplace features are very tightly integrated into the Xbox 360 hardware and interface. For one looking to purchase a casual game, Microsoft offers a clean and simple alternative to the bewildering array of game portals and aggregators in the PC world. Sure buying downloadable casual games online is not new, but the slick virtual retail store that Microsoft has created with Live Marketplace integrates demoing games with downloading and purchasing games elegantly into its hardware package.

This isn't the first time that a company has tried to use a game machine as a Trojan horse for new technology. Sony has made a habit of it by including DVD functionality in the PS2, UMD in the PSP, and Blu-Ray in the upcoming PS3. But Microsoft's inclusion of Xbox Live Marketplace is not exactly akin to Sony's media-disc shoehorning strategy. Sony is trying to promote new delivery forms for all media, while the Xbox 360 focuses on changing the way that people use their gaming hardware by streamlining the process. In this, it is more like the Nintendo DS's ability to use WiFi to connect to other users over the Internet.

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