"The rumors of my death have been greatly exaggerated"–Mark Twain

The recent warranty problems with the Microsoft (MSFT) cost the big software company over $1 billion. They had people calling for spinning off the game platform business and debating whether it would ever make money.

But, not so fast. Microsoft says that a number of game releases coming in the next few months will drive up the users of its Xbox Live platform from seven million to ten million.

Unlike the Sony (SNE) PS3 and Nintendo Wii, Xbox Live allows gamer to connect with one another across the internet. And, Microsoft charges for the service with the prices being relatively high for levels of service like Xbox Gold running $60. And that is on top of the hardware and games.With 10 million subscribers, the pot of recurring revenue could hit $500 million a year.

In a conversation with the FT, the head of the Xbox operation said: "the online element of Halo 3, Microsoft’s biggest franchise, would add members when it was published in September and exclusive online content for the Grand Theft Auto 4 game would give a further boost when it is introduced next spring."

Live internet gaming is a big advantage. And, Microsoft’s rivals don’t have it now.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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