Live is a portal that provides the following:
– Targeted Advertising, which makes Microsoft money
– Media purchasing avenue (Games, Videos, Add-ons, etc), which makes Microsoft money
– Multiplayer functionality around games which make Microsoft Money
– Subscription Fee, which makes Microsoft money
Only cost that has no/little return is from people who play multilayer constantly and somehow avoids seeing any of the advertisements.
This is really just a profit grab. I can’t really blame them since they don’t have to compete with anyone for their existing install base, but it does irk me.