There are a few different reasons. One reason is that Xbox Live provides a Framework that allows the Game to determine who the Host is. Different Games (aka Studios) provide different multiplayer capabilities, but regardless of the type (one-to-one or one-to-many), Xbox Live provides the Framework that allows the Game to determine who the Players are, and thus who is placed in what role. So even if you are the Host (aka the Server is hosted on your Xbox and others connect to you), Xbox Live is essential in identifying your Account in relation to other Players. Another reason is the interoperable capabilities that Xbox Live provides in terms of the Xbox Community. Your Avatar, Statistics, Messages, etc, that are similar in terms of capability, but shared across the Game Library. This allows Games (Studios) to leverage the Xbox Live Framework to provide a better Community Experience.
Seriously? Running a service cost money. Yes they likely have a markup, but the point is you can't get everything for free. How slow would match making be if it was entirely p2p with no Msft central servers?
On an entirely subjective note, I think xbox lives game recording will be baller!
Doesn't Microsoft also make you pay for xbox live just so that you can connect to Netflix's servers (who you are also paying) over your home internet connection (which you are also paying for)?
I do not believe this is true (although I haven't verified it). Xbox live basic level is free. Xbox live gold costs money. I would HOPE you can still use Netflix with Xbox live basic.
As surprising as it may be, Netflix requires Xbox Live Gold.
This is different than say the PS3 which does not require PS+ for Netflix.
This is one of the many reasons that while I may eventually own an Xbox One (I own 2 different Xbox 360s now), my first "next gen" console will be a PS4.
Yet PS3 requires you to have PSN+ to download in the background and to save games to the cloud. Both things you can do without Gold on Xbox. They each have their pros and cons for paid upgrade, but I find the Xbox live experience to be far superior to what the PS3 has to offer.
> Yet PS3 requires you to have PSN+ to download in the background [...]
This isn't true, either. Background downloading predates PlayStation Plus and everyone has had access to it since its launch. You might be thinking of automatic downloads, but that's not true either as of PS3 system software update 4.50, released last week.[1]
> [...] and to save games to the cloud. Both things you can do without Gold on Xbox.
Xbox support seems to indicate[2] cloud storage requires an Xbox LIVE Gold membership. Has that changed recently (so the support article is out of date)? I couldn't find any update notes indicating that it had.
At least on the 360, your Live account payments are not going to hosting any of the servers (at least not the ones that you pay for). Any actual game servers for 360 games are paid for by the developers of the game (and run independently of Microsoft).
How this changes for the xbone remains to be seen.
