Microsoft has/had a somewhat captive audience, so they can do a lot of milking. The justification from Microsoft is two-fold: 1) Having to pay for patches give

Microsoft has/had a somewhat captive audience, so they can do a lot of milking. The justification from Microsoft is two-fold: 1) Having to pay for patches gives publishers an incentive to release less-buggy games the first time. When consoles first started enabling developers to release patches, it was fashionable for gamers and reviewers to complain about patches. Many people subscribed to the idea that patching was lazy and games shouldn't have bugs at all. These days people are more likely accept patching as a good thing, so this patch cost is really more damaging than helpful. 2) Microsoft does extensive QA on your patch (just like they do initial releases) to make sure it doesn't do anything egregious, and this process costs money. Gamers don't always care who screwed up, they will blame the console-maker. So Microsoft benefits from ensuring patches don't brick your console, etc. However, it's not exactly clear how worthwhile this process is considering the buggy patches that have come out. Surely it doesn't cost them anywhere near 10 grand to pay for the testing process. Although the top-end games are still getting more and more expensive to produce, the quality of game that the average developer is able to make on her own has risen dramatically. You no longer have to have very specialized skills to create a great game that will sell a million copies. Publishers and console-makers don't hold the power they used to. There are so many available open channels for developers to release their games to large audiences with no interference. MS is refocusing away from the gamers who rely on them less and less, to a more broad audience. Other similar behaviors Microsoft gets/got away with: charging gamers for the ability to play online, charging a 'licensing fee' for any game released on the system (other console manufacturers do this as well), showing advertisements while navigating the console's menus.