Nintendo has succeeded in getting a digital distribution platform for smaller-budget software off the ground with the recently launched WiiWare service, and Sony has offered software distribution of its own through the PlayStation Network; SCE also has interesting things in store for PSN with PlayStation Home. In light of this increasing competition to Xbox Live Arcade, Microsoft believes it still has the biggest trump card; user-created games based around XNA development.

First announced earlier this year, "Xbox Live Community Games" intends to leverage game development across Microsoft's current gaming platforms using XNA tools by giving users the chance to create and share their own software titles across Xbox Live. The process involves users creating games for submission on Community Games for peer review; the best games have a shot at seeing release on the Xbox Live Marketplace. Kinda like the submitting new game profiles through NeoCRS, if you needed a better idea of how the system works. ;)

Tapping into small-budget/indie development was just the start for XBL Arcade; the next step is encouraging development from talented individuals outside of companies, and XBL Arcade's David Edery explains that this XNA-backed content is just the ticket towards giving XBL the edge over its rivals. The real secret is finding new niche audiences (casual or hardcore) before the competition does, and Xbox Live Community Games could provide a more suitable venue for these smaller hits which may otherwise be deemed unproven for Xbox Live Arcade itself, at least at first:

"To some extent it will certainly help us have more innovative content than either of them, just by definition. With all this random stuff coming from the community, every once in a while there's going to be a real gem in there that you just couldn't have found otherwise, it wouldn't have found its way on to a console.

"I'm not going to green light a hardcore scuba diving game for Xbox Live Arcade today because there are not enough people who are interested in that. But with XNA it's perfectly possible. So I'm much more interested in it from a perspective of can it be used to satisfy more people, with more diverse content, than anything else."