More than a million gamers are expected to be playing online on the Xbox by the middle of the year, says Microsoft.
Gaming as a 'social experience'?
Microsoft is set to hit its target of a million Xbox Live subscribers by June, Xbox's chief said in a keynote address to a games conference in Las Vegas.
"We are finding a new way for people to have social experiences," said Robbie Bach, "we are blazing a trail."
Microsoft is pumping millions into its gaming service, to tempt gamers into buying an Xbox over rival consoles.
"As the hardware gets faster the big difference is going to be in the software," Mr Bach told delegates at the Digital Games Summit in Las Vegas.
"Software and services are going to play an incredible role in future generations as they have in this generation."
The software giant is competing with the undisputed market leader, Sony PlayStation 2, for the hearts and wallets of gamers.
It is trying to take the lead in online gaming by offering a subscription-based service in comparison to Sony which is taking a more hands-off approach.
Microsoft says it has an advantage over Sony as Xbox Live uses a central broadband server for its subscribers.
Microsoft says it is well on the way to a million subscribers
Mr Bach talked up the prospects for the service in 2004, saying the company had had a successful holiday season.
Xbox Live recorded a million game sessions a day over the five-day Christmas period, compared to an average of 1.5 million sessions a week.
"The subscriber base for Xbox Live will be over a million by June," he said.
Looking to the future, Mr Bach echoed the thoughts of many in the games industry, saying that the challenge was how to expand beyond the core audience of young men.
"We have to turn video games from being a solitary experience into a community experience."
"But we can't lose sight of the core audience. We have to cater for the 15 to 35-year-old audience.
"That audience is at the heart of what is happening in the video game space."
He pointed out that 60% of those playing on Microsoft's games website were women, saying he hoped the Xbox could reach similar figures within five years.
The Digital Games Summit is being held in conjunction with the world's largest consumer technology exhibition, the Consumer Electronics Show, which runs from 8 to 11 January in Las Vegas.