The home video-game console has come a long way, baby. Microsoft and Sony are engaged in a high-stakes game of one-upmanship, building more and more features into their next-generation consoles. While the Sony PlayStation 2 destroyed the Microsoft Xbox in the marketplace during the last console release, the Redmond software giant appears poised to wrest control of the living room from Sony during the next console release cycle.

With Sony’s PlayStation3 delayed for a year, the Microsoft Xbox360 has already made serious headway into the marketplace, in large measure due to the company’s insistence on developing online games and communities, which encourage socializing and thus increase time spent playing.

With so much money at stake with console sales – whoever sells the most consoles controls the conduit to the entertainment, and in turn controls the living room and all the money that can be made there – neither Sony nor Microsoft has been willing to truly engage with its communities of players, other than to sell them services. There’s just one problem with that business philosophy: video game players love to modify (mod, to you and me) their games, creating new levels, adding features, and sometimes making the game much better than the original. Until now, this practice has been limited to PC games, which put a huge burden on console game developers, who could never keep up with computer game developers.

Microsoft wants to change that. The company announced it would open up its developers kit to anyone willing to pay a small subscription fee, according to this story at SF Gate, which means there will likely be more games (or at least more good games) created for the Xbox360. It also means real mods will be coming to the console, and that could put the Xbox360 on a par with its PC counterparts.

Plus, dare I say it, the move creates a Long Tail (the next part of my book review will come this week) for Microsoft, likely extending the life of the console past the typical 4-5 year lifespan, which isn’t very long for an entertainment system that costs upwards of $400. Presumably, though, developers will port old games to the new system (something most developers can’t afford) and create new games as well.

All of this makes the Xbox360 a more attractive console for gamers. From the SF Gate article:

Analyst Richard Doherty of Envisioneering, a technology research firm in New York, said offering the software tools at a low price is a shrewd move by Microsoft. It not only encourages a new generation of designers to program specifically for the software company but it also creates the potential to reap profit from their products down the line.

“While some of these people can’t work at Microsoft yet, you can still have that talent work for you,” Doherty said. “If the Xbox can become the default system for people, not the PlayStation, Microsoft can (create) their own crop of students.”