The official statement:
Quote:
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"We have taken action against a small percentage of consoles that have been modified to play pirated game discs," a Microsoft spokesperson told IGN. "In line with our commitment to combat piracy and support safer and more secure gameplay for the more than 20 million members of our Xbox LIVE community, we are suspending these modded consoles from Xbox LIVE."
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From looking at the people that have been banned, they have very little in common. What I suspect is that M$ has been able to detect modified firmware for some time. My theory is that each year, they ban a random sampling of about 30% of the modded consoles. The complete randomness of it keeps pirates running through hoops trying to verify everything, not play before release dates, having the firmware do extensive checks that make new games not work, etc. when perhaps those things don't even matter.
The timing is around the holidays each year to inflate holiday numbers, and the banning itself is a move to show publishers that M$ is doing something about piracy. Why doesn't M$ just ban everyone then? The answer is that this cycle of partial bannings makes them a lot of money. I know of people who have 3+ 360s from getting hit with the ban waves.
If M$ banned everyone instantly, these people wouldn't keep buying new systems. Additionally, M$ makes a ton of money off the modders as even if they pirate every single disc based game. They will still buy Live Arcade games, DLC, and pay $50 a year for the Xbox Live service. If the modders knew for a fact that they would get banned, they wouldn't buy anything, but if uncertain, they take the risk.