Microsoft claims as much as 60 per cent of the revenue from Xbox Live Community Game sales, according to XNA developer, Mommy's Best Games.
The developer's president, Nathan Fouts, received the sales data for the company's XNA title, Weapon of Choice, describing the results as "sobering", with less than 10,000 units sold, stating "that hurts".
In his blog post, Fouts explained that Microsoft takes a baseline cut of 30 per cent and remittance rate, plus an additional 10-30 per cent cut for advertising. This put the developer under strain, he explained, as it also pays for membership, software licenses, hardware and marketing as well as royalties to contractors.
"What all that means to our bottom-line, we do not yet know, but it does not feel great," he wrote. "Maybe rational people hang up their keyboard and call it quits. But if you played Weapon of Choice, you realise we're far from rational."
Fouts concerns echo comments made by Andrew Oliver, chief technical officer of Blitz, who told GamesIndustry.biz that a developer could make more money by working with a publisher than acting alone through digital distribution.
Update: Microsoft told developers that it would no longer charge the additional 10-30 per cent fee for marketing and advertising costs.
"We're still determining how much it costs to feature a game and what effect it has on sales so we did not deduct a merchandising fee through this quarter," Microsoft told GamesIndustry.biz.
"The bottom line is that Microsoft is headed into uncharted territory with Xbox Live Community Games. It isn't yet clear what effect our merchandising efforts will have on the sales of games and we don't want to make any premature decisions that could potentially be detrimental to creators.
"Our ultimate goal is to allow developers to benefit from their creations, so we will be monitoring sales figures through the remainder of the fiscal year."