NEW YORK (CNN/Money) - By 2007, Microsoft hopes to have 10 million subscribers for Xbox Live. It's an ambitious goal, but if met, it could mean a cash inflow in the neighborhood of $1.2 billion per year for the company. Like any ambitious goal, though, it has a lot of obstacles in its path. And the company's fate isn't entirely in its own hands.

On the technology side, there's really nothing to complain about. It's astonishingly easy to link your Xbox to the Internet and challenge opponents hundreds or thousands of miles away. And the features Xbox Live offers are masterfully thought-out and organized. But that might not be enough to convince users to sign-up for the service.

Arguably the biggest problem is the also the trickiest. To be a part of Xbox Live, you've got to have a high-speed connection to the Internet. Microsoft's argument is online gaming via a 56k modem is a frustrating experience that will turn away more customers than it will attract.

Xbox Live's OptiMatch service lets you find opponents of similar skill levels.

While broadband is certainly more widespread than it was a few years ago, it has still fallen far short of expectations. Industry analysts estimate that as of Jan 1, there were only 10 million or so homes were equipped with some form of high-speed access (DSL, cable or satellite) in the U.S. – far short of the 50 million some companies were anticipating.

Microsoft (MSFT: Research, Estimates) is counting on enthusiastic gamers to sign-up for broadband service to be early subscribers to Xbox Live. But a lot of those gamers won't have the final say on financial decisions.

Console gamers tend to skew younger than PC gamers – 46 percent are under 18 years of age, as opposed to just 34 percent for the PC. While those players can easily afford the $49.99 starter kit (which covers the first 12 months of service) and the likely $10-$15 monthly fee that will follow, it's unlikely they have the disposable income to cover broadband costs as well. And convincing mom and dad to pay $50-$60 per month so they can play games online won't be easy.

The smart kids will argue that parents will be able to use that same high-speed connection for their home computer. Not a bad plan, but that only adds to the cost. In order to fuel both a PC and Xbox, you'll need a router or networking kit – another $50-$100. And I won't even go into the pain of having to wire your house so you've got a network connection in your living room (where most consoles reside). Here's the good news, though. Xbox Live is much more network-friendly than Sony's online adaptor for the PlayStation 2.

Chatting with other players is a big component of Xbox Live.

Hardcore players are a small percentage of Xbox owners, though. The real market Microsoft needs to tap is the casual gamer – and those are people who have shown virtually no interest in the pay-to-play model so far. Services like Electronic Arts' (ERTS: Research, Estimates) pogo.com, which offers cash rewards for free games, have seen tremendous success, with 12 million active registered users.

Pay-to-play PC games, meanwhile, have only attracted a niche audience. And while that audience has shown substantial growth, its numbers don't compare to the free-play model. Sony's (SNE: Research, Estimates) EverQuest is one of the most popular pay-to-play PC games on the market these days, but only 450,000 people are willing to shell out $12.95 per month to play.

Industry experts say it will be two or three years before Microsoft knows if it has captured the interest of casual gamers.

"The adoption curve for online console gaming will follow the curve of console gaming," said P.J. McNealy, research director at GartnerG2. "Casual gamers are not going to go and drop $49 for a starter kit. They're going to wait until they have broadband, then they're going to wait until there's an easy way to get that in the living room and then they're going to wait until there's an attractive [pricing] plan."

Then there's the final hurdle: the games.

Xbox Live will launch with eight online-enabled games, including the eagerly anticipated "Unreal Championship" and "Tom Clancy's Ghost Recon." What's missing, though, is a franchise game that will appeal to both avid and occasional gamers.

Microsoft will rectify that next year with "Halo 2," but it still needs to foster more third party support for its network. Electronic Arts, the industry's largest software publisher, is passing on Xbox Live for now. That means that while subscribers can compete against each other playing Microsoft's own "NFL Fever 2003" or Sega's "NFL2K3," they won't be able to do so with the industry's most-popular football game "Madden NFL 2003."

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And don't count on that changing in the immediate future.

"Xbox Live is on the agenda for discussion, but I wouldn't say that either party has it on the top of the list," said Jeff Brown, vice president of corporate communications for EA.

The hurdles are substantial, but they aren't insurmountable. If Microsoft can attract an audience beyond the hardcore gaming crowd, it can set the standard for online console gaming – and line its pockets with a steady, practically inexhaustible stream of cash.  

Morris is Director of Content Development for CNN/Money. Click here to send him an email.