Update: As a clarification to the original article, the described advertising cut is currently not an immediate factor, as all XNA developers are receiving 70 percent of profit regardless of whether their game was given a feature spot or not. However, if Microsoft begins to impose fees on advertising, the situation could change. For now, though, the cut remains as a flat 30 percent across the board.

Microsoft is taking in a large chunk of revenue from titles released through its XNA Community Games label — as much as 60 percent, according to developer Mommy’s Best Games. This is giving developers little room to recoup development costs or fund future efforts, especially if sales are less than stellar.

President Nathan Fouts lamented over sales figures for the company’s well-received XNA effort Weapon of Choice, revealing that it pushed only 10,000 units, placing revenue stream in the category of “that hurts.” Based on what was spent during development, 20,000 units and above would be palatable according to Fouts, but he does not anticipate sales picking up all of a sudden, seeing as the title was released four months ago.

Fouts explains that Microsoft imposes a baseline cut of 30 percent and a potential 10 to 30 percent on top of that for advertising fees. This is all in addition to paying for royalties, taxes, as well as hardware and development costs.

It’s clear developers on XNA have it tough, and the fact that the Community Games section is a relative unknown to most 360 owners isn’t helping one bit.

Big fish in a shallow pond [Mommy's Best Games]

XNA mainstay and fan favorite, The Dishwasher: Dead Samurai, will be available for download this Wednesday, April 1st. Xbox 360 gamers got a taste of this indie title developed by James Silva of Ska Studios, who won first place in the 2007 Dream-Build-Play contest which netted him $10,000 and Xbox Live Arcade publishing contract.

For those not familiar with the title, you will take on the role of an undead samurai dishwasher, armed with numerous bladed weapons and "Dish Magic" in later levels. Not for the feint of heart, the game grabbed an M for Mature rating from the ESRB for its bloody, side-scrolling gameplay.

The Dishwasher: Dead Samurai will be priced at 800 Microsoft Points and available for download Wednesday, April 1st. Let's hope this isn't an April Fool's joke.

Some more news coming in from the Game Developers Conference in San Francisco is that Microsoft has announced the third annual Dream-Build-Play game development competition and some new updates to its free XNA Game Studio development tools.

Available to professional and hobbyist developers this spring, both Xbox LIVE Arcade and Community Games developers will be able to include customized Avatars. The XNA Game Studio update, which will also include improvements like video playback and new audio APIs, means that more games featuring Avatars and LIVE Party could start appearing on Xbox LIVE as early as this fall.

Additionally, Microsoft reinforced its commitment to professional developers with the preview of new Xbox 360 Development and Test Kit hardware. This hardware includes additional debugging memory that allows developers to more efficiently produce games, push the console to its maximum capabilities.,

Also, beginning Monday, April 6 developers from all over the world will have an opportunity to submit their unique game creations to the Dream-Build-Play 2009 competition for a chance to win a cash prize and an opportunity to sign an Xbox LIVE Arcade publishing contract. Winners will be announced this fall. Last year, more than 10,000 members of the community enrolled in Dream-Build-Play, yielding more than 350 completed games from all over the world developed using Microsoft’s free XNA Game Studio tools.