Microsoft has pulled the plug on the accounts of thousands of subscribers to its Xbox 360 online service, Xbox Live.

Microsoft claims that it has suspended only those subscribers who use Xbox 360 consoles that have been specially modified to play illegally downloaded games. The suspension is thought to affect around 600,000 subscribers worldwide, out of a total of over 20 million.

"Our commitment to combating piracy and support safer and more secure gameplay for the more than 20 million members of our Xbox Live community remains a top priority," Microsoft said in a statement.

"All consumers should know that piracy is illegal and that modifying their Xbox 360 console to play pirated discs violates the Xbox Live terms of use, will void their warranty and result in a ban from Xbox Live. The health of the video game business depends on customers paying for the genuine products and services they receive from manufacturers, retailers, and the third parties that support them."

Like the music and film industries before it, the video game industry has become increasingly vulnerable to piracy as broadband speeds have grown to reduce the time needed to download large data files, such as games. Although accurate figures are impossible to come by, experts estimate that the video game industry loses £750 million per year to piracy.

Unlike film and music, the software required to play console video games is proprietary: only Microsoft makes the machine to play Xbox 360 games. To get around some of the restrictions imposed by the game software and console hardware, an entire sub-industry has sprung up, offering modifications to the consoles' internal chips or logic boards. These can permit a user to install an unofficial hard drive, or - in some cases - to play illegally copied or downloaded games.

Unlike music and film, however, video game makers have the option to fight back through the online services that the consoles provide. Microsoft's Xbox Live service is one of the most popular, and allows users online access to multiplayer games, video rental services and even Sky TV.

The move to ban users with modified consoles comes the day after the launch of Call of Duty: Modern Warfare 2, the sequel to the console game that is most frequently played online. Any players who have purchased an illegal Xbox 360 copy of the game, or are playing on a modified console, will have their online privileges revoked.

Microsoft's decision also swiftly follows a ruling yesterday by the UK Court of Appeal, which dismissed an appeal by retailer Christopher Paul Gilham against his earlier conviction at Hereford Crown Court. Gilham had been selling modification chips - “modchips” - enabling users to override protective technological measures preventing the playing of counterfeit or "pirate" videogames.

The Court of Appeal found that associated copyrights are infringed by the playing of a counterfeit game on a chipped console. The Court ruled that characters such as Lara Croft are included within the copyright if their image from the playing of a game can be viewed as a result of chipping a console.

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