Q: Fable III is the next big project for Lionhead - give us a bit of an overview of the game?
Peter Molyneux: It's always tricky when a sequel comes along on the same platform - traditionally this is when sales drop off. So with Fable III we're going to take a bold step forward. With the Fable franchise we want people to expect the unexpected, but for the time being we're just going to be talking about the story.
So in Fable the player was one of many heroes, while in Fable II the player was the only hero - but in Fable III we're allowing you to be a rebel hero, trying to overthrow a tyrant to become the ruler of Albion yourself.
Then for the second part of the game experiencing what its like to be the hero king or queen, so now in Fable III the promises you've had to make on the road to rule have to be kept when you become ruler.
But the question is, what sort of ruler will you become? Will you be just or cruel? Will you hoard gold while your land experiences poverty...?
Q: Indeed... Fable II was a rare recipient of full marks from Eurogamer - that sort of reaction must have been very pleasing?
Peter Molyneux: Very! But I still hope that even more people will get to enjoy Fable II, so we're announcing Fable Episodes. Fable II is broken down into five chapters each one will be released as an episode. The first chapter will be free and then in-game the player can decide whether or not to purchase the next episode - or there's a season pass option that opens up the rest of the game.
Hopefully the temptation of a free episode will encourage more people to play the entire game.
Q: How tough is it going to be to follow that success up?
Peter Molyneux: I think we need to keep on with the quality and unique experiences within the Fable world. For me that means taking big steps and questioning some of the foundations that Fable is built on.
Q: Moving onto the economy, you'll have seen a number of ups and downs over the years in your time in the games industry. What's your feeling about how things are bearing up at the moment? This time last year people didn't seem to feel that videogames would be hugely affected, so has it?
Peter Molyneux: I think it's a global recession - it's not a little, local thing. For Britain, at least, that's quite a good thing, because if it was just about Britain that would be very, very bad. I suspect that we, as an industry, are still growing - but just not growing quite so fast.
I think that does make people nervous, but that's not so much about whether them consumers will continue to buy - I think there's reasonable confidence about that - it's whether or not all the infrastructure things are right.
I know of a couple of small independent companies - and this is tragic - that haven't gone to try and get bank loans simply because they think they're going to be turned down and get a bad credit history. Once you get turned down for a loan it goes on your record - and that's really affected their ability to take on different projects.
And I think there are lots of examples like that - so it's less about the games industry and more about being a small business, and how a small- or medium-sized business will survive in this credit crunch environment.
I know that the old days of expecting a pay rise, and expecting it to be a certain size, for a lot of companies is very different now. That's very challenging - so everybody's nervous, but part of it is that this global credit crunch is being talked up, with the stories in the press. I think that's making people reticent to invest large amounts of money, and take bolder steps than they'd normally take.
But I don't see any panic, or our market shrinking dramatically the way other markets are shrinking though. I wouldn't say it's absolutely recession-proof - it's recession-proof in the way that your watch is waterproof. You can't take it to the bottom of the ocean, but you can get it a bit wet.
Q: Something being talked about a lot at the moment is release dates, and the number of games - after last year's experience - being pushed back to 2010 to avoid going up against certain key titles. But do you think having bigger releases spread over the course of next could be a much better thing for the industry?
Peter Molyneux: Well, yes it is - I don't think Christmas is going to go away any time soon, though. I've got two views, and they're kind of polar opposites.
One view is that we've been doing this long enough as an industry, we should be able to get our release dates right by now, surely? The other view is that making any sort of game is an incredibly tough thing to do, and I think you can lay all the production schedules out you like, but if you sit down and actually play the game and realise the game's not an experience that's going to sell millions and millions, that's a very good reason to push things out... and a cost-effective thing to do.
So at the end of the day I think games will continue to move, and we should strive not to do that because it's extremely upsetting - and financially huge. Christmas is this insane focus where an enormous percentage of our market is there.
I think there are other opportunities in the year - Easter, and the summer holidays - but I just cannot see six or seven huge titles coming together at an arbitrary time any other time. It's not only Christmas you see, it's Christmas and Thanksgiving, it's a real double whammy which America drives us all through.
But as a gamer, it's nice to have a really big game come out every single month of the year, because you can be entertained all year round. There is this fallow period over the summer months where nothing really big comes out.
Q: Couldn't the industry get gamers to part with more cash in the long run by spreading out the big hits a bit? Maybe one or two key titles every month, instead of forcing them to choose from 15-20 at Christmas, then pick up the rest once they've been reduced in price six months later?
Peter Molyneux: There's logic in your argument.
Q: But... logic doesn't always trickle through?
Peter Molyneux: The reason that it's very hard to comment is that it's not just publisher, or retailers, or consumers - it's a sort of triad of those three.
Q: Probably one of the things that's most sensitive to release date is new IP - in your current role, would you release a new IP in the run-up to Christmas, up against a Gears of War 2, Modern Warfare 2 or Fable 2?
Peter Molyneux: I think it's very difficult. These products create what we call craters - the bigger the product the bigger the crater, and the larger you want the distance to be away from it.
I'd say that it's very easy to focus on one thing at a time - it's harder to focus on three things at a time. If you're inside the blast radius of something like Halo or Gears of War, or even Fable, you have to have a very strong, clear message of why a consumer should spend this much more on your product.
If you haven't got that you should stay clear of the blast radius - it's really that simple. Quite often, products are released because they've been finished, which in my view is the wrong reason. They get shipped six weeks after the gold disc is made, but that doesn't make it right to do it that way.
So in summary, if you want to go inside someone else's crater, just make sure you have a very clear message of why you stand out against it, because you're going to be competing for the front covers of magazines, front pages of websites, and the huge end caps at the end of stores. That's going to make a difference.
Of course, things are changing, aren't they? I think you can feel it as a change in the wind, but I'll leave that with you as a mystery.
Q: That sounds intriguing... is it the most exciting time for the industry ever, right now?
Peter Molyneux: Well I'm always one for the superlatives, but let's lay down the things that are exciting: Natal from Microsoft is pretty exciting; I think there's a lot more talk about digital download and games on demand; there's a lot more talk about episodic content; connecting people together on Live; new genres.
Add all those things together, and if you simply look at the last ten years and how many other years would have such a long list... I think you'd struggle. It is a pretty exciting time, and with that come enormous opportunities, but enormous risk as well.
Peter Molyneux is creative director at Microsoft Game Studios. Interview by Phil Elliott.