Europe will be a battleground for the Xbox 360 Microsoft studios' corporate VP Shane Kim told New York Times reporter Seth Schiesel in a discussion at this year's D.I.C.E. Summit.
Kim answered a number of questions from Schiesel ranging from the loss of developers to the strength of the Nintendo Wii.
While not characterizing Activision's acquisition of Blizzard as a missed opportunity, Kim did say it was a "big" opportunity that "would have been nice."
Like many people in the industry, Microsoft looked at Blizzard a long time ago, but an acquisition just didn't work out for them
Schiesel pointed out last year's exodus of several developers that worked on exclusive titles for Microsoft — Bizarre, Bungie, and Bioware.
"It is a very fluid industry," Kim offered. "We work with a lot of external development partners and still have a lot of great external development partners," he said, mentioning Epic by name. "It's the nature of the game."
Kim noted that the acquisitions happened in rapid succession, but that Microsoft cannot control the actions of other publishers. He remained focused on Microsoft's internal studios, and said that he was very confident in their own development capabilities.
With Bungie in particular, Kim said that they had a group of enormously talented individuals who just wanted to be independent. He discounted the economics and rumours that the company's creative freedom was somehow being stifled by Microsoft.
"No studio had more creative freedom within Microsoft than Bungie. The bottom line for them was that they wanted to return to independent roots," he said.
Microsoft thought it was in their best interests to support that decision. "At the end of the day, you are talking about human beings. My personal philosophy is that you want to work with people who want to work with you."
Kim acknowledged that not everyone wants to be part of a large company like Microsoft, noting some "additional challenges" that go along with the benefits. Even so, he felt that the fact that Peter Molyneux — someone who earned his own way in the industry and doesn't have to work for anyone else — chose to work for Microsoft exemplified the benefits.
Schiesel pressed Kim on where Microsoft is spending its money, noting that studios have been let go and the company hasn't been shelling out a lot of money on exclusives.
"This fiscal year will be the most successful financially for Microsoft Game Studios. That's something we are very proud of.
"Beginning in 2004, we really took the approach that Microsoft Game Studios needed to take its mission as a first-party studio very seriously.
"Because of the costs of development, we will see fewer third-party exclusives, so most of that platform driving exclusive content will have to come from first party."
Schiesel admitted that Microsoft Game Studios did well with first-party exclusives at the launch of the Xbox 360, but questioned whether the 2008 and 2009 pipeline was quite as stacked.
"I think the pipeline is very stacked, but you just don't know about it," Kim said.
While refusing to give many details, he did note that there are plenty of upcoming titles - Fable 2, Halo Wars, Alan Wake — that people know and care about. The company was also excited about plans to nurture and grow Halo, its most valuable IP.
"Our job as a platform company and a first-party publisher is to drive a large installed base so that people like EA, Ubisoft, et cetera can sell their titles to that base."
Kim stated that Xbox 360 was the leading platform for 80 per cent of developers. Even though titles such as GTA IV and Bioshock may not be exclusive to Microsoft platforms, Kim said that publishers have been able to demonstrate that their games are a great experience on the 360.
Kim was also unwilling to concede that Nintendo has won this generation's console wars thanks to the success of the Wii: "This generation still has a long way to go. It is way too early to declare a winner there."
But he didn't want to discuss what clues he would look for as definitive evidence that someone had won the console war. Neither was he willing to make pronouncements for four or five years into the future.
"A few weeks ago, a lot of people thought the Patriots would win the Super Bowl too," he quipped, referring to the shock sports result earlier in the week.
As for Microsoft apparently not reaching out to a broader audience beyond hardcore gamers, Kim said that there were multiple facets to competing for that customer.
"Let's be honest - when your flagship titles are Halo and Gears of War, most people naturally attribute a brand of M-rated hardcore to your platform," he said. "It does make it more challenging to reach out to a more mainstream customer."
He agreed that the Wii was important to the future of the industry because of the way it has broadened the definition of what a gamer is and opened up new opportunities for developers.
But even so, Kim said there are other aspects of the Wii business that the industry needs to pay attention to, posing such questions as, "How are they using the console? Are they buying a lot of games? Purchasing a lot of content?"
And Microsoft isn't underestimating Sony either.
"Sony was the winner of last two generations for a reason. They are a formidable company," said Kim. "It is going to take time for us to build up that similar level of [brand] equity."
He refused to give a timetable for future Microsoft hardware, as the 360 enters its fourth holiday season in 2008.: "Our belief is that the Xbox 360 will have a very long life cycle. It is much different than the original Xbox.
"For strategic reasons, we launched the 360 four years after original," he said, not conceding that the current console is expected to have a five year lifecycle.
Schiesel pointed to the strength of the PS3 in Europe and EA's recent pronouncement that Sony's console will soon outsell the Xbox 360.
Kim acknowledged that Sony's first-party development had ramped up, seeing the decline of third-party exclusives just as Microsoft did. He admitted that Europe will be a battleground for the 360, but was confident in their upcoming titles.
"Again, I know a lot more about our pipeline that you do," he teased.
Microsoft had no immediate designs on the MMO space, noting that it was a very tough space with one big "Kahuna" and a lot of smaller other titles.
"We don't need to be in that space, but if we had the right opportunity and the right market, we would absolutely be willing to pursue it. But we would be careful because we don't have a long track record in that space."
Kim denied that he is the new face of Microsoft Games with the departure of Peter Moore - and declined to share any new tattoos.
With respect to Don Mattrick not being out in public as much as Moore was, Kim said that he thought we would see him start to do more PR work.
"In his first six months, [Don] understood there was very little he could do or would want to do to influence what was going to happen last holiday," he said. Instead, Mattrick's focus has been on driving the company's strategic development.
"In general, we are really happy with how we did in 2007 and the holiday. Again, almost half of the spending in this generation on hardware and software has been on the 360.
"We are comfortable with our strategy, but have work to do in Europe."