Shack: So going back a bit, on changes to the market and viability of other competitors, Nintendo is an interesting case there. They seem to have almost the exact opposite situation to deal with from you--right now they're really digging into that mass market and still have to prove themselves to a lot of the hardcore, whereas you have that hardcore slant and are looking to the mass market long term. How do you think that's going to affect you?

Shane Kim: Well, first of all, I think Nintendo is very smart. Nintendo focuses on what Nintendo is good at and what Nintendo wants to achieve. They're about the Wii and the DS, and they maximize that business--and taking a big share of first party. I think they care a lot less about establishing a consumer entertainment platform in the home, and about creating an ecosystem for third parties. Nintendo's good and they make a lot of money at what they do.

Their start, I think, is good in general actually for us in the industry. In the long run, if they really attract more people to the industry, that's good because we think we've got the best overall solution. And we're not that far away in terms of price point. The Core is only $50 more. We need to do a better job telling the story there and making sure we have more that's compelling for that audience. We have to compete for that audience. It's not about competing with Nintendo, it's about competing for that audience. If we're going to reach our objective of winning this generation, we've got to reach that customer.

Shack: You've heard this before, but at this point do you still really feel that the Core is a viable choice?

Shane Kim: I do, I do. With the Elite, and the Xbox 360, and the Core, I think we have a pretty interesting and good SKU family that offers a lot of choice. We've obviously taken that strategy of choice, whether you're talking about the HD-DVD drive or the fact that you've got a [range] from Elite to Core. There's going to be a set of customers out there that isn't hardcore gamers but that wants to tap into a high-def gaming experience with a Core system, and that will be enough for them. They may not buy as many games as the Xbox 360 or Elite customer, but they're still a really important part of the overall market. People say, "Why don't you just kill that thing?" Well, that thing is a $300 price advantage versus PS3, right?

Shack: Yeah, it does seem that Sony is really taking the focus off the $500 model.

Shane Kim: You can't buy it here anymore, right? Now, you've got a $600 SKU. It's a tough situation. That was part of betting on Blu-ray in the first place. You've got a drive in every single one, which is very expensive.

Shack: Switching gears a bit, what's the next step with XNA Game Studio Express and Creators Club? Do you have anything immediate in the pipeline for that?

Shane Kim: It's not really my area, but there definitely is work going on. The question is, now that we're getting Game Studio Express into so many people's hands, how do we create an avenue that best allows people to share the work that they're doing, either with other creators or ultimately with customers? That's work that the platform team, the XNA team are working on.

Shack: This might also be a little outside your specific sphere, but as far as IPTV, what's the time frame on that?

Shane Kim: They're working on it, they've got deals going on. That's what I know. I think they've got partners in various parts of the world who are starting to get ready to roll it out, which is exciting. That's about the extent of what I know.

Shack: Do you think we'll be seeing many more titles in the future with the PC to Xbox 360 cross-compatibility in multiplayer?

Shane Kim: No, I think--well, I want to make sure people understand that bringing Live over to Windows is important for Windows, and it's really important for Live, expanding the capabilities of those platforms. A lot of people are not single-platform customers. Being able to extend the same functionality and take that across platforms is really important to Live, because I think Live is actually the most important platform we're building within the company. Cross-platform play across Live is an important thing, because it's something that we're uniquely positioned to do, but I don't think it's good for people to assume that every title is going to be like that.

I guess that's my way of saying you shouldn't expect to see a ton of titles like that, but it is one aspect of being able to extend the service across multiple platforms. Just as important or more important is making sure that we have great functionality with respect to security, or Marketplace, or communication, all of that stuff, so that you're not platform-dependent. That's really the value of Live. You want to be a member of Live, you don't want to think, "What's my login and password over here versus over there?" If we can do that right, that's great, and if we have cross-platform gaming as part of it, that's super.

Turn the page for Shane's response to Games for Windows concerns, PlayStation Home, and Xbox 360 failure rates.