Shack:

On the PC, what would you say to longtime gamers who are wary of a standards-driven or potentially monetized approach such as Games for Windows on an open platform?

Shane Kim: Well, I'm not sure what they should be afraid of. What we're planning to do as a platform owner is ensure that at the end of the day there are great gaming experiences for customers. We're trying to help validate that for customers so it takes some of the guesswork out of the equation for them. You know, I've heard more concerns from developers and publishers that we might try to make the PC more of a console market, which is not going to be the case. But for customers, I think it's mainly goodness, where we're just trying to bring a greater focus on increasing the capabilities and stability of the system itself, with ease of use, and that's what the Games for Windows program is all about. Then there's getting behind it in terms of marketing the platform, too.

Shack: You touched on my next question, which was about developer response. I've talked to some developers who are very skeptical, and some who are very excited. What kind of reaction are you getting from your end, or is it that same kind of spectrum?

Shane Kim: It's the same kind of spectrum, and we're just going to have to prove it. We have the same thing with Xbox Live. It's hard to remember it now that we have six million members, but 2002? Not that long ago. And EA didn't even join until 2003. People were saying, "You're going to bring online gaming to consoles? What are you talking about?" Blah, blah blah. We had to turn around people's perception, and the same kind of thing is happening on the Games for Windows side. People are saying, "Are you going to charge a royalty?" and we're saying, "Well, no." We need to make sure that we protect the health of the PC gaming category. That's what this is about.

Shack: This is really only applicable to first party so far, but why limit certain games [such as Shadowrun and Halo 2] to Vista-only on the PC? Isn't that going to unduly limit your market penetration?

Shane Kim: Well, it potentially is, sure. There's no question. But look--you don't get to be first party unless you're going to be the one carrying the flag, running up the mountain. It's just like the Rare guys with Kameo at launch and Viva Pinata this past holiday--what publisher does that? Seriously, what publisher? Well, a first party publisher does. Same thing with Halo 2 for Vista. What publisher would do that, not support XP? We think Halo 2 is the kind of title where a lot of people would be interested in playing, and it might encourage them to upgrade their machines to Vista or buy a new machine with Vista. It's really no different from saying that Halo 3 is only available on Xbox 360. It's no different conceptually.

Shack: What do you think about PlayStation Home? Are you guys going to do anything like that, or--

Shane Kim: No. I don't think we need anything like that. I've spent some time with the Linden Lab guys [developers of Second Life]. To try to build Second Life on Xbox Live--or YouTube, Facebook, any of those big social networking services and sites--it's a lot of work. It's all software, and we're the software company in this market here. I doubt [Sony's] ability to implement it and execute it in a really rich and compelling way. PlayStation Network is not Xbox Live, it's not even close. To think about layering [Home] on top of that--wow. The hardest part is not even creating the system, it's regulating the behavior and all of that too. Boy, that's a massive investment in infrastructure. I actually believe that most gamers will always find more value in what we have on Xbox Live and now Games for Windows Live and how we're building that out, which really started all about gaming features and now has added more like instant messaging, Video Marketplace, etcetera. That's what I think is a much better approach, and that's what our approach is going to be.

Shack: Here's another topic you surely get asked about a lot. Peter Moore recently called Xbox 360 failure rates a "moving target." Is that an assessment you would agree with, and do you think you're proceeding acceptably on that front?

Shane Kim: Well, I always agree with Peter. [laughs] I think what we're doing is that we're always trying to improve the quality of whatever we do, whether it's hardware or software. As Peter has said, we feel bad when people have quality issues or hardware problems, whether it's one person or a hundred people. The other thing that we're working really hard on is to make sure that if you have a problem, we're addressing that in the best way possible for the customers. You've got to work on both sides of the equation. Like I said, one person having a problem is too much. We know there are things that we're working on, but--well, I don't know if I would say it's a moving target. He wasn't going to give a specific number anyway, and that was his way of saying that. [laughs] But that is definitely an area we're definitely focused on, just like we're focused on cost reduction, just like we're focused on Xbox Live updates every six months.

Shack: Here's an easy one to wrap this up. Obviously at the moment Halo 3 is on people's minds, but what specific other games are you looking forward to this year?

Shane Kim: We've got an awesome lineup. Besides Halo 3, Blue Dragon's coming to the West, Forza 2 and Shadowrun are both hitting the US on May 29. We have PGR4, which is going to be amazing, Mass Effect, Lost Odyssey, Alan Wake, Fable 2, Banjo--

Shack: Banjo is this year?

Shane Kim: No, but looking through the portfolio there are a lot of great titles. There's also some good stuff we haven't announced yet. We've got more up our sleeves. Then there's Gears of War, there's a chance we might do another one of those.

Shack: Yeah, maybe. [laughs]

Shane Kim: Yeah. [laughs] I think we've done a good job of making some very good bets.

Shack: Thanks for your time.

Shane Kim: Thanks, good questions.