On the subject of Microsoft's failing as a first-party game developer, I don't think the big moment was when J Allard and Robbie Bach left. Things were heading in that direction years before, with the closing down of FASA Studio (MechWarrior, Shadowrun), ACES (Flight Simulator series), and Ensemble (Age of Empires, Halo Wars). They refocused Rare to the point where all they do anymore is Kinect Sports and XBox avatars. Lionhead is a shadow of its former self. That pretty much leaves 343 (Halo), Turn 10 (Forza), and recently acquired Twisted Pixel.
Microsoft Game Studios was also renamed to "Microsoft Studios" this year. Lots more Kinect and casual focus recently.