E3 '07 Q&A: Microsoft's Shane Kim

SANTA MONICA, Calif.--The press conferences are over, the news is out, and the first revamped E3 Media and Business Summit is underway. Microsoft kicked the event off with its press conference Tuesday night, followed Wednesday morning by Nintendo and Sony, respectively.

Shortly after Sony wrapped up its conference, GameSpot sat down with Microsoft Game Studios corporate vice president Shane Kim. From the increasing scarcity of third-party exclusives, to Microsoft's decision not to cut the price of the Xbox 360 at the conference, to the company's performance in Japan, Kim gamely answered questions on a wide range of topics.

GameSpot: What's the theme of this year's E3 for Microsoft?

Shane Kim: The theme is "right here, right now." We are going to deliver the greatest lineup of titles in the history of the industry this holiday. We've got the perfect storm hitting again with Halo 3, Grand Theft Auto IV, and Madden NFL 08 from Electronic Arts. And the only place you can play all three of those titles is on Xbox 360.

We've also got a terrific portfolio surrounding those three megahits as well, led by exclusives like BioShock, Mass Effect, Project Gotham Racing 4, Lost Oddysey, Blue Dragon, Splinter Cell Conviction... really a tremendous set of games for Xbox 360 gamers, all of which are releasing between now and the rest of 2007.

GS: A lot of people expected a price cut from Microsoft's press event, given that Sony dropped the price of the PlayStation 3 by $100 and cut into your price advantage. Why was "right here, right now" not the situation for an Xbox 360 price cut?

SK: We don't feel the need to respond to Sony's pricing moves. We're in the leadership position in the next generation. We've got tremendous momentum, as we talked about at the press conference. Consumers have spent as much on Xbox 360 games and accessories and hardware since our competitors launched in November as they have on PS3 and Wii combined. So we really feel great about the momentum. We know we have the best lineup available on any platform this holiday. So we don't feel any pressure to respond to what Sony has done.

We're always looking at how we can drive costs out of the system. All the hardware manufacturers want to figure out how to get to mass-market price points as quickly as possible, so that work is ongoing. Sony's pricing announcements are a little confusing too, because they still have a $600 price point for an extra 20GB of storage. So I'm not sure it's a price cut in the traditional sense.

GS: What were your reactions to the Sony and Nintendo conferences?

SK: I didn't see the Nintendo conference. I only heard a little bit of feedback and it sounds like Nintendo's continuing to do what Nintendo's good at and where they've enjoyed success. They're targeting people who aren't really core gamers, and they're trying to bring more people into the industry. And I say, "Hey, that's great." And when those people want to move to a high-definition, next-generation, fully online system, Xbox 360 and Xbox Live are going to be the best solutions for those people.

I did get to watch a fair amount of the Sony briefing and I didn't see a whole lot of new things or exciting things. At this point we're happy to put our holiday lineup against them, especially the first-party exclusives.

GS: How do you like the new E3?

SK: I'm still getting used to the new E3, to be honest. It's obviously not the spectacle that E3 had become in Los Angeles, and in general I think that's a good thing. We were all sort of going crazy trying to outdo each other on the show floor. The press briefings are the press briefings, though. That's where the major news and announcements will be communicated, so that won't change. [Our conference] was as big a production as I think we've had in past years at E3. Obviously, you don't have the big show floor at the convention, so that's going to take some getting used to. But I never get out of this [meeting] room anyway, so that doesn't affect me. [laughs]

GS: Any update on the Halo movie?

SK: We continue to be super-interested in getting a movie set in the Halo universe created. We continue to be in conversations with friends and studios in Hollywood. You saw a little taste of what's possible when you take Halo to the live-action setting, and I believe it can be a fantastic movie property, and certainly something that would propel the property to even greater heights. I'm going to keep working on getting a Halo movie done with the right partner and the right quality, and that will be super successful when it does come.

GS: Microsoft has made Xbox Live Arcade the biggest part of its casual gaming push so far, but Scene It is going to be a retail package with the four extra controllers. Is retail going to play a bigger part in Microsoft's attempts to court the mainstream audience going forward?

SK: We've had a multipronged approach to trying to address the broader audience on Xbox 360. Certainly Xbox Live Arcade has been a tremendous success for us. We've had 45 million downloads since we launched, which is fabulous. But you have to also remember, Microsoft Game Studios launched Kameo when we launched Xbox 360, and we launched Viva Pinata last year ourselves. So from a first-party standpoint and a retail standpoint, we've really tried to reshape the image of the Xbox 360 in people's minds as not just for hardcore gamers, but really as a platform for everybody.

We're excited to announce Viva Pinata Party Animals and Scene It, of course, coming this holiday. And we've got great third-party titles as well. The Rock Band demo onstage, the first place anywhere it was debuted, is another great example of those kinds of titles, DDR, Guitar Hero, and so forth. So we're really trying to broaden out the entire portfolio, whether you're talking about Arcade or retail titles.

GS: How do you keep your casual success in perspective when Nintendo seems to be reinvigorating and reshaping its entire company around its own casual success?

SK: That's an interesting question. We have a strategy that we laid out five years ago when we started the planning for Xbox 360, and our strategy at that point has stayed consistent until now. Our aspiration is to win this generation, and in order to do that, we know we have to appeal beyond the core gamer segment.

For us, what that means is we've got to bring more content like what you'd find on Arcade, like Viva Pinata, like Kameo, Scene It and so forth, because that's the kind of audience that we're trying to attract.

I applaud what Nintendo's doing. I applauded them before they launched. They're trying to bring more consumers into the industry. They're obviously taking a slightly different approach with some of the things they announced here, and that's a good thing for the industry, but we're going to focus on executing our strategy from a content standpoint.

GS: Why did you decide to move the next installment of the Viva Pinata franchise away from Rare and give it to Krome?

SK: We decided to work with Krome on Viva Pinata Party Animals because they're great game developers. They've got a long history in the industry and we have a ton of respect for their work. And Rare was really happy to work with them because Rare is obviously the creators of VP. Rare is hard at work on a number of different projects. The next Banjo Kazooie title that's coming next year is obviously one that we've announced, but they're also working on some other things.

We're still really excited about VP, we're bringing it over to Windows, and the animated TV series continues to do well both in the US and now it's out in Europe. So this is a great way for us to take that property and expand it into other genres--into the party game genre in this particular case--and Krome was a perfect fit for us there.

GS: Two of the highlights of the Microsoft conference were the Call of Duty 4 demo and the new Resident Evil 5 trailer. These looked great, but these and a lot of other high-profile third-party games are multiplatform. With the current generation of game development so expensive, how do you attract third-party exclusives?

SK: The fact that titles--the very best titles, especially-- these days are so expensive to produce is actually what's attracting third parties to Xbox 360, in addition to the success the Xbox 360 and Xbox Live are having all over the world. We are the leading platform in the next generation. So all third-party publishers are looking at Xbox 360 as a great platform to publish on.

I think you're going to see far fewer third-party exclusives. Sony has a couple, we still have a couple with BioShock and Splinter Cell: Conviction--and that's great--but for the most part what we've really focused on from a strategy point is leveling the third-party playing field and leaving it to the first parties--in our case Microsoft Game Studios--to deliver the exclusive content that's going to make the impact we need, showcase our platforms, and convince people that the Xbox 360 is the best option for them this year.

GS: Many third parties, and even Sony, have embraced the idea of annualized franchises. Why hasn't Microsoft pursued the idea more?

SK: I'm not a big believer in annualizing franchises for the sake of annualizing them. That sounds like a profit-revenue maximization strategy. We're about quality over quantity. It's not how many titles you produce; it's how good the games are. [At Microsoft's press conference], I talked about the fact that in 2005 and 2006, Microsoft Game Studios' portfolio of console and PC game titles led the industry. That's the kind of work you have to do if you're going to create real excitement around a platform and convince customers that when they're ready to go to the next generation, Xbox 360 is the only choice. Sure, I guess there's an approach where we could just spit out annual releases, but that wouldn't prove to be successful for us.

GS: Have the games Microsoft has developed for the Japanese market--like Blue Dragon--gained the traction in the market that you had hoped?

SK: We're really happy about what we've done in Japan this generation. Partnering with Sakaguchi-san was a major investment for us. And it's in keeping with our general approach, which is to try to work with the very best creative talent in the world, wherever they are. And Sakaguchi-san certainly deserves to be part of that list.

We're really happy with Blue Dragon and how it's helped us in Japan. And I do expect Blue Dragon to be successful in the West as well. Where that investment is really paying off for us--as well as our general Xbox 360 leadership in this generation--is getting more and more Japanese publishers to support Xbox 360. You can go back to Xbox and that wasn't the case... Resident Evil coming to Xbox 360 is a huge development. We've never had a Resident Evil on an Xbox platform.

GS: In retrospect, how much has launching first helped you this generation, and how much did coming late hurt you last time?

SK: Launching first in this generation has been a huge advantage for us, and you can see that in the numbers. Even after our competitors have released, we continue to lead the generation in that time period. Third parties are enjoying greater success on Xbox 360. Two-thirds of the third-party, next-generation software units sold since November have been sold on Xbox 360. So we feel really good about that and continue to build momentum behind hardware sales... I think you're starting to really see that the strategy is paying off for us.