I am an Xbox owner but I had the opportunity to play the demo on a friends Ps3. On the Ps3 the game played perfectly using the D-pad. Now like most you I was very frustrated that Mircrosoft did not receive the same demo. I was scared the D-pad wouldn't hold up, and it doesn't. Analog sticks are pretty inaccurate for most special moves and fatalities as well ( On the Ps3 I could easily pull off any of the four characters fatalites within a second of the match ending, now I'm lucky if i can do one period). There is nothing wrong with the game itself. Its fantastic, easily the BEST Mortal Kombat in the past decade. But the Xbox 360 controller is absolutely frustrating to use. I would highly suggest a fight stick, unlicensed 360 controller with a Playstation like D-pad,or moding your current D-pad. Personally I'm buying a fight stick.
P.S. Don't buy the Official Mortal Kombat fightstick on Ebay or other auction websites. Jackass's are pricing it up to nearly $200 when you can buy it straight from the maker for $120 at PDP's official website (hefty price still).
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