[IMGW]http://media.1up.com/media?id=3353314[/IMGW]You've already checked out a few bits from out sit down with the head if Microsoft Game Studios, Shane Kim -- why there was no price drop at E3, whether the company is relying too much on the Halo IP --- but John Davison and I spent more than 30 minutes with the studio chief at E3 last week, so there's plenty more to discuss.

Does it bother Kim when Denis Dyack rushes to the message boards to defend harsh criticisms of his game? When are we going to hear about Xbox 360's 2008 lineup? How come Rare isn't working on the Viva Pinata spin-off? Unreal Tournament 3 on PlayStation 3 will have full MOD support, but can we expect that on Xbox 360?For all that and more, read on for Kim's thoughts.

1UP: You guys didn't talk about 08 at all. It was brought up a little bit -- Resident Evil 5 was the only exception made -- you guys haven't announced X07, so where does the 08 lineup come in?

Shane Kim: We had a very specific strategy we wanted to execute. This isn't just a strategy about this year's E3. We laid out our announcements last year at E3, last year at X06, even at GDC. This E3, our plan has always been this is the third holiday for Xbox 360, it's a very important holiday, the other guys are going to be in full supply - theoretically. We wanted to focus on - look, we've made a lot of announcements, we want to prove we're building on the things we talked about, so that's why our focus was all on 2007, there's lots of time for us to talk about the future. We've already announced a lot of titles that are coming in 2008 and beyond and I alluded to some of those in my part of the presentation, too, and we did show the Resident Evil thing. We wanted to say "look, we have an amazing lineup this year."

1UP: Are we going to hear about what's coming next this year?

Kim: You'll hear more about our future stuff. I think we're pretty good about letting people know what's coming, but, for this year's E3, we definitely wanted to focus on 2007.

1UP: You name checked Alan Wake, Too Human...

Kim: Fable 2, Banjo, the collaboration with Peter Jackson with the Halo series, Halo Wars...we have an awful lot coming and stuff we haven't talked about, either. We do have some announcements, we just didn't want to make them here.

1UP: What strikes me about that, I didn't even know Fable 2 was unveiled until I saw it on 1UP's screen page. You can see Halo Wars, you can see Fable 2, but it was shoved away after the conference. If you're focusing on 07, why even show them?

Kim: Why show them here?

1UP: Yeah.

Kim: There are people we care about. In terms of the broad coverage, we want it to be about E3 2007. But, for important people, we know they need to get hands-on and get a closer look at those key titles. We are building for the future, too, so a lot of what we do is that people can check in on big titles, in our case Halo Wars and Fable 2 behind closed doors, so you know development is progressing, they're looking really good and we're happy about that.

1UP: You guys have a very structured strategy, especially for Q4, with a big game hitting every month. Halo is the big climax point for the industry as much as anything, not to keep banging on about next year, but how are you handling the roll out for next year? Is it going to be as consistent?

Kim: We don't have a title a month for the entire year. We don't have that many titles in development. For us, it's about quality, not quantity, but we will carefully manage to roll out our first party titles, the first party titles are meant to be advertising models for the platform, we're the exclusive content that's supposed to drive the platform. We're not going to try to release things on top of each other, we do try to avoid that as much as possible, sometimes titles don't cooperate with us and they move into each other, but we're going to try to space things out, so an Xbox 360 customer can say "wow, there's something great and new that's coming" and of course the third parties are going to be complementing that along the way. We do try to carefully manage that portfolio.

1UP: Last year, we didn't really see Fable 2 or Alan Wake, or there were only brief mentions, but Too Human was there and playable. This year, it was just a trailer thrown on Xbox Live and there were even some technical issues with that. What happened? It's obviously an 08 title now.

Kim: I think we would all agree we showed Too Human too early and it's hurt the title's reputation in people's minds, so we're going to be very careful about how display and disclose the title. That's a title that I have not lost any confidence or enthusiasm for, but we're going to unveil it when it's ready. And that's what it needs to do. It's not like when we unveiled Mass Effect or Gears of War and everybody went "oh my god, that's great" and we could build on that kind of momentum all the way through, this is a title that got beat on, let's be honest. It got beat on. We probably should not have put it on the floor, and in a case like that, we're about consumer entertainment marketing, we're not going to run that it's at the point that it can turn people's perceptions, because it has a lot of work to do that. I'm convinced Denis and Silicon Knights can do that, otherwise we wouldn't be behind the title.

1UP: How do you reboot that? They have a good track record, especially with Eternal Darkness, but how do you restart after something like that [E3 2006]?

Kim: You do it the only way you possibly can: with real product. We can't throw more ads out there, we can do the trailer, which is fine, but it's not about advertising and talking about it more, it's about showing people "look, this is the game we envisioned it from the start, it works the way we wanted it to, it's really compelling." Until you can get your hands on it...we're not going to let you get your hands on it until we're ready for that. That's the only way I know of - or give it away for free. But that's the only way I know we can restore consumer confidence.

1UP: I don't want to harp on Too Human too much, but one of the things I've noticed is that when there's a lot of critical analysis of Too Human, Denis Dyack is quick to become a defender of the game on the message boards. How do you feel about situations like that? As soon as the trailer came out, he was on, and he seems to get a bit defensive, which is understandable - Too Human is his baby. How do you, as running Microsoft Game Studios, respond to him running out there and talking online?

Kim: We don't own Silicon Knights, so he's not an employee and I don't tell him what to do. I respect developers who are passionate about what they do and some developers take different approaches to stuff like that. Denis happens to be a guy who wants to get engaged with the community and say "hey, this is why this is" and so forth. We advise him, as a publisher, we advise him on how we should approach public relations, but at the end of the day, Denis is an independent company and Denis is an independent guy, he's going to do what he thinks is best.

My perspective, I always think that not being defensive is a good thing, so the best way, again, it sort of goes to your last question, the best way we're going to restore confidence is actually delivering the product that blows people away. Dennis can get up there and try to defend the criticism from all of these anonymous posters, but is there really going to be a victor at the end of that? Probably not. Maybe he'll sway the community and people will get shouted down or maybe the community will shout him down, but there's probably not going to be a victor at the end of the day. The only way you're going to win and convince people is by delivering the product, and that's always my advice.

That's why I'm a big proponent of, hey, we're not going to show Too Human until Too Human is ready. Unfortunately, we had some glitches with the trailer on marketplace, but I think those are fixed now, but it's like, aw jeez...of all the products! [laughs] But, like I said, nothing has dampened my enthusiasm for Silicon Knights or Too Human and we're still behind the production in a big away.

1UP: One of the themes of E3 seems to be somewhat lead by Nintendo, but the industry's obsessed with becoming more mainstream. All three parties seem to have slightly different way of approaching that. Sony's doing it from the device level - PS3 does everything - Nintendo's focused on the controller and experiences, and I've seen a couple of examples of the way you guys are doing it through the studios. One example is expanding the Viva Pinata IP with Krome and Peter Molyneux the other day with Fable 2 about taking a game perceived as hardcore and trying to make it more accessible.

Kim: Yeah, yeah. That's like making Halo Wars more mass market, too. [laughs]

1UP: For you guys, what's the MGS approach to push the demographic out?

Kim: For MGS specifically, you're going to see more and more content in the portfolio expansion over time, we're entering that phase of the console generation where you're seeing more and more titles like Scene It and Banjo next year, and that's where a lot of announcements we haven't made will fall in. And not just with the core titles, but really in the broad appeal space. From an overall platform standpoint, you're absolutely right. Nintendo is doing it Nintendo's way and we won't follow that, and I hope Nintendo's successful in bringing more people to the industry, but we what we're going to do, and a lot of this is actually in place, we need to get better at convincing people and we also have to hit mass market price points. We're not there yet.

When you think about Xbox Live Video Marketplace, video chat, integration with your digital entertainment devices, all things that exist today, there's a lot for broad consumers. We have to add more content from a gaming standpoint, Xbox Live Arcade really helps us there, too, but the biggest thing, and I think of this as a publisher of Viva Pinata, is hitting that mass market price point. What's funny is we're not that far from the Wii with the Core system, but we need to get better at telling that story. That's where a lot of our focus is.

1UP: Is it a sort of lead by example approach?

Kim: I think we have done that with the entire Xbox 360 generation. You tell me what third party publisher is going to launch new IP at the launch of 360 and the second holiday, as we did with Kameo and Viva Pinata, where the console's still at its launch price point. We talked a lot about this, right? We needed to start changing the perception right from the get go that Xbox 360 was just a hardcore gaming platform, because that's what Xbox 1 achieved, but if you want to win the generation, you've got to win more than just the just the core gaming audience. That's why we took those steps and that's why you're going to see more and more of those types of titles in the MGS portfolio.

1UP: The new Viva Pinata party game, is that driven more by the success of the Fox show? The game, people that played it, loved it, but not many people bought it.

Kim: We had very high satisfaction with Viva Pinata and I'm never going to apologize for that, and thank you for your support, too. In that case, I think the biggest problem is price point. That game is obviously targeted at a pretty broad audience, but for some people, $300 to $400 is still out of reach for a next-gen console. Fine, we're going to address that issue. For Viva Pinata Party Animals, we think we've built a pretty interesting property with Viva Pinata that we can expand into other genres and that's what we're doing with Party Animals and our partnership with Krome. It does leverage the characters that we've built through the animated TV series, which I think is appropriate for that party game, but fundamentally it's based on the world of Viva Pinata we created with Rare and we're not backing away from that at all.

1UP: What is the mass-market price, and when will Xbox 360 achieve that?

Kim: If you look back in history -- again, it's not just going to follow what's in history -- in some cases, 75 to 80 percent of the business gets done $199 and below. So, we're not quite there yet. I think that number can change over time because of inflation, greater capabilities; what we can do what Xbox 360, even the core system, is far beyond what you could do before in previous generations. Who knows? Maybe $249 will be a mass-market price point -- but historically, $199 has been when you're talking a PlayStation 2-like install base. 80 percent of the business gets done at $199 and below. We're like the other guys, right?

We're trying to drive costs out of the system as much as possible so we can hit those price points. We're a little closer than Sony is with PlayStation 3, thankfully, but we're all trying to get that magic price point.

1UP: Are you going to move toward that in '07?

Kim: Stay tuned. We didn't announce anything here, didn't feel the need to. July is a very odd time to announce a price reduction. I'm not even sure Sony announced a price reduction, anyway [Kim is pointing to the fact that the PS3 launched with a $499 20GB version and a $599 60GB model; Sony discontinued the $499 20GB version in April 2007 in North America, so the company is essentially reducing the 60GB model to the 20GB price. --Ed.], but we don't feel the need to do it here at E3.

1UP: Going back to Viva Pinata for a moment, why isn't Rare on Party Animals?

Kim: Rare is very busy, they're working on Banjo and a couple of unannounced projects, as well. What Rare has done is built the Viva Pinata world. I feel really great, it's sort of like taking Halo Wars to Ensemble Studios. We've created a property that can be leveraged with a very good developer, like Krome, into other space. If Rare had come to us before and said "look, we really want to do a party game with Viva Pinata," great, but they're also working some other things we care a lot about, too. We're ale to take Viva Pinata and the idea of a party game to Krome, that can actually create the meta game and the mini-games and have that ready for us this holiday and I think it's going to be a lot of fun. IT's a really good thing for us, not just the Viva Pinata property, but the platform in general to have more options in general like that. It's not for everybody, but people who are looking for family friendly content, something they can draw into really easily, sure.

1UP: You guys announced the warranty change next week. When I talked to Peter Moore about it, he came across as very sincere. He talked about how it was difficult for Microsoft to read the headlines and see people having so much trouble. But, at someone who's working on the games themselves, what was your perspective? Because when I've talked to different Microsoft studios, they mention it's frustrating because their games are being blamed for problems that aren't their fault. When Gears of War came out, when Guitar Hero 2 came out, when Forza 2 came out, that's when you see a rash of problems.

Kim: I didn't feel any worse or better as the head of Microsoft Game Studios. I'm a corporate offer and a leader in the interactive entertainment business, so I don't feel any worse just because people are attributing some of the problems to Forza 2 or Gears of War. People were having too many problems with Xbox 360 and that's the reason why the company stepped up and took a very unprecedented step and extended the warranty for three years for this general hardware failure and took a billion dollar charge, that's not something a lot of companies would do, but once we understood the scope of the problems and accepted the fact that this is just not acceptable, we stood up and said "look, we're going to take care of the problems for anybody who runs into these failures."

So, we're not a it's their fault our fault kind of company, we're one team and Xbox 360 live and falls together. The fact that the people were attributing some of these things to Forza 2, I felt worse that people were having a bad experience with a Microsoft product than Xbox 360 overall. I feel really good about what we did last week in enhancing the warranty. It's a big pill to swallow, but once you've swallowed it, you can feel really good that you're doing the right thing, and I think most people, in terms of who we've talked to and the reaction on the boards and all of that, are applauding us. You've got a lot of people out there saying "why'd it talk so long blah blah blah," but the majority of people are saying "good job, thanks for doing this, I feel better about buying an Xbox 360."

1UP: But, that's kind of what I thought, too. Why did it take so long? From day one, the same issues that are being discussed are being addressed now 18 months later.

Kim: But, nowhere on this kind of scale, Patrick. You have to get the critical mass in the installed base before we can really assess what really is going on.

1UP: Is critical mass 10 million?

Kim: Yeah, and, of course, the volume of issues and complaints from people also increased. And we're also able to do a lot more testing, because it's not like a) every unit fails or b) every unit fails at the same time. You have to go through some lifecycle testing and real-world empirical data and our own testing and we determined, "ok, it's a variety of issues that result in a general hardware failure and the one thing that's constant is that you get the three red rings of light." Enhanced warranty, three red rings of light, no questions asked. Customer service and replacement.

1UP: When Gears of War came out, when Guitar Hero 2 came out, when Forza 2 came out, that's when the next rash of problems hit. This fall, you have Halo 3, Mass Effect, BioShock. Even though the warranty's there, from a MGS perspective, those reports are going to come out again, regardless of the warranty. Especially with Halo 3, you're going to have a bunch of people picking up new machines and the machines still on shelves don't necessarily have whatever hardware modifications have been made to completely solve this down the line. Day one of Halo, day one of Mass Effect, is there a fear you're going to hear about this all over again?

Kim: Well, there's no fear. There's an acknowledgment there's going to be some issues, we know this. That's why we did step up and say anybody who has these issues, we're going to take care of these problems. We have apologized, we feel very badly about this. We've apologized to customers to this and taken a billion dollar charge to the company, and we know people that some people are going to run into these problems, whether it's Halo 3 or whatever, and we're working hard to fix those issues that we know about in the hardware, but people are going to run into these issues and we're going to take care of it as fast as we possibly can at no cost to the consumer.

1UP: Do you feel you're overstretching the Halo IP? Where do you draw the line?

Kim: If we were pimping this out and prostitute it, yeah, I would feel real bad. In general, everything we try to do with Halo is with high quality partners in a high quality way. People can criticize us for Halo2 Vista, that's fine, I know that's not our best execution. But, Halo 3's going to be great and Halo Wars is going to be fantastic. This is Ensemble Studios, so we didn't just schlep it out to somebody, a third tier developer. The Halo movie, if and when it gets done -- and I remain very interested in doing that, we're in conversations with our friends in Hollywood about the movie -- that's going to be a great thing, but we're only going to do it if it's a great movie and it's set up to be done in a high quality way. We're not going to get a movie done just for the sake of doing a movie.

What you saw the other night with the Halo short film from Neil Blomkamp, we will use in our promotional opportunities for Halo 3, that's why we've commission those short films, but it does give a glimpse at what's possible when you take Halo into the live action world. Everybody knows I'm not a hardcore gamer, but I love the Halo world and I love the Halo universe, and the fact that I can gain access into that world via live action and hopefully a movie someday, that's when we start to talk about Halo as an entertainment property. With any entertainment property, if you don't judicially manage that, if all of a sudden I start bringing you Halo party games...

1UP: I was just going to say...if I come back next E3 and say you crossed that line! You told me you weren't going to do it!

Kim: No, that's crossing the line. Halo Wars I don't think is crossing the line, and that's all we've got going in the gaming space. Halo 1 PC and Halo 2 Vista, those were Halo first-person-shooters, we didn't really deviate from the core of what Halo is.

1UP: And you stated the other night, you're closing out the core three chapters.

Kim: A trilogy is three.

1UP: Is the future of the franchise in supporting stuff? Peter compared it to Star Wars, which initially was this core franchise that was spun off in various directions. At your level, is that the strategy for the brand now?

Kim: Yeah, we hopefully have created a property that we can expand and extend into other areas where they make sense. For example, the partnership with Peter Jackson and what we're doing with Bunige there. It's going to be set in the Halo universe, but it's not going to be Halo 4. It's not going to be set inside that Halo 1, 2, 3 timeframe, it's a different story being told in the Halo universe and it's really exciting. You will hear more about that shortly, but it's really exciting. That's the way you start to expand beyond Halo the videogame into Halo the entertainment property, and you have to do that really carefully or people will say, "What's next? The Halo Party game? What's next? The Halo Driving Game?"

1UP: Halo Kart Racing.

Kim: Yeah, exactly. We're not going to do that. It's too valuable a property. Peter says it's a billion dollar franchise, which is true, in sales of Halo videogames, but in terms of asset value? Four or five times that. That's really what we're going to be careful about nurturing and growing. Now, we don't have a lot of experience doing this, so it's going to be a lot of fun, so that's why we're going to be really careful about things like the Halo movie. I want to go to a red carpet premiere, yes, but I want to go to a red carpet premiere of a really great Halo movie that we can all be proud of and then [have people] go "oh my god, I have to get into this universe somehow."

1UP: At the Sony conference yesterday, Epic announced a multi-stage deal with Sony about various things, starting with optimizing the Unreal Engine 3. They announced that Unreal Tournament 3, originally an Xbox 360, PS3, PC game, is now at least a timed exclusive for the PS3. But, something that was a very big bullet point and something Epic's talked about far back with UT is the mod space. At the last TGS, Tim Sweeney, Epic's CEO, said they were frustrated because everything Sony was telling them was that the platform was open, but Sweeney was quoted as saying they were frustrated with Microsoft because it was a closed network and Microsoft wasn't open to user generated content. When, and if, UT3 arrives on 360, how are you going to address that huge feature difference?

Kim: Yeah, it is - on one hand. In general, a) we're bringing user generated content to our platform. Look at what's happening with Forza Motorport 2 with the auction house and the livery editor, that's just taken off huge. It's not the same kind of user generated content model that Epic is going to do with UT, but it is user generated content. We have just as much interest in that space as anybody else, but I will tell you that there is a lot of value to managing the service and system the way we do on Xbox Live, versus the wild, open, supposedly open PlayStation Network. You're going to have to be very careful about what happens and we'll see how much responsibility the platform holder actually takes there in terms of managing that stuff.

It's not unlike Sony PlayStation HOME. It's great to talk about all this, but assuming you could even build it, one of the biggest challenges is actually managing the behavior. We have a lot of experience doing this on Xbox Live and that's part of the value proposition we bring to our customers, is that you're going to have a great experience on Xbox Live and we take care of a lot of problems for you and don't just say it's the responsibility of the publisher of the responsibility of the community to manage this. We take accountability, we do that as the owner.

Same thing's going to be true in user generated content. We're going to have user generated content, I'm not worried about that. I know what our plans are in that space, but we're going to do it in a way that works really well for customers.

1UP: The way I understand it, there's going to be a filter. It's not unlike YouTube. You create the level, you submit it, it goes through a filter and then goes up. On a basic level, if that's how it worked in Unreal Tournament 3, would the Xbox platform be open for doing something like that, leaving the control to a third party?

Kim: Eventually, you're going to see more and more stuff like that. I'll take another example: XNA Game Studio Express. That's to enable people to use Game Studio Express to create more and more of this casual type of content, but it's all created by the community. You don't have to be a professional game development studio to use Game Studio Express, we're going to figure out how to expose that content to end users but we're going to do it very carefully. The last thing we want to do is have Xbox Live flooded with all of this content that's not usable or not high quality or is offensive or whatever, but that's just our approach.

We're going to take responsibility as the platform holder, we're not just going to say "here's some filter that the publisher has created," and, of course, you're relying on the publisher to do that and different publishers have different ideas of what's acceptable and what's good. We're saying, look, as the platform holder, we're really going to try and own that and make sure it's a good experience on our platform, and we'll see whose approach works better for customers, but we're sticking with what we've done because it's been very successful for us.

Thanks to 1UP.com for sharing the news with us!