"I've never heard of a motion-sensing controller..."

GR: How's your relationship with Bungie?

SK: Still good. It's an arms-length relationship, but we still work very closely together - they've just released a new set of downloadable content for Halo 3 and we continue to work with them on the Peter Jackson project, so our relationship is still strong. It's gone the way we'd hoped it would go. Once we decided we were going to part company we always said we wanted to maintain a long-term relationship with Bungie and that's what's happened.

Above: Halo 3

GR: You mention the Peter Jackson project - do you have any plans to have him make games with you in the same way that EA have got Stephen Spielberg?

SK: Well, he is working with us but not in the same way as Stephen is working with EA. Our partnership with Peter is taking a master story teller and bringing him into our world. No disrespect to Stephen, but there's a lot of movie guys that want to make games, like John Woo for example. But our deal with Peter is not about a movie guy making a game. What we're working on with Peter is how we can use Live as a medium to introduce episodic interactive storytelling. There's some people in our industry who can tell stories - but they're not Peter Jackson.

GR: Can you tell us anything about the rumoured motion controller that Microsoft may or may not be working on?

SK: Well, the stock answer is that we don't comment on rumours and speculation. But I will say, look, we have a lot of research and development going on all over the place, in Live and in Hardware. And we have a ton of success in the accessory business - and that's probably a story that doesn't get told enough. From a commercial perspective and also in terms of critical acclaim.

We're going to continue to look at new ways we can introduce different things - the third parties are doing this as well with the music controllers. So there's opportunities for us there too. We're an R and D company at heart.

GR: Is Japan inmportant as a territory for Xbox 360?

SK: It's still important for us to have a presence. I mean, we have a reasonable install base there. We said we'd make a big investment with Sakaguchi-san with Blue Dragon and Lost Odyssey. And while those were well received critically in Japan they didn't buy us Xbox 360 sales.

What will help us in Japan ultimately, will be success in the West. Because the bulk of the content has to come from Japanese publishers - it has to be content that Japanese consumers want to play. we've already see this with developers like Tecmo and Capcom - they see the success that we've had in North America and Europe and they know they've got to run businesses.

We'll continue to look for new oppotunities in Japan and we've got a few irons in the fire there that we're pretty excited about, but you probably won't see us release anything specifically for Japan. There's a lot of great talent in Japan, so we'll just take a more global perpspective to development.

Above: Blue Dragon

GR: Last year at E3, Scene It was part of your plan of attack to reach the mass-market. How well do you feel you've done that?

SK: I think it's a multi-dimesional challenge for us. Clearly Scene it alone is not going to do it and neither is Viva or Banjo. The fact of the matter is our core titles are Halo and Gears Of War so we have a mature-rated brand out there. So marketing is definitely a challenge. We have to work out how to make the brand more appealing and that's what we're doing... there's actually a lot more choice here today than just Gears Of War 2.

Third parties are supporting us too fantastically with a broad catalogue. You just have to look at Guitar Hero and Rock Band, and the success they enjoy on our platform.

And price point is another issue, we have to get to a more mass-market pricepoint.

So I don't think there's one silver bullet. You know, I wish we had the 'Halo' for that audience.

Above: Viva Pinata: Trouble in Paradise

GR: Sony has kind of cleared up on this front with the success of Buzz and Singstar (especially in Europe) and you seem to be relying on third-parties for these mass market appeal titles that aren't even exclusive to 360. Why aren't you developing your own SingStar and Buzz?

SK: Who says we're not? (Laughs) I agree, I understand in Europe particularly Singstar and Buzz have been huge. Of course that's a position of strength for them in Europe, which is making it more difficult for us. We just have to keep plugging away and continue to think about new experiences that take advantage of the unique capabilities that 360 offers. So Live is the big platform for us, and I know it isn't as big in Europe as the US, but I think that can change as well. And we have to look at ways of making it attractive to people so they will want to pay the subscription fee.

GR: Going back to the motion controller rumour, it must be tempting to try and do something similar to capture some of that market - but wouldn't it come across as a bit 'me too'?

SK: Well, you have to be careful about doing the me too thing. But what's interesting is that you have a lot of third parties that are trying to rush to the Wii phenomenon, but if you look at the data, the vast majority of software that has sold on Wii has come from Nintendo. So it's not turned out to be a great third party eco-system.

So it could work if you had something that had a great third party eco-system. Having said that, our unique perspective is going to be online oriented for better or worse. In the same way that Sony is Blu-ray and Nintendo is the motion-control, our thing is online. And each of these has strengths and weaknesses in different markets of the world. Whatever we do has to take advantage of our unique capabilities.

GR: Which is why we thought it was weird whenwe heard the motion sensing rumours. Because if Microsoft suddenly came out with a motion sensor it would be last to the party - and SixAxis has hardly taken off that well...

SK: I agree with you. But I've never heard of a motion sensing controller... I don't know what you are talking about...

May 13, 2008