Shane Kim on the Xbox Microsoft Game Studios' manager discusses their strategy for ruling 2004.

Microsoft's Xbox showing at last week's Electronic Entertainment Expo included a bit of everything: lots of playable software, lots of enhancements to Xbox Live online play, and a great mound of anticipation surrounding Halo 2's upcoming release. 1UP caught up with Microsoft Game Studios head Shane Kim during the show to find out where he sees his team progressing for the rest of the year.

1UP: So what do you think the Xbox's main theme is for the coming year?

Shane: Well, I think it's delivering on the innovation leadership that we've already started. We had some really big announcements on Monday night [at Microsoft's E3 press briefing] that I think further demonstrate how we're turning that innovation leadership into market leadership. I look at continuing our software leadership with XNA -- as that becomes more concrete and continues to evolve, I think that's going to be a great thing. Games are a big deal for us; we unveiled a lot of big things. I'm particularly proud of what's coming out of Microsoft Game Studios. I feel really good about our lineup at E3 this year.

Halo 2 was tons of fun at E3 -- unless you couldn't get into the private showing 1UP: What do you think will be the biggest catalyst for Xbox console sales in 2004?

Shane: Actually, I think that already started in April. We had great success when we reduced the price of the Xbox; that was a great month for us. I think those stats will be coming out shortly if they haven't already come out. [Nearly 300,000 Xboxes were sold in North America in April, eclipsing the PlayStation 2 by over 100,000 units.]

1UP: How do you see the PS2 now? Is it more of a threat now that you're at the same $149 price point?

Shane: Well, we were pleased with our performance before the price reduction. Again, it's not just about price; it's about the value that you deliver for the price. I look at the content we're going to deliver -- not just from Microsoft Game Studios, but from third parties, such as Full Spectrum Warrior and Doom 3. Of course, the big announcement that we ended Monday night with was EA coming aboard [the Xbox Live online service]. That's going to be a significant boost, not only to the platform but also to Xbox Live.

1UP: Do you think EA joining Live will be a major boost to hardware sales, or is it more something that's going to draw current owners to Xbox Live?

Shane: I believe it's going to do both. I think there are a lot of customers who have a real love for those franchises; they're great franchises that have developed over many years, and now they're a reason to buy Xbox because players can enjoy the best online service in the world here. I mean, obviously there are Xbox customers who've enjoyed those games offline today; they'll be excited about the Live component. But I also think there are people who love those franchises who are now going to look at Xbox as the best place to play those games.

Microsoft's Peter Moore showing off some bicep at his company's pre-E3 press briefing 1UP: Speaking of Xbox Live, Microsoft demonstrated several new online features at the briefing, including downloadable arcade games and video chat software. Will all of that be included with the standard Xbox Live package, or will it be a "premium" service?

Shane: Well, as for the video chat, I think J [Allard] talked about how we're going to start that as a test in Japan first. That's not going to be available in North America and Europe yet.

1UP: That was developed at Microsoft Game Studios in Japan?

Shane: No, it wasn't developed by Microsoft Game Studios internally -- I actually don't have all the details on where it was developed. But a lot of the other things J talked about will be part of the basic service. In particular...

1UP: The Xbox Live Arcade?

Shane: Well, Xbox Live Arcade you'll be able to get separately, and there will be a few pack-in games available for customers. One popular game we developed with Alexey Pajitnov is called Hexic; that will more than likely be available as a pack-in game. There will also be a whole host of games that customers can download as well.

1UP: Do you think there's a movement on the part of Microsoft and third parties as well to try and monetize Xbox Live? You know, charging for downloadable maps and so on?

Shane: I don't look at that as attempts to monetize so much as I see it as an opportunity for publishers to offer more value to customers. Xbox Live provides an infrastructure for publishers who have shipped great retail franchises, but customers want to have a prolonged experience with them. It's an experience that many gamers have enjoyed over on the Windows side, and now Xbox Live brings that over to the consoles. We've seen it with MechAssault and Project Gotham Racing, where new downloaded content has extended the value that customers are seeing. Customers recognize value, and they're willing to pay for it -- it's all about whether you deliver that value. The good news, I think, is that the platform delivers the mechanism to do it.

1UP: So you've received a quantitative response to downloads so far?

Shane: Sure. You can go up on Live and see what players are playing what games. Many games that typically would have had quick lifecycles have embraced Xbox Live and they're enjoying prolonged shelf life from the start -- longer lifecycles than you might have seen traditionally in the console space. But again, you look at the Windows gaming space, that's a pretty known phenomenon.

Will EA's Xbox Live lineup make Microsoft's console the de facto choice for sports nuts? 1UP: Where do you see your main competitors going? How do you think Microsoft will be able to overcome them?

Shane: I'm pretty focused on Xbox and making Xbox successful. I don't worry too much about the other competitors. We're very focused on making this generation successful, extending our leadership in the online space with Xbox Live and the innovations that we're bringing there. XNA is going to be a premier development platform for many generations, both on Windows and Xbox. I like the content portfolio that we're going to deliver to customers the rest of this year and beyond. That's how I think you compete -- it's not about press conferences, it's about delivering value for customers. With Xbox Live and the content we've got, I like our chances.

1UP: Speaking of XNA, it sounds like the developer response to that has been impressive for you. How long do you think it'll be until the advances offered by XNA translate into the gamer's experience?

Shane: You have to remember that XNA is an architecture. It's a platform that's comprised of many tools and technologies. Some of them already exist today, so we use components of XNA already today in the development of our games. So it's hard to say. You could go so far as to say that games developed with XNA are available today. I think XNA has much greater promise as it continues to evolve and really starts to deliver a greater infrastructure for developers to take advantage of. We all know that games are getting more expensive to make. To deliver the kind of value and content quality, the entertainment value that customers expect... The industry's done a great job of convincing customers that they should expect great things from us. It's getting more expensive to deliver that, and nobody's immune. So XNA is hopefully going to deliver a great solution for developers that will enable them to focus less on the infrastructure and more on creating the magic and the art.

Parts of XNA are in place, but it's just going to get better. I don't think that there's a better company than Microsoft in position today to deliver on something like XNA. Software is our heritage; we know software, and we believe in software as the compelling feature of the next generation. We think the next generation is here now.

1UP: And on that note, I'm sure you're familiar with rumors that the Xbox's successor could come as early as mid-2005. How much longer do you think this current console will be your main focus?

Shane: Well, I can't talk about any next-generation plans, so it would also be a mistake to comment on how long I think this generation could last. I think this current generation is great -- I think customers have a great story, a very compelling opportunity with this generation. This E3 is about Xbox. Again, you look at the announcements; I thought the content throughout the briefing was really compelling. Frankly I'm biased, just a little bit [laughs], but I thought there was a lot of great stuff in that announcement for the current generation, for customers and for developers.

1UP: So the focus is on that end for the foreseeable future?

Shane: Absolutely. If you go out on the floor, you'll see everything about this generation; there's a good story to tell.

1UP: From a personal standpoint, which first-party title are you looking forward to the most?

Shane: Well, it's always hard, but I certainly have great expectations and hopes for Halo 2. That's obviously the flagship title of the Xbox platform.

1UP: I was surprised to see that it wouldn't be available on the show floor. Was that a decision on Bungie's part, or...?

Shane: I think that the marketing people decided what's best to show on the floor -- we're saving a little bit of that magic. We want to make sure that customers know a little bit about the game, but customers should look forward to all aspects of Halo 2. Last year at E3 we showed single-player; this year we wanted to focus on multiplayer, which is going to be a great addition.

Somebody asked me this one the other day, and I said that it's really hard to pick amongst your children. We're obviously very excited about Fable, Jade Empire, and Dungeon Siege 2. I'm very excited about Forza Motorsport and what that franchise can become over the long term.

1UP: It sounds like it has a lot of new ideas for online play.

Shane: That's certainly a place where I think the platform has leadership, and Microsoft Game Studios has been a leader in exploiting what Xbox Live provides. In racing, we've been a real strong leader in the racing category on Xbox with Project Gotham Racing and Rallisport Challenge. Forza is going to be a great addition to that family, and you can bet it's going to be a great Xbox Live title.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in 1UP.