A big part of Microsoft’s ‘Open House’ event in New York today was to pimp the holiday games and updates for the Xbox 360 due in the coming months. But the most interesting nuggets came from a roundtable discussion with Robbie Bach, president of Microsoft's entertainment & devices division.

Here are a few notable comments on the possible projects in the queue for the company’s games unit:

• Start saving now for Project Natal. Bach says the new control peripheral for the Xbox 360 will mirror that of the console itself – start high, then slowly work its way down. “Relative to Natal, we’ll see how the pricing cost works out,” he said. “But people should except that it will go through the usual price curve.”
• Asked when we’ll be able to stop referring to the device by its code name ‘Natal’ Bach jokingly answered “When we tell you to call it something else.”
• Microsoft has been touting the synergy between the Xbox 360 and Zune HD when it comes to video, but there are only a couple of older Xbox games coming out for the personal media player. Can we expect more? Bach wasn’t willing to commit: “We’ll decide how w we want to evolve [the Zune HD] and how it plays into our mobile strategy platform later.”

Now that all three of the console manufacturers have cut prices, you might be tempted to think we won’t see additional reductions for a while. That’s far from certain, though.

Microsoft has already shown some flexibility on its pricing with a $50 rebate on any Xbox 360 Elite purchase before Oct. 5. And one key industry analyst thinks that could be a test balloon for upcoming cuts, sooner than anyone was expecting. 

Michael Pachter, managing director of equity research at Wedbush Morgan Securities, predicts we’ll see more price shifting around the Xbox 360 as early as January – possibly February, depending on how successful the holiday season is.

Pachter believes Microsoft will cut the price of the Xbox 360 Elite with a 120 GB hard drive to $249 early next year, as it introduces an upgraded Elite version with a 250 GB hard drive for $299.

That pricing, he says, should continue until holiday 2010 – when Microsoft will dump the Arcade version of the system (which does not have a hard drive) and reduce the price of the system with a 120 GB hard drive to $199.

“With that, you’ve got a really great $200 console,” he says. “That’s a huge advantage over Sony.”

It’s speculative, of course, but Pachter has a pretty good track record. And keep in mind that Microsoft will be aggressively attempting to push Project Natal into people’s lives by late next year.

The bigger question is if this does happen as he predicts, can Sony afford to further reduce the price of the PS3? And, even if it can, will it? Two substantial price cuts in one year for the system could shorten its life cycle, something Sony would like to extend for as long as possible.

While we’re all waiting on Nintendo to make the Wii price cut (to $199) official, Microsoft has struck again.

Less than a month after the company lowered the price of the Xbox 360 Elite, it's now offering a $50 rebate to anyone who buys that system between now and Oct. 5. That, effectively, brings the price of the top-tier Elite down to $250 – an incredible bargain (and, temporarily, less than the revamped PS3).

The rebate form is a bit hard to find. It can be located here.

Why the move? Hard to say, but it could be an indication that last month’s price cut for the Elite isn’t moving models as fast as the company had hoped. It could also be a test balloon for yet another price cut on the system, perhaps early next year when the industry will be flooded with highly anticipated titles.

If nothing else, Microsoft is once again managing to divert the media spotlight to its console, just as a competitor is trying to make an impact with its own price reduction. 

Shane Kim, a longtime veteran of Microsoft Game Studios – and most recently the man in charge of the company’s Interactive Entertainment Business, will retire at the end of the year, capping a 19-year run at the company.

Phil Spencer and Dennis Durkin, two other Microsoft executives, will split Kim’s workload. Spencer, who is currently general manager of Microsoft Game Studios will get a bump to corporate vice president and will continue to oversee first-party development at the company.

Durkin, currently the CFO of Interactive Entertainment Business, will be promoted to the newly-created COO role, according to GamaSutra. Kim is reportedly retiring to spend more time with family.

Kim is one of the good guys in the industry. I’ve met with him many times over the years and he is affable even when the questions were confrontational. His institutional knowledge will be sorely missed at the company.

I’ve got lots of memories of our talks and chance encounters over the year, but when I think of Shane Kim these days, the first thing my mind zeroes in on is sitting next to him at last year’s MTV party at E3 – where The Who played a two hour gig.

He may not have the flashiest reputation in the industry – but folks, this guy can dance! 

Rockstar’s final episodic content for “Grand Theft Auto IV” hits Xbox Live on Oct. 29 – and today the company is giving the first peak at what the add-on will look like with the trailer "You’ll Always Be The King of This Town".

And, not to spoil the fun, but it might help to have your boogie shoes handy - along with an extra wardrobe. The Ballad of Gay Tony” will also bring the usual level of chaos to Liberty City.

As Luis Lopez, part-time hoodlum and full-time assistant to legendary nightclub impresario Tony Prince (aka "Gay Tony"), players will struggle with the competing loyalties of family and friends, and with the uncertainty about who is real and who is fake in a world in which everyone has a price.

The downloadable content will cost $19.99 (or 1600 MS Points). It will also be available as part of a retail release called “Grand Theft Auto: Episodes from Liberty City”. That disc will feature the content from the first episodic release (“The Lost and Damned”) as well as “The Ballad of Gay Tony” on one disc for $39.99. It will not require players to own a copy of “GTA IV” to play. 

Are you sitting down for this? Microsoft just cut the price of the Xbox 360 Elite to $299.

I know! Who saw that one coming, huh?

The current worst kept secret in gaming is now out in the open. The Elite will fall from $399 to $299. The entry-level Arcade will stay at $199. And the Xbox 360 Pro will drop from $299 to $249 until Microsoft gets rid of the existing inventory. (The mid-level machine is being phased out.)

Officially, it’s a price cut. And officially it has been long planned. The fact that the announcement comes just as Sony launches the slimmed down PS3 is purely coincidental, says the company.

Right.

Cynicism aside, Microsoft had a lot of luck when it cut prices last September. Sales soared 78 percent the next month and in 2009, Xbox 360 sales are up 17 percent – the only console hardware to see a sales increase.

Now the industry turns to Nintendo to wait and wonder. The answer there is a bit more uncertain. We’ll have to see how many hardware units “Wii Sports Resort” has moved before a clearer picture emerges.

The rumors have been swirling for a while now, but a trifecta of leaked retail flyers seem to lock in the whispers that some price maneuvering is imminent for the Xbox 360.

Target, Wal-Mart and Best Buy are all apparently planning to advertise the Xbox 360 Elite at a new $299 price in this Sunday’s paper. That would be a $100 price drop – and put the 360’s top-end model in-line with the slimmed down PlayStation 3 that was announced last week. (Both units will come with a 120 GB hard drive.)

The Xbox 360 Pro, which currently sells for $299, is being advertised at $249 – but that could simply be a clearance sale on those, as Microsoft may discontinue that model. With its 60 GB hard drive, the Pro would be at something of a disadvantage in the market.

The official announcement will likely come before the end of the week.

While this does technically count as a price cut, don’t be fooled. It’s very much a marketing maneuver designed to take a little wind out of Sony’s sails right before the new PS3 hits shelves. (Only problem there? The new PS3 hit some stores, including many Best Buys, early.)

Lionhead Studios is whipping up some excitement with Che Guevara’s face (and an accompanying quote from the South American revolutionary) greeting visitors to its Web site. 

The quote - "At the risk of seeming ridiculous, let me say that the true revolutionary is guided by a great feeling of love." – is accompanied by a giant number six, likely a countdown to an announcement at next week’s Gamescon convention. (Microsoft has noted that Molyneux will make a “special announcement” at the show.)

Clicking the “thumbs up” or “thumbs down” take you to different versions of the site’s home page – one red, one blue. Expect those to reveal a bit more in the coming days.

Any guesses as to what Lionhead is teasing? Could it be the official reveal of the game behind the “Milo” technology Molyneux was showing off at E3? “Revolutionary” and “love” seem to be key elements of the game indicating yes. But would Microsoft fully unveil the game before next year’s E3, taking away from the splash it can make with Project Natal? Doesn't seem likely.

Orson Scott Card has some serious geek credentials.

He’s not only an award winning author and the writer of “Ender’s Game,” he’s also a hardcore and old school gamer. So old school, in fact, that he regularly challenges his wife to competitions on the “Millipede” arcade game in his house.

“I’m a game lover,” he says. “I’m a game addict. I progress from game to game to game like the progression of opium to heroin to morphine. When I am not playing ‘Civilization,’ I have this nagging feeling that there are cities waiting for me -- which is pathological, I realize.”

As a child he was a regular fixture at his local 7-11, found in front of the “Super Breakout” machine. So it’s really not all that surprising that as an adult, he has worked regularly in the video game industry.

These days, he’s collaborating with Chair Entertainment on “Shadow Complex,” a platform shooter that will be available exclusively on Xbox Live starting Aug. 19.

The game is set in the universe of “Empire,” which debuted as a New York Times Best-Seller in November 2006. But this is hardly a case of developers seeing a property with potential and acquiring the game rights. From the beginning, Card and Chair collaborated to bring the game and book to life.

Chair developed the initial concept for the universe: A modern civil war occurs in the U.S.  There were other details, of course, but the idea was a broad one.

Last July, when Microsoft took the wraps off of its Xbox Live Prime Time program, it promised the games would allow people to compete for “real world” prizes. So far, it has failed to deliver on that.

That begins to change this Friday, though, when players of the U.S. and Canadian beta of “1 vs. 100” will be competing for up to 10,000 Microsoft Points and a new Xbox LIVE Arcade title in every round. (Each two hour episode of the live show generally features between eight and 13 rounds.)

Players who are playing as part of the mob (or, the “100” in the game’s title) or “the One” will have a chance to win the points and games. The great unwashed in the crowd still just get to play for ego boosts and sweepstakes entries, which puts them in the running for a Zune or an HDTV home theater system.

That’s a bit nicer, though hopefully Microsoft will offer players in the game more than just points and LIVE Arcade titles when the game comes out of beta and launches its regular season. That (at least, according to Shane Kim -- corporate vice president of strategy and business development for Microsoft’s Interactive Entertainment Business -- was the plan at the beginning.

Time has a way of changing game plans, though.

It’s worth noting that residents of Connecticut, Iowa, Maryland and Vermont (as well as Quebec, Canada) are ineligible to win prizes due to laws in those areas.

Just one month after signing a deal to stream live programming via the Xbox 360 in the UK and Ireland, Microsoft has struck a similar deal for customers in France.

Canal+ has signed with the console maker to offer more than 3,000 live and on-demand films, sports and television programming to users of the system. The two companies plan to incorporate more programming and expand the partnership to other Microsoft devices in the future.

It was just last month that Microsoft and Sky TV unveiled a similar partnership, letting Xbox Live subscribers in the UK and Ireland gain access to Sky's Sky Player service without a set top box. One of the appeals of this sort of programming is being able to watch sporting content with online friends and chat in live time during the game.

For now, U.S. Xbox Live subscribers cannot access live programming, though they are able to stream films on-demand from Netflix. However, today’s agreement (as well as the Sky TV deal) suggests that the company is continuing to work on a way to enable more streaming programming for domestic audiences as well.

It’s all part of the company’s plan to make the Xbox 360 the entertainment hub of the living room. Both Microsoft and Sony have made no bones about their desire to displace other set top boxes as space becomes more limited in people’s homes.

Oh Steve Ballmer… You certainly enjoy stirring up the enthusiast press, don’t you?

If you missed the tempest in a teapot earlier today, there was a lot of excitement when Microsoft’s CEO, speaking at the Executive’s Club of Chicago, reportedly told attendees that a new Xbox 360 would be arriving in 2010.

In a word: Balderdash.

Ballmer is a master of hype and sometimes lets his enthusiasm run away with him. That seems to be the case here.

Microsoft gaming officials have made it clear that “Project Natal” will launch with a lot of fanfare. And the dramatic changes the motion-sensing controller will bring to the system are, in some ways, the next generation of Xbox. But that doesn’t mean we’re going to see a new Xbox hardware unit.

The only likely exception to this would be a revamped 360 that costs Microsoft less to produce. (Akin to the heavily speculated slim PlayStation 3 – same machine, different form factor.)

Oh, and that ‘confirmation’ of a 2010 launch date? More balderdash. Microsoft officials at E3 were adamant that Natal would not launch until there was a critical mass of software to support it.

That may well be in 2010 – but since developers have only had the tools to create Natal-based games for two weeks now, it’s not set in stone.

Ballmer’s enthusiastic, but he knows better than to launch a monumentally expensive hardware product without software support.

Here’s the official word from Larry Hryb, Xbox Live’s Director of Programming:

“A few people have emailed me regarding something Steve Ballmer said earlier today about a new Xbox coming in 2010. As the Xbox team stated at E3 two weeks ago, we are not even halfway through the current console generation lifecycle and believe Xbox 360 will be the entertainment center in the home for long into the next decade.  Project Natal will be an important part of this platform, but we have not confirmed a launch date at this time.”

While Paul McCartney, Ringo Starr and Steven Spielberg turned a lot of heads at Microsoft’s E3 press conference, the name on everyone’s lips as they walked out of the Galen Center was Milo.

Was the star of Peter Molyneux’s Project Natal tech demo pre-rendered? Did the technology work as well as it seemed to in the video he showed? Or were we being subjected once again to Molyneux’s infectious enthusiasm for a project that doesn’t quite live up to our expectations?

During E3, I was able to spend a little time with Milo and see the little guy in action.

A lot has been written about Microsoft's new motion sensing technology "Project Natal," but it's hard to capture the essence of the product with words. 

And then there were three…

Sony today joined the motion sensing controller club, unveiling the PlayStation Motion Controller, a new controller that works in concert with a video camera that it says it plans to launch in the spring of 2010.

It’s a controller that has a lot more in common with Nintendo than Microsoft’s “Project Natal”. A remote works in conjunction with the Sony EyeToy to reflect onscreen movement.

But where Nintendo is chasing the casual audience, Sony has its eye on the hardcore. The company showed several tech demos, including using the controller in a first person shooter context and as a mace, which takes out advancing demons with a swing.

Sony and Microsoft are both offering more advanced devices than the Wii, even when you take the Wii’s forthcoming WiiMotion Plus add on into account. But both are at least a year away from being available – and neither company has the current installed base of the Wii. The Wii, though, lacks the graphical power of the Xbox 360 or PS3. 

Should be an interesting fight when the three start slugging it out.

Microsoft took pains to further position the Xbox 360 as an entertainment hub at its pre-E3 press conference today.

The company announced several new partnerships with Facebook, Twitter and last.fm – all set to begin this fall. It also announced plans to beef up the quality of its video content, with all HD movies and television shows in its 18,000 title collection being made available in 1008p this fall.

Additionally, it will no longer require users to download a film before they can begin watching. A new “instant on” feature will allow purchases to begin playing immediately.

Microsoft also plans to extend the number of countries it offers the content in from eight to 18.

The changes will take place as Microsoft begins integrating that portion of Xbox Live with the upcoming Zune HD. 

Microsoft and Sony have been competing for film and movies fans as fiercely as they have been for gamers this generation. Both companies believe the key to becoming an indispensible part of the living room is to appeal to all members of the family, including the ones they can't convert into gamers.  

Also this fall, Facebook and Twitter users will be able to update their status via the Xbox 360, as well as track friends’s updates, photos, etc. Players will also be able to instantly post screenshots from games they are playing starting with the release of the new “Tiger Woods”. The other features will go live this fall.

The last.fm partnership, which will also go live this fall (sensing the trend?), will be another part of the integration with Microsoft’s Zune HD. The service will let users stream music through their Xbox and will be free to Xbox Live gold subscribers.

As we prepare for the E3 madness to begin, there are some interesting nuggets of information floating about. None are necessarily long enough to warrant their own entry, so here, in easy to digest bullet points, are the whispers we’re currently hearing.

• Hope “God of War 3” isn’t on your holiday wish list. Despite widespread assumptions that the game is due this year, word now is that it has been pushed to 2010 (as has the next “Gran Turismo”). We may get official confirmation of this tomorrow at Sony’s press conference. 
• Microsoft’s press event later today will be star-filled. Tony Hawk will be there to demo (big shock here) “Tony Hawk Ride”. The big news is Microsoft’s surprise guest who will kick off the conference. I don’t want to ruin the surprise, but I will say the guest musical in nature – and is likely to “Help!” demo a hotly anticipated game from Harmonix. 
  • Update. Yep, they showed up. Paul McCartney, Ringo Starr, Yoko Ono and Olivia Harrison reunited on stage to promote “The Beatles: Rock Band” - but they didn't play the game. “The game is good. The graphics are very good. And we were great!,” joked Starr. “Who would have ever thought we’d end up as androids?” added McCartney  
• From Joystiq comes word that the DLC for “Batman: Arkham Asylum” that will allow PS3 owners to play as the Joker will be free. That’s a nice incentive for players and could give the PS3 version the upper hand when the game comes out later this year. 
• “Starcraft 2” is reportedly looking great – and will be on shelves this year. Activision showed the game to analysts last night, who walked away impressed. Blizzard announced that it hopes to ship the game in calendar 2009, which should be a huge boost to Activision’s bottom line. The beta kicks off this summer.

The long-awaited pairing of Microsoft’s Xbox 360 and the Zune is finally imminent.

This July Microsoft is releasing a new collection of "Gears of Wars 2" add-on content (details here).

The retail version will include the Flashback, Snowblind, and Combustible map packs, which cost $5, $10, and $10, respectively, to download on Xbox Live, along with the new "Dark Corners" add-on, which has a new campaign chapter and seven multi-player maps. Cost: $20. A great deal.

But for gamers who already own those map packs, Microsoft is offering "Dark Corners" by itself for digital download. The cost: $20.

Eh?

Let's get this straight: People who download via Xbox Live get a portion of the content available at retail for the exact same price. And remember that distributing content on XBL costs substantially less than selling it at retail, since there's no manufacturing costs, no shipping costs, and no retailer to split the proceeds with. So Microsoft's profit margins are much bigger on that $20. Sounds like a major rip-off to me.

In fact, customers who have already bought the map packs and now buy "Dark Corners" are paying over twice as much as those who buy the entire retail package. Even allowing for some kind of discount on the first three map packs over time, that's pretty damned bad.

Considering that the people who download content on XBL are probably Microsoft's most loyal customers, it sounds like the Xbox 360 maker is giving fans a little financial chainsodomy.

It was the biggest question at GDC: What do you think of OnLive? Will it work?

Given the major companies (EA, Take-Two, Ubisoft, Warner Bros.) behind it, OnLive is certainly not vaporware like the Phantom. It has solid technology and a business plan that could work. If the service runs as smoothly when it launches next Winter as it did in OnLive's GDC booth, it should have a fighting chance, especially amongst consumers who haven't yet bought an Xbox 360 or Playstation 3 (and most certainly by the time the big three launch their next consoles).

Regardless of whether OnLive is a hit, subscription-based or ad-supported video games are the future business model for the industry, just as it is for software and other forms of entertainment. Once consumers become comfortable not "owning" anything the way they do now, the insanity of buying a new console or version of Microsoft Office every few years will become apparent.

That transformation will mark a remarkable shift of power in the video game industry. No longer will Nintendo, Microsoft, and Sony be the center of the industry, defining technical specs and getting a cut of almost every dollar spent. The new center of power will likely be the cable and telecom companies that provide Internet and television service.

Remember when TiVo came out and the early DVR lovers bought its box? Today, TiVo is dying and most of us get TiVo-like service from our cable or satellite provider, via a set top box with a DVR built in. Instead of buying hardware for several hundred dollars, we just pay Comcast or Dish an extra $5 or $10 per month.

February video game sales data was just released today and all the data, including the top 10 titles, console sales, and industry growth, are below. But here are your key points:

The industry is slowing, but still growing despite the recession

It's nothing close to the phenomenal 34% growth of the U.S. video game business last year. But 10% when the rest of the economy is contracting is still quite impressive. And software and hardware are contributing virtually evenly to the mix -- a good sign that the hardware cycle isn't slowing and that current gamers aren't cutting back disproportionately on buying new titles.

Microsoft had a good comparison, Sony had a bad one

The 54% jump in Xbox 360 sales is impressive. But you have to remember that last February Xbox 360 sales were dismal, due largely to supply constraints post-holiday and in anticipation of "Grand Theft Auto IV." This past Fall's price cut helped too of course. But nothing as amazing as that 54% number would indicate actually happened for Microsoft. It's just back to where it should be.

Sony, meanwhile, had a decent month, given its recent problems. Sales were almost flat, despite the fact that the PS3 sold unusually well last February (thanks in part to the then-recent victory of Blu-ray, as well as the 360's supply problems). Still, I'm sure Sony would love to see PS3 sales actually grow for a change. The PSP, meanwhile, continues to suffer. No wonder Sony's pushing aggressively for big new titles like "Hannah Montana," "Assassin's Creed," and "LittleBigPlanet" on the device.

 Killzone 2, Street Fighter IV both had solid launches

323,000 units in fifth place isn't bad for a PS3 exclusive that launched on the last Friday of the month. Quite good, in fact.

And Capcom kicked ass, at least as far as February releases go, with "Street Fighter IV," selling 849,000 units across the two high-end consoles. By contrast, Capcom's big sequel last February, "Devil May Cry 4," sold 528,700 on the same platforms.

FEAR 2 and 50 Cent, not so much

Warner Bros.' heavily hyped "FEAR 2: Project Origin," it's first stab at a non-licensed title for the  hard-core market, flopped. Despite launching early in the month, both the PS3 nor 360 versions sold less than 136,000 units. There are all sorts of possible reasons, most notably that in the current economy mid-level hard core titles simply aren't selling. But it's still a bad sign for the studios' ambitions to compete with major publishers that a sequel with relatively good reviews couldn't do better.

"50 Cent: Blood on the Sand," had the same problem, though it did launch late in the month. Still, THQ's expectations may have been more modest, since it bought the former Sierra title from Activision at what was likely a sizable discount off the full development cost.

Remember Nintendo? They're still dominating

There were no major new Nintendo releases, but that didn't slow the House of Mario down too much. It still claimed five of the top 10 games, with another, "Guitar Hero: World Tour" breaking into the top 10 only with its Wii version. Notably, the newest Nintendo game on the top 10, was at #1, "Wii Fit." It's "only" nine months old. "Mario Kart DS," meanwhile, is on the top 10 over three years after its debut.

And the Wii, once again, topped the market, growing 74% -- helped, of course, by easing supply. DS sales were flat, but still well ahead of every other console except the Wii.

It's not that uncommon for console makers to team with third party publishers on big titles for joint marketing efforts. If Sony can get you to buy, say, "Grand Theft Auto IV" with ads that emphasize it's on Playstation 3, or Microsoft the same for a game on 360, it's worth the money in a fierce console war.

"Resident Evil 5" is the first major game in 2009 to test the 360 vs the PS3. And Microsoft is investing a lot in the fight, including a special edition of its console.

The really surprising detail came in the mailing I got from Capcom today with a retail copy of "Resident Evil 5." The game was for 360 -- a little unusual in that nobody asked my console preference, but hardly a big deal. What I've never seen before, however, is a letter enclosed with the game, directly from Microsoft, touting the advantages of its console.

Since the two versions of the game are identical, Microsoft really has to stretch to make its case. Amongst its claims:

With "Halo Wars" out of the way and no major first party titles on the horizon save for "Halo: ODST" in the fall, it's no surprise Microsoft is looking to ride the year's big third party games. Will it be able to sell fans, and the press, on the idea that "Resident Evil 5" is better on 360? It seems like a stretch, but it's sure going to try.

In the category of news that informs us something wasn't a complete disaster comes this announcement from Microsoft:

Well yea, given that it's the most expensive DLC ever available on Xbox Live, and it comes from one of the biggest modern franchises in the videogame industry, it had better have broken the record. If it hadn't, something would have been very, very wrong for Rockstar and Microsoft.

Note that Microsoft only mentioned revenue, however, and not the actual number of units. We can safely assume from that that it didn't break the record for the most number of paid downloads by a piece of DLC, which appears to have been set by "Call of Duty 4's" Variety map pack last spring.

Without knowing how many copies of "Lost and Damned" Rockstar sold, we don't know anything really interesting. Like how many of the more than 10 million people who have bought copies of the game (the vast majority in North America and Europe and thus able to acces the DLC) bought "Lost and Damned?" And how much progress did Microsoft make on earning back the $50 million advance it gave Rockstar parent Take-Two for exclusive rights to "Lost and Damned" and the upcoming second "GTA IV" DLC.

All we know so far is that the "Lost and Damned" didn't launch way below everyone's expectations.

(Spoiler warning: If you haven't bought the castle in "Fable 2," but want to find out for yourself what happens, stop reading)

Remember when Peter Molyneux sent that letter to "Fable 2" reviewers that asked us to, amongst other things, "ALSO BUY THE CASTLE AND SEE WHAT HAPPENS!!!" (that's his caps and italics and !!!)

Well buying the castle requires finishing the main story and saving up a million gold, so I didn't get it done before my review. But last night, after what's probably been a good 40 hours or so of playing that game (yes, I really like it), I finally completed that quest. And boy is it surprising. Not just for what you do, but how it effects the social dynamics of the game and brings up some extremely modern questions about sexual identity.

At first, Castle Fairfax is eerie, in just the way I expected. Walking through the empty halls of a castle where a traumatic event from your hero's childhood take place brings up lots of unpleasant memories. Which is why I think the experience was actually more meaningful a few months after I started playing, rather than rushing through it all and getting there in maybe a week. When I walked in the room where Lucien killed "my" sister back in October, it was a little like remembering actually horrible events from my youth.

But the weird part happens a little later, when you fight off some bandits invading your castle and discover the hidden underground caverns. After killing all the bandits down there, you find yourself in a room with an unexpected potion: One that can, if you drink it, change your character's gender. Given that I had been thinking about starting the game again as a girl just to see what the experience is like, I figured "Why the hell not?" and took a chug. And suddenly my hero had a cuter face and boobs.

Like most things in "Fable 2," the potion is presented in a rather light hearted way. Clearly it's intended to be a fun twist for those of us who have played the game for far too long. But then I went back to visit my families. And things got interesting.

To be clear, I've got three families in "Fable 2": A wife with two kids in Brightwood, a wife with one kid on Knothole Island, and a husband in Bowerstone (we want kids, but Albion isn't too progressive on the gay adoption front).

In the boring real world, I've known a handful of transgendered people, some who just live their lives socially as not the gender they were born, and others who've had surgery. In my admittedly limited experience, social interactions with someone you once knew as a different gender are always a bit awkward. Gender is such an integral part of our culture that seeing someone you knew as a "he" as a "she" is just plain tough to wrap your head around, whether fair or not.

Albion is a pretty progressive place in "Fable 2" and all the random people on the streets who may have seen me around didn't seem phased by my new C cups. "But what," I wondered, "will my family members think of me?"

In the real world, kids are often a lot less hung up on cultural norms than us grown-ups, and so it is in "Fable 2." I stopped by to see my daughter in Knothole and she started whining "Please Mommy, can I have some chocolate?" and bragging "My mommy's a hero!" Mommy, Daddy, it didn't seem to phase her. She's still as whiny as ever. They must teach "Heather Has Two Mommy's" at Knothole Island Elementary.

How about the adults, though? I couldn't find Mia offhand on Knothole, so I figured I'd go to Bowerstone and see my other wife, Alicia. At first she reacted well to me, giving me a gift as she always does when I came home. But then I started flirting. I seduced her, blew some kisses, and she kept cringing. When I asked her to come back to my place, her exact response was "I'm not that desperate." Wow. After all the thousands of gold I've earned for you out in the world, this is how you treat the former father of your child? Just because I'm asking for some lesbian action and you're hetero? Believe me, I was ready to toss her aside like yesterday's trash. But as a child of divorce, I didn't want to do that to my kids Ben Jr. and Flaude. So I went to see if my husband Glen was any more open minded.

Nope. In the world of Albion, people are happy to stay married to you if you're no longer the gender that attracts them, but they just won't sleep with you. Apparently Glen just wanted me to be his (excuse the term) fag hag, happy to hang out with a gay guy instead of landing a romantic parter of my own. Screw that. I sold the house he lived in and started flirting with Brian right in front of him. After Glen ran away in tears, I proposed to Brian, moved him into the best home in all of Albion, Castle Fairfax, and promptly bore him a son (Ben Jr. Two). That's the life you could have had if you were just a little more open minded in the bedroom, Glen.

It's undoubtedly just a weird quirk of the "Fable 2" A.I. that your spouses stay married to you after a sex change, but won't sleep with you. And I'm sure Lionhead threw in that sex change potion at the end of the castle quest for the silly fun of it. But the best part about "Fable 2" has always been how alive the world is -- the fact that your actions and choices have a real impact on the way people treat you. Which is why I'm not going to deny it: I'm feeling a little rejected.

As Sony announced yesterday, Playstation Network has 20 million users.  Xbox Live, by comparison, has 17 million But PSN is for the Playstation 3 and PSP (around 70 million devices), while XBL is only for the Xbox 360 (about 28 million). PSN has been around for 27 months. XBL? 67.

What does it all mean? Who knows? There are dozens of variables that make comparisons difficult. But more importantly, "registered user" statistics are virtually meaningless. How many websites have you ever registered for? "Second Life" has over 15 million registered users, but it's struggling to survive and find a reason for being.

If you're interested in the business of video games, there's only one statistic of any significance: Sony has generated $180 million in gross revenue from PSN two-plus years of life. As of the last E3, after about five and a half years, Xbox Live had generated over $1 billion.

On that basis, the advantage goes to Microsoft. PSN has been around about 40% as long as Xbox Live, but made less than 20% as much money. Given how much more content there is available to download on consoles today (more games, video content, etc.) than the first few years of XBL, the advantage is even more dramatic.

EXCEPT... A little more than half of XBL members pay for the service. Without knowing how long they have paid for, and under what plans, it's tough to  estimate with any precision how much revenue that has generated for Microsoft. But it's safe to guess it's well into the hundreds of millions.

So on download revenue, the two might be roughly equal. But Microsoft still has an advantage. Revenue, after all, is revenue. And running Xbox Live certainly costs, ballpark, about as much as it costs to run Playstation Network. So Microsoft is making more revenue on around the same costs.

Sony's reason for making PSN free is, of course, to make the Playstation 3 and PSP more attractive. But given the weak sales of the PS3 and so-so sales of the PSP (whose main competitor, the DS, also offers free online play), it's not particularly working.

I think it's really tough to argue that, at this point, Sony wouldn't be better off by cutting the price of the PS3 as much as possible and making up at least some of the difference by charging for online play via PSN.

Posting will be light today and tomorrow as I'm in Park City, Utah,  at the Sundance Film Festival to moderate a panel on storytelling in videogames (basic info here). It looks like a great panel and I'm told that it is being filmed and that it should be digitized so hopeuflly I'll be able to post it here for you all to cringe at watch next week.

Here's the panelists. FYI, it's sponsored by Activision Blizzard, which is why you'll find three out of the four of them do or have worked for the company. Still a very good group, though, I think:

Meanwhile, there is news today and unfortunately I don't have time to lend much analysis. So I recommend checking out Gamasutra for solid write ups of disappointing earnings and layoffs at Microsoft and Sony, as well at slightly better news at Ubisoft, including a solid launch for "Far Cry 2," a more disappointing debut for "Prince of Persia" (perhaps because it came later in the year and deeper in the recession) and the official if unsurprising announcement that "Assassin's Creed 2" is coming by next March (and probably this holiday season).

I spoke to Microsoft entertainment and devices president Robbie Bach at his company's booth at CES to go a little more in depth on his company's entertainment business, particularly videogames, in the face of a recession. He was largely upbeat (shocker!), but opened up a bit about how the slowdown is impacting the mix of what Microsoft sells. In addition, we talked about how his company is doing in its efforts to expand its audience to families (and other people mostly buying Wiis), music videogames, and how online is effecting the Xbox business's bottom line.

How do you see the recession impacting the videogame business? You have growth rates other media sectors would love, but the holidays were certainly down from earlier this year and last year.

I think what’s happening is people are still buying consoles, they are excited about consoles and gaming. They want to be entertained even when the economy is not entertaining.

What we will see and we saw a little in the December period is that when people go into store to buy a console, if last year they were buying five games, maybe this year it’s four. We do see people making value choices. The other thing I think we see happening is AAA content is still selling exceptionally well, but as people buy a little bit fewer games, the stuff they’re not buying quite as much is A titles or portfolio titles from the previous year.

So for Microsoft, are you seeing the $200 arcade version of the Xbox 360 perform proportionately better in the slow economy than it did in the past?

We don’t break those figures down, but we have seen the $199, 179 Euro product do very well. It varies a little by retailer as well. At a place like Wal-Mart, the arcade edition does a little better than some other places. At Gamestop, the arcade does very well, but it’s a different customer mix where more are looking for a hard drive [only included in the $300 pro and $400 elite editions].

Reaching the family audience was a big push for Microsoft this fall, from the redesign of Xbox Live to new games. While the redesign seems to be doing fine, I haven’t seen much sales momentum for “Lips” or “You’re at the Movies.” Do you think you’re succeeding at expanding your audience?

It’s still a little early to tell. We have to go survey. It’s a research project. I will tell you anecdotaly I know the audience is expanding quite nicely. The two areas helping us expand the fastest are music titles, like “Lips,” “Guitar Hero,” and “Rock Band,” and the second area is the Netflix arrangement [Xbox 360 owners can now stream Netflix movies through the console]. A number of people have come up and said, “Wow, Netflix is so cool, that’s how I was able to convince my spouse we need an Xbox and put it in the living room.” That expands the demo to people who aren’t traditional gamers, even if they start to watch movies, they end up playing games.

You mentioned the importance of the music category, but it seems like “Rock Band” and “Guitar Hero” sales are slowing. Do you agree and how is that impacting you?

Music is still very strong. You’re not going to see the same growth this year as last year because of where the business is. But I think category is still very, very strong. It has a visceral appeal. We see it in the download numbers on Xbox live. We’ve had an amazing 60 million songs downloaded.

Between all those music downloads, the games and videos available to download that you’ve said are growing in popularity, and the new advertising opportunities on Xbox Live, is that business becoming meaningful for you compared to consoles and retail games?

Xbox Live is a good business for us and a good business for our partners. If someone says, “Walk me through the contributions to your P&L,” I’d say [in order] consoles, plus or minus, are break even; software, both first party and third party licensing, are very good; peripherals are very good; and finally Xbox Live is a good business.

Can you tell me a little more about “Kodu?” Is it a game or an application?

It starts as a set of tools. It’s a “Hey you can create your own environment!” product. But then once you create the game, now it is a game and you can share that with other people and play on Xbox Live. So this is both things.

But it doesn’t ship with a full campaign story mode? Because the obvious comparison is “LittleBigPlanet.”

I don’t think it’s a lot like “LittleBigPlanet.” It’s a new game every time. It’s a development environment, in which you can download and share.

And “Kodu” would be something that users pay to download on Xbox Live? Would there be a full social network where you rate user created games, tag them, and so on?

It’s a little early to talk about. We’re still developing how that plays out. The [Xbox Live] community channel as a whole has that rich environment where  a lot of feedback. The opportunity to get feedback on variety of different games is a hallmark.

Keep in mind the audience we’re targeting it to initially probably ends up being a very young audience. People who are interested in some fun learning activities. What I’m interested in is whether it catches on with the broader Xbox audience… How far into that audience does it go? Would Ben want to be creating a game?

In the keynote you touched on Zune Social, the online store and environment, but not the devices. Are you trying to separate them more so you can grow Zune Social apart from how the players perform?

It’s not a separation. We continue to work on devices, build devices in that ecosystem. Certainly, we recognize music is a genre that isn’t just isolated to these devices. You have it on PC, Xbox, on mobile phones. We do think Zune Social could play a role in that.

Much more from the Consumer Electronic Show at Variety.com's CES blog.

I won't be able to transcribe my interview with Microsoft entertainment president Robbie Bach (who oversees videogames, amongst other things) until tonight, most likely. But between my talk to him, Microsoft's keynote last night, and Sony's keynote today (which included a section with Playstation topper Kaz Hirai talking videogames), I got a few interesting statistics worth comparing:

-Number of worldwide members of Microsoft's online videogame service Xbox Live: 17 million. Number of registered accounts on Sony's competing Playstation Network: 17 million. (Even though there are substantially fewers PS3s on the market than Xbox 360s, Sony does have the advantage of people going onto PSN from the PSP. In addition, PSN is free to play online, but Xbox Live costs money, though anyone can "join" just to browse downloadable content)

-In the last three months of 2008, Microsoft added 3 million Xbox Live members. In December, Sony added 2.1 million Playstation Network members.

-Playstation Network users have downloaded more than 330 million pieces of content. Microsoft's content downloads went up 70% since it launched the new version of Xbox Live in November (not comparable, I know)

-Over 25 million "Halo" games have been sold and the average player spends more than 150 hours online (given that some people don't play online, that means some people have played a lot more than 150 hours. wow.)

-More than 1.3 million "unique users" have played "LittleBigPlanet." Note that this is not the same as Sony saying it has sold 1.3 million units of the game. There are more than 300,000 user-created levels already. It would take two straight years, non-stop, to play them all.

-Over 80% of all "Guitar Hero" and "Rock Band" downloads have been on Xbox Live, which means only about 20% are on Playstation Network. Microsoft says it has sold over 60 million song downloads. Assuming that just an infinitismal number of those are for new karaoke game "Lips," that means Sony has sold about 12 million songs on PSN for those two franchises (and probably a few million more for its "Singstar" karaoke franchise).

Say hello to “Kodu.” It might look familiar. Kinda like Sackboy’s little brother.

At tonight’s pre-CES keynote, Microsoft unveiled a new "game creator" (their term) that will look pretty familiar to anyone who follows the videogame world, or pays attention to  Sony ads.

“Kodu” is, as Microsoft entertainment president Robbie Bach describes it, a way to "empower everyone, the entire breadth of our audience, to create their own games."

What does it look like? Well, it’s an accessible, adorable application that lets regular people design and share their own own videogame levels. Microsoft can protest as much as it wants, but in the big picture, it's about as distinct from “LittleBigPlanet” as avatars are from Miis.

The most obvious difference, however, is that "Kodu" is 3-D. It's not just a platformer. In the demo that Bach did with a 12 year-old girl named Sparrow, the game she created in her little 3-D world was essentially fetch, in which two robots tried to get objects spit out of a machine and return them to a spot for points.

Watching Sparrow create the game, it's largely based on equations (like the ones on the right). Telling the factory that every 10  seconds it spits out a new item, for instance. When I say "equation," I mean you're literaly using + and = signs to make in-game rules.

The menus are still tricky (just like in "LittleBigPlanet," you have to navigate through a lot of stuff), but it's a language that anyone who graduated elementary school can probably understand.

Unlike "LittleBigPlanet," "Kodu" isn't the result of years of work by a development studio. It came out of Microsoft R&D, where it started as a way to help teach kids how to program. Because it's not a "game," per se, it won't come with a rich campaign or, I'm going to guess, arch voiceovers by Stephen Fry.

It's coming in the spring and it'll be downloadable. Microsoft hopes to use it to fuel lots of user creations on its Community Games channel, though it's not clear if there will be a rich social community a la "LittleBigPlanet" (rating, tagging, etc.) or if users will just be sharing the games they create with friends.

"Kodu" is definitely not a "LittleBigPlanet" killer. Sony's game is inarguably the richer experience. But Sony will no longer be able to claim it has the only console with an accessible and intuitive level builder. And based on what I say, "Kodu" may even offer a few tricks that make videogame building even simpler than "LittleBigPlanet" has shown us it can be.

(Part of our series counting down the top ten videogames of 2008 -- with interruptions for the most disappointing and most overrated -- according to Variety critics Leigh Alexander, Tom Chick, Chris Dahlen and Ben Fritz. Full details are here. To check out the rest of the list, click here. Most importantly, vote for your favorite games of 2008 in the Cut Scene reader awards here.)

Leigh Alexander

Fallout 3 (Bethesda Softworks / Bethesda)

It's more of a prototype for the wholly-lifelike game experience than a perfect execution thereof, but no coin's ever landed this close to the cup. The expansive rendition of a post-apocalyptic Washington is both breathtaking and unsettling, a wide-open nuclear playground that offers a decidedly overwhelming array of options for how it's to be experienced. It's dark and exhausting, but the sense of discovery and the opportunity to mark each fallout-dusted stretch of land with the footprints of choices invoke an almost giddy delirium.

Tom Chick

Banjo Kazooie: Nuts and Bolts (Microsoft / Rare)

Forget "Lego [Insert Popular License With Geek Appeal]." This is the best Lego game I've ever played. Never mind that it doesn't have the Lego license. That's Lego's loss. As I explore this colorful world built for exploring, gathering bits and parts along the way, "Nuts & Bolts" appeals to a unique compulsion that most games can't touch: the desire to engineer stuff. Not just make stuff. Lots of games are doing a great job letting me make stuff. The "Boom Blox" toy box, the map maker in "Far Cry 2," and the video editor in the PC version of "Grand Theft Auto IV" are all wonderfully accessible studios in which I can build something, consider it, and then ask myself, "Um, now what?" But the things I create in "Nuts & Bolts," the cars and airplanes and submersible attack ships, have immediate gameplay value in this colorful world. These are the vehicles I use to tackle various challenges: go this fast, jump this high, carry this doo-dad there, run this course, and so on. And I'm even free to break many of these challenges by outbuilding them instead of outplaying them. That's freedom: the ability to foil the developers themselves.

Chris Dahlen

The World Ends With You (Squre Enix / Square Enix)

I've heard from diehard Japanese RPG fans who say this didn't knock their socks off. Maybe I'm just not tired of angsty spikey-haired adolescents grinding their skills and saving the world. Or maybe I adored the game's winningly emo dialogue and its fantastic sense of place, from the ramen stand to Shibuya’s mythical phone booth of love.  “Any tree can drop an apple. I’ll drop the freakin’ moon.”

Ben Fritz

Fable 2 (Microsoft / Lionhead)

“GTA” and its legion of imitators have made physical sandboxes old hat, but “Fable 2” is the first successful societal sandbox. No videogame world has ever felt quite so alive or so full of consequences. A brilliantly accessible but rich combat system makes “Fable 2’s” quests a joy, but it’s the awareness that you’re fighting for something deeper – whether it’s new houses for all three of your spouses, a fierce reputation so people will cower everywhere you go, or revenge on the villain who killed your sister so many decades ago – that makes the experience matter.

Coming tomorrow morning: The second best videogame(s) of 2008.

(Part of our series counting down the top ten videogames of 2008 -- with interruptions for the most disappointing and most overrated -- according to Variety critics Leigh Alexander, Tom Chick, Chris Dahlen and Ben Fritz. Full details are here. To check out the rest of the list, click here. Most importantly, vote for your favorite games of 2008 in the Cut Scene reader awards here.)

Ben Fritz

Grand Theft Auto IV (Rockstar / Rockstar North)

Liberty City is awe inspiring not only for its beauty, but its subtle rhythms and sharply drawn, often hilarious denizens. Despite it’s massive scope, “GTA IV” is an intimate affair that slowly opens itself up as the player, much like Niko Bellic, discovers how exhilarating, disheartening, and up-for-grabs the American dream is. If only Rockstar had figured out how to integrate open world mayhem with a tightly structured story, it could have been a truly great game.

Leigh Alexander

Chrono-Trigger DS (Square Enix / Square Enix)

Is it cheating to rank a remake among the year's top ten? Not when it's quite this good. It's true that the original SNES game, widely regarded as one of the best RPGs ever developed, didn't need too much in the way of an improvement -- but this edition's subtly optimized for the DS, wisely allows purists to play with classic controls, and through a cleaner, more naturalistic localization, proves itself an absolute must-have for old fans and new-audiences alike. Welcome back, champion. 

Tom Chick

Sacred 2: Fallen Angel (CDV / Ascaron)

Probably the most perfect embodiment of the mindless joy of a good action RPG. It's all about the loot and the leveling. The wild battles along the way and the lovely graphics are fine, too. But it's all about the loot and the leveling. Mostly the leveling. 200 levels of leveling, every one of them a lovely dilemma for how to spend your skill points. Still, the loot is pretty nice. It wasn't a good year for action RPGs. "Space Siege" and "Too Human," both showed up by the no-budget indie "Depths of Peril?" Then "Sacred 2" came out and showed us how it's done.

Chris Dahlen

Gears of War 2 (Microsoft / Epic)

Yes, the story's a mess, the canon is simplistic yet obtuse, the small tactical firefights that made the first one so replayable are missing, and it's also kind of easy. But "Gears of War 2" crept onto my list thanks to about a dozen amusement park-style spectacles that took my breath away - like the gunboat flume ride on an underwater river, or the spectacular reaver race across the open plains, or the chance to ride a brumack - which for the uninitiated, is a little like hanging off the back of Godzilla and making him kill everybody. This is how you thrill.

Coming tomorrow morning: The eighth best videogame(s) of 2008

(Part of our series counting down the top ten videogames of 2008 -- with interruptions for the most disappointing and most overrated -- according to Variety critics Leigh Alexander, Tom Chick, Chris Dahlen and Ben Fritz. Full details are here. To check out the rest of the list, click here. Most importantly, vote for your favorite games of 2008 in the Cut Scene reader awards here.)

Leigh Alexander

Midnight Club: Los Angeles (Rockstar / Rockstar San Diego)

A car game that even a reviewer who hates car games can love. Its graphical dazzle is as glitzy as the world of West Coast street racing it portrays with the satirical disdain that serves as developer Rockstar's hallmark. The technically impressive in-game transition from a realistic Los Angeles to an overhead map lit with linking lights is one of the year's coolest special effects, and the point system for passing races is welcome and friendly for players not quite so bad-ass as their gleaming, fully customizable car might indicate. Energizing, enervating and infinitely replayable.

Tom Chick

The Club (Sega / Bizarre Creations)

As a commercially successful game, "The Club" was doomed. A shooter based on replaying the same levels to see if you can improve your score? But consider that it was from a developer known for the Project Gotham Batman-less racing games (a game based on driving the same route to see if you can improve your time?). And consider this is also the developer of the maddeningly addictive score-based compulsion of "Geometry Wars" games (it's all in the multiplier, baby!). Now it clicks. And by "clicks", I mean it slides into place with the decisive ka-thunk of chambering a new shell in a shotgun. Bizarre  Creations has taken what they know and managed to create something I haven't seen in a very long time: a shooter that's unlike any other shooter I've ever played.

Chris Dahlen

Fable 2 (Microsoft / Lionhead)

I went back and forth on whether to list this. On the one hand, while I was playing this game, there was nothing else in the world I’d rather have been doing. Bartending is my mini-game of the year; the real estate feature made "Fable II" an ideal dollhouse for grown-ups. At the same time, the story was underwhelming, and only one of the characters had three-dimensions – and it wasn’t the player. Or the dog. I felt like the entire game was just setup for the Big, Important Choice at the end, and while the choice was haunting, I wound up feeling played.

Ben Fritz

Metal Gear Solid 4 (Konami / Kojima Prods.)

Based on everything I read, I thought I’d need earn a PhD in Kojima Studies to even remotely enjoy this game. But it turns out “MGS 4” has loads to offer anyone who appreciates an uncompromised directorial vision and expertly crafted stealth gameplay. Sure, the overwrought cutsenes are as creaky as Snake’s knees, but just like its hero, “Metal Gear Solid 4” unapologetically holds onto its old school values and proves they’re not quite as irrelevant as those in thrall of the new would like to think.

Coming today at noon: The ninth best videogame(s) of 2008

In a year with two well reviewed, successful, AAA console RPGs, I've noticed an interesting phenomenom: There are "Fable 2" people and there are "Fallout 3" people and rarely do the twain meet. Sure, lots of us respect both games, but I have yet to meet a single person who loves and has invested dozens of hours in them both.

Despite coming from the same genre, they've very different games in all sorts of ways. Which is why everyone I know, for one reason or another, is either a "Fable 2" person or a "Fallout 3" person. Why is that? I thought it would be interesting to have two writers who respect both games but find themselves drawn to one much more than the other discuss their differences.

I'm the "Fable 2" person and Variety's ace reviewer Chris Dahlen (who can also be found at his own Save the Robot blog) is our "Fallout 3" person. Here's us going at it.

The "Fable 2" guy -- Ben Fritz

Five or six hours into “Fallout 3,” I glanced at the bottom of the screen and realized something: I didn’t know what almost anything on the HUD means. “Cnd?” “AP?” The two numbers with a slash between them? The multiple markers, some flashing, on my compass? What the hell is all that?

I’m sure it’s my fault. I probably didn’t pay enough attention in Vault 101 (maybe I shouldn’t have cheated on that test) and I could obviously look at the “help” menu or the manual.

What’s interesting isn’t that I didn’t know what all the numbers mean, but that I just didn’t care. Fundamentally, I’m not interested in engaging with dozens of different statistics. I don’t want to spend time boosting my action points, distributing my experience, or selecting perks and S.P.E.C.I.A.L. attributes. But I have to, because my character is essentially a collection of points that I’ve assigned.

"Fable 2" is more my style, because your character develops not by deliberate choice, but through the consequences of your actions. I like using magic, so I become a skilled magician. I like stealing stuff and killing shopkeepers, so even if I would prefer to be loved, I'm known as a scoundrel. I spend a lot of time as a blacksmith, so I'm loaded. I like going on quests to earn acclaim and commissioning statues of myself, so I'm quite the hottie (though my wife and husband get kinda jealous).

As the first information about sales in November -- the most important month of the year for videogame sales -- starts to creep out ahead of Thursday's official report from NPD, it's looking like amidst recession, gamers are going for the familiar and the cheap.

To wit, Nintendo prexy Satoru Iwata told Reuters that his company sold 800,000 Wii units in the U.S. during Thanksgiving week, more than double last year's figure. The increase is helped in part by the fact that the supply is bigger, but still, the fact that there's still that much demand indicates consumers are still happy to buy the cheapest (or rather believed to be cheapest, sorry Xbox 360 Arcade) console.

Also selling very well,. it appears, is "Gears of War 2." Microsoft already announced it sold more than 2 million units worldwide and Wedbush Morgan analyst Michael Pachter predicts the game sold as many as 3 million units domestically last month (EEDAR analyst Jesse Divnich predicts a more conservative 2 million-plus). The other huge game, according to Pachter, was likely "Fallout 3." Bethesda already announced that it shipped 4.7 million units worldwide and the analyst predicts it sold around 1.5 million units in November, on top of the 510,000 from the end of October.

Not selling so well? It looks like the big music games could be in decline. "Guitar Hero: World Tour" sales were already down 61% in October from "Guitar Hero III" last year (as I detailed here) and Divnich predicts the November "III" to "World Tour" drop could be 50%. "Rock Band 2," meanwhile sold a so-so 238,000 units in October and Wii Music moved a dismal 81,000. Only the latter is a flop, but it seems that none are setting the world on fire they way they did last year and even in the first half of this year (when "Guitar Hero III" for Wii, in particular, was very hot).

Another sign: Prices for "World Tour" on eBay are significantly cheaper than retail, indicating that supply is no longer a problem.

It could be that "Rock Band" and "Guitar Hero: World Tour" are so expensive and these are obviously lean times when not many people are ready to spend $200 on a videogame ("Wii Music" is only $50 but has other problems, like the fact that it's not very good). Of course the bigger question that Activision and MTV have to worry about is whether this is a sign that the music videogame biz has peaked. Given the hundreds of millions MTV spent on Harmonix and the major investment it's making in a Beatles game, plus the fact that Activision plans to triple the number of "Guitar Hero" skus by 2010, that's a worrying thought.

Finally, it appears that EA's "Mirrors Edge" experiment may not be working out, at least off the bat. I am hearing industry sources that initial sales on the first person parkour game were quite soft.

Of course we'll get actual hard data on Thursday from NPD.

There's no denying "Lips" has style. Microsoft's attempt to draw more casual players to the Xbox 360 with a "Singstar" competitor features hefty, glowing, motion sensive mics and visuals, easy jump-in co-op, a clean iPod-esque interface, and visuals that range from musicvideos to trippy ambient designs.

But as Variety critic Leigh Alexander notes, it's rather shallow, with a poor selection of songs and an import function that's just plain broken:

"Lips" eschews timeless karaoke favorites in favor of an odd blend so dispersed across genres that each player's taste is likely to find only a couple of desirables out of a list of 40 titles that run the gamut from A-Ha's "Take on Me" through perplexing, ultra-current one-hit-wonders like Sara Bareilles' "Love Song."  The box promises more songs available via download, but there aren't many just yet, and no must-haves, which looks grim for "Lips" when you contrast it with "SingStar," which has such a massive song library that Sony had to build a separate, iTunes-esque online store to house them all.

"Lips" promised to make up for that shortcoming through an innovative feature that lets players import songs from an iPod or other MP3 player, tone down the singer's voice and "freestyle" to the music even if the lyric data isn't available. But the feature barely functions. Not only does it require the music player to be attached to the console at all times (as opposed to actually transferring files), but this reviewer couldn't get a single song from the iPod to work in "Lips," even though the game was able to recognize them and add them to the track list.

Leigh also notes that while "Lips" works easily as a party game (assuming you like music on the disc), there's really no challenge for anyone used to crooning in "Rock Band" or "Guitar Hero: World Tour." Which isn't necessarily a bad thing, but may limit the appeal a bit. Especially since those two games work just as well for parties with non-gamers as for the hardcore types alone at 3AM with nobody they have to worry about waking.

Full review: Lips

It was right around the 10th time I screamed "I f*cking hate Franklin!" into my headset that I realized "Gears of War 2's" "submission" is my favorite online multi-player mode ever. It's capture-the-flag, except the flag is a guy, with a gun, powered by awesome artificial intelligence. Franklin was the name of our flag the first time I played "submission" and I got so goddamned mad every time I had an opening to grab him, but he shot me dead. But I kept coming back for more, and more. Franklin was my white wale.

As I wrote in my review in today's Daily Variety, "Submission" captures everything that's great about "Gears of War 2": The creativity, the emphasis on team-based strategy, and the brilliant A.I. Along with the addictive survival-horror mode "horde," "Gears 2" the best online multi-player I've ever seen (though I haven't played "Resistance 2" yet, so that "I've ever seen" is key). One caveat though, and it's an important one: This game is seriously violent. Here's a simple test: Does hearing the word "chainsodomy" disgust you, or intrigue you? If it's the former, "Halo 3" may be more up your alley.

Sounds like "Gears of War 2" is in the running for game of the year. But then there's the campaign. Level design wise, it's pretty good. It's much longer than in the first "Gears," with sharp (though still dismally grey) graphics and plenty of emphasis on using the game's key cover and active re-loading mechanisms. It's all a little better than the first one and there are some nice new tweaks, like indicators that show up as you make progress toward an achievement. But fundamentally it's more of the same. Which isn't bad thing, but also isn't inspiring.

Then there's the story. Dear God, the story. All the pre-release hype and commercials like this one promised that the plot would be more comprehensible and central than in the first and that's true. But they really shouldn't have bothered. Because, to be blunt, the writing is awful. It's cliched, mawkish, and bombastic to the point where I could never get through a cutscene without cringing in embarassment. A few highlights:

-The eager new member of Delta Squad who drops his gun when he first shows up and the other guys nickname "rook" (short for rookie). Want to take a bet on what happens to him? If you can't figure it out, you've never seen a movie before.

-The new guy named Dizzy who wears a cowboy hat, screams everything he says, and basically makes Yosemite Sam look like a subtle portrait of Texan culture. (Why are there Texans on Sera? Let's not even go there)

-Dominic staring wistfully at a crumpled picture of him and his wife, who has been captured by the Locust. See, "Gears of War 2" has emotion. Dominic cares about somebody. See? See???

-Every single word that comes out of Cole Train's jive talking mouth. I know he was in the first one, but I'm still not over it. Let's just say that if historians play videogames, this week won't be seen as quite the major step forward for African-Americans as many of us are thinking.

-The cut scene leading into the first major mission that gives a whole new meaning to the word "bombastic," particularly when the human government's chairman (is this a community government? anyway...) gives his speech. Here's a sample: "This is teh day we ensure the survival of our species. My fellow Gears, go forth and fight for the hope of humanity!"

-Someone dies and these are the last words out of his mouth: "Tell my brother... my ma... that I love 'em and... and..." And no, I didn't put in "ma" to make it seem more hokey. That's exactly what it said in the subtitles.

You get the idea. But it brings up an important point. If you're not going to put the energy, time and money into quality writing, why bother? As important as I think narrative is in videogames, it's better to keep it simple than do it badly. In all honesty, the 10 second introduction to "New Super Mario Bros." (Bowser kidnaps Peach; Mario goes after them) is far superior to the probably hour-plus of story we get in "Gears 2." And the thing is, I bet most players would be happier if this game just had a 10 second introduction that basically consisted of this: "The Locust are invading again. Stop them!"

For more on why "Gears of War 2" is a very good game, but not quite great thanks to the writing, check out my full review:

Variety Review: Gears of War 2

As I wrote on Wednesday, I have found Microsoft's updated version of Xbox Live to be a mixed bag navigation-wise. And I haven't used a few key features like parties or Netflix yet.

But there's one feature I'm using that is undeniably awesome: Saving games to the hard drive. As soon as I got the NXE (new Xbox experience) beta test, I immediately saved "Fable 2" to the hard drive, mainly because the game is constantly accessing data from the disc and it is loud, even by Xbox 360 standards. I was hoping I would no longer be distracted by the noise of a disc spinning with such fury it could fly out of the machine and behead me and I was right. The 8 minutes or so it took to transfer the game to my hard drive was well worth it, because the 360 is now virtually silent while I play.

But there was one extra, unexpected benefit: "Fable 2" looks noticeably better. The graphics are sharper and brighter. So much so that it's like the game, or my graphics processor, has gotten an upgrade. Perhaps someone more familiar with programming can tell me why, but I assume it has to do with the fact that it's easier for the console to access and process all the requisite data, so it has to make fewer compromises to deliver me graphics in real time.

Nobody at Microsoft (or anywhere else) has talked about this benefit that I've seen I can't say whether it will happen with every title. But presuming so, it really makes transferring games to the hard drive a no-brainer, so long as you've got the space. Who doesn't want their videogames to look as sharp as possible?

(In terms of hard drive management, I imagine I'll be regularly transferring and deleting different games based on how much space I have and what games I'm playing the most at the moment.)

[Big introductory note: This post is about the one part of "Fable 2" that troubled me. But keep in mind it's still one of my top picks for game of the year. If you haven't read my review yet, please do so and keep it mind as you read this.]

It's kind of ironic that my interview with Peter Molyneux a few weeks ago focused on the one part of "Fable 2" about which I ended up having significant complaints: the story.

In his typically charming but none-too-modest manner, here's what Molyneux (creative director of "Fable" developer Lionhead) said about his goals for upping the game's dramatic stakes: "I said we've got to try and make the greatest story ever told."

Now, obviously the chances of the folks at Lionhead surpassing Shakespeare and Dostoyevsky and Dickens and Marquez and a few thousand of our other greatest writers were pretty low. But in the end, the story in "Fable 2" wast just, well, standard videogame fluff, as I wrote in my review:

[T]he main story... is "Fable 2's" weakest link. Though it presents a few awesome battles, it's a fairly bland and derivative tale about stopping a dastardly villain who wrongs the hero early in the game and goes on to try and take over the world. The plot's few emotional beats are mostly on-the-nose moral choices, and the entire thing ends with a disappointing whimper.

The script isn't terrible, but it just doesn't match the depth and characterization of something like "The Force Unleashed," nor the emotional resonance of a game like "Shadow of the Colossus." The two moments that really tried to go beyond videogame cliches, the years in the spire and the idyllic childhood flashback at the end (those who have played will know what I mean), are clumsily executed and unearned.

It kind of makes me curious about the creative process leading to the final narrative, since Molyneux described something fairly sophisticated for a videogame. Apparently before programming and game design had even begun, Lionhead started working with scriptwriters and then had professional actors perform the script, under an experienced film and TV director, on a stage. Molyneux claims doing this, and doing it early, was really important: "The reason game stories end up being so complex they lose people or else tedious and boring is because it's so late in the development process that you even get to see the story."

Molyneux was also focused on the fact that there are no cut scenes -- You can always do something while the computer controlled characters are talking. "I didn't want players to put down the controller," he said. "In 'Metal Gear Solid' and 'GTA,' my finger is hovering over the skip button." Walking around and having access to a small number of expressions during some dialogue scenes is just not that compelling, however, if the story isn't good.

Ultimately, my discussion with Molyneux about narrative seemed focused on process -- having actors perform the story, making sure players don't put down the controller, etc. But all that doesn't seem to have impacted the end result, which is average at best. Sure, the cut scenes in "Metal Gear Solid IV" and "GTA IV" can get tedious because they're passive. But the most important thing is that they're (arguably) well written. In my mind, it's better for a game's story to be interesting but passive than cliched and slightly interactive.

The frustrating thing is that I felt so much more when I wasn't stuck in the narrative Lionhead gave me. I got mad when my first wife (and husband!) divorced me. I felt proud when I bought my first house. I enjoyed the renown I garnered from successful quests. I liked stealing money when I needed cash, but tried to do it when nobody was looking so it wouldn't hurt my public perception too much. And I really came to care about that damned dog after all we went through together.

Writing a plot for a game that's primarily an emergent world in which the player's choices define who he or she is and how people regard them is extremely difficult. After all, the building block of any good story is character, and in "Fable 2," the main character varies wildly depending on what the player does. Which means Lionhead had to either come up with a story that could be deep and compelling while still integrating into an ever changing world, or create a light hearted story that doesn't attempt an emotional resonance it can't achieve. The awkward middle ground just didn't work and, frankly, was never as interesting as the story that "Fable 2" lets players create themselves.

Apologies for my absence since early last week. Many of you probably know that this is one of, it not the, busiest weeks of the year for videogame reviews, so I've been absolutely buried with writing and editing reviews, as well a tracking down a big story that I think you'll all find really interesting when it's done in a few days, plus other assorted things.

I have a few really good (I think) forthcoming posts that I hope to start writing by tomorrow. Meanwhile, rather than fall endlessly behind, here are links and very short summaries to some of our recent reviews in Variety. I'd call particular attention to "Fable 2," which has a very good shot to be my favorite game of 2008:

Fable 2: "No interactive world has ever felt quite so alive," says Variety's pretentious twit of a videogame blogger. "Deep, accessible and endlessly adaptive, it's a boundary-pushing experience."

Far Cry 2: Chris Dahlen, in his first review for Variety, calls this action sequel "stunningly beautiful and morrally harrowing," but "plodding in its execution."

Midnight Club: Los Angeles: "Detailed beyond most players' interests," writes Leigh Alexander, "the game still manages to be broadly accessible thanks to simple controls, a smooth mission structure, and jaw-droppingly stunning graphics."

LittleBigPlanet: Above referenced pretentious twit describes it as "[A]n exercise is anti-immersion, attracting even the most casual player to its irresistibly adorable cartoon world, then slowly pulling back the facade until they're left with a blank canvas."

Rock Revolution: "Overly complex where it should be simple and soulless where it should be rich," says Leigh.

Am I the only person who feels like I can't click on a single website the last few days without seeing an ad for "Fable 2?" I'm talking gaming sites, newspaper websites, political blogs, entertainment sites. It's almost like Microsoft has bought out the World Wide Web (insert joke about them already having done that here). The one below is from the Washington Post.

One good thing that came out of all the fussing and feuding between Microsoft and Bungie during E3: the Xbox 360 maker had the biggest news to announce at Tokyo Game Show by far.

"Halo 3: Recon" (info here; trailer here) is, of course, the game that Bungie was going to announce at E3 back in July. But Microsoft didn't like that Bungie planned to handle press for its franchise and not only did it force Bungie to cancel the announcement, but it left out all mentions of "Halo" from its press conferene, including the Ensemble-developed "Halo Wars," which was on display at the show. (relive the fun here)

How did that work in terms of press strategy? For Microsoft, pretty well. It had plenty of significant news at E3, from the Xbox Live re-design to "Final Fantasy XIII" coming to Xbox 360 to the Netflix partnership to "Lips." Now at Tokyo Game Show, it easily overshadowed competition by having a new "Halo" game to announce, along with "Tekken 6" coming to 360 and some other RPG stuff. Sure Japan is the market least interested in "Halo," but still, news is news.

Bungie, however, lost out on the opportunity to establish its new independent identity since splitting from Microsoft last year by making its own announcement, or even "co-announcing" by coming out on stage with its "partner" Microsoft for the news. Even though Microsoft owns the "Halo" franchise, it's not all that unreasonable for Bungie to stake a claim to the news, since the deal to produce  "Recon" was struck well after the divestment, a Bungie rep confirmed to me. Despite their previous relationship, these are now two separate and significant companies working together. But the way the announcement played out (and I'm not in Tokyo, so I'm speaking broadly) didn't seem much different than how it would have gone if Microsoft still owned Bungie.

Of course, the big news will come when Bungie is finally ready to talk about the original IP it's developing that's still on the DL. Even if Microsoft's publishing it (which is likely, but not definite), I'd bet Bungie wants to play a big role in how that news comes out.

All that being said, my favorite news from Tokyo Game Show is that there's already a sequel coming to one of my favorite games of the year. I'm not sure about the name "Desperate Struggle," but a new "No More Heroes?" Hellz yea.

Late October is turning out to be an incredibly rich few weeks in the videogame world. I now have in my possession review copies of (what look to be) three of the most exciting games of the year: "LittleBigPlanet," "Dead Space" and "Fable II."(Not to mention "Fallout 3," which I haven't received yet.)

Like most such review copies, all three came with information about the game, tips for reviewers to make sure they don't get stuck and see all the best stuff, etc. But "Fable II" comes with something more unusual -- A letter from Peter Molyneux with a specific request for reviewers:

I have a favour to ask you -- we build this game not only to appeal to gamers like yourself, but to appeal to anybody. So please, please, please, please, pleae find somebody who doesn't play games, watch them play it and see how their world turns out, because I think it's only when you see those differences that the unique experiences comes through.

It's a good suggestion. Then again, I think it's a good suggestion for most games, at least if you're writing for a publication like Variety where a good number of our readers are not avid gamers. On the other hand, I think reviewers (at least for non-core publications) should be able to analyze how a more casual player would experience the game. It's kind of part of the job. And while I sometimes do and probably will in the case of "Fable II" get a casual player to try it out, I can't realistically ask them to play it for 10 or 20 hours in order to "see how their world turns out."

Molyneux also devotes two paragraphs to explaining how great online co-op is going to be, but how we won't be able to review that until after the game comes out, perhaps in the first week, via the promised Xbox Live update. Which brings up an interesting question: Should reviewers wait until online co-op is enabled to run their reviews? Or run a review with the caveat that an important feature isn't yet working? I'm actually not sure of the answer. On the one hand, it seems like readers would be well served by a review that includes an analysis of one of the game's key features. On the other hand, reviews (at least online) can be updated just like games and wouldn't readers be well served by a review that's available when the game comes out, perhaps with an update when that feature is added, rather than having to wait a week or even longer to get a review?

On a related note, I've played most of the campaign of "Fracture" and am ready to review it, but I'm going to wait to see if I can find anybody online to play with tomorrow in multi-player. I haven't been able to find any of my fellow reviewers (or anyone else who has the game) so far. Not to give too much away, but the multi-player would really have to wow me for "Fracture" to get more than an "enhhh" after what I've seen of the campaign.

Update: There's some confusion in the comments here and elsewhere, so let me be clear: Molyneux did not ask anyone to hold their review until after online co-op is added. He just explained that online co-op would be launching via an update soon after launch. I asked the question whether we should wait for that to write a review. The request that he made of reviewers is that we watch a non-experienced gamer play "Fable 2."

After almost a decade in development, many of us may have had unreasonable expectations for Silicon Knights' "Too Human." But the final product doesn't even meet basic expectations for an action RPG, at least according to Variety reviewer Tom Chick:

"Too Human is a disappointingly substandard role playing game buried under the debris of a thousand forgettable robots slain in a hundred vacant hallways by one man in a silly outfit... Nearly every cutscene is cringeworthy, with terrible dialogue mouthed loudly and earnestly by characters who look like vacant-eyed puppets... "Too Human" is full of waiting, whether the player is walking down yet another long empty hallway, meandering through vacant cyberspace that looks like unpopulated leftover levels from "Fable," or standing by after dying for the interminable resurrection sequences performed by what must be the slowest Valkyries in history.

It's also worth noting that while most games don't deserve a fashion critique, it was necessary for "Too Human": Rarely do characters look as ridiculous as they do here, decked out in their mismatched and nearly meaningless inventory items. "Too Human's" hero dresses like he lost a bet."

There are plenty of mediocre reviews out there for the game, but Tom's just may be the most critical one yet. To read the whole thing, click here.

Oh, and be sure not to miss Tom's "Top 10 most unbelievable lines of dialogue from Too Human" over on his SciFi.com blog Fidgit. My personal favorite: "Your agonized shrieks shall be your only monument." Just take a moment and think about that...

Today, as promised, I got more details on Bungie's fight with Microsoft that led to the Xbox 360 maker completely omitting new "Halo" projects from its Monday E3 press conference and the developer canceling its planned announcement of a new game on Wednesday. (If you want full background on the imbroglio combined with what I'm reporting now, read my story in today's Daily Variety)

What was the reason for all the fussing and the feuding? According to a source very close to one of the companies involved, Microsoft was seriously peeved that Bungie was making its own plans to announce its new game on Wednesday at E3.

Even though Bungie's now an independent company, Microsoft is still its publisher and apparently wants to be in charge of PR strategy, especially when it comes to major new game announcements. While that may not be the only cause of tension, I'm told it has been the major issue in the past week and is what precipitated Xbox head Don Mattrick's decision to omit all references to new "Halo" projects on Monday, even "Halo Wars" (which Bungie isn't even developing and is being shown at Microsoft's booth). And it's also, of course, the reason why Microsoft (the mysterious "publisher" in Bungie president Harold Ryan's Tuesday website posting) forced the developer to delay plans to announce its new game.

The view within Microsoft, however, is that Bungie made a premature promise to announce something new at E3 and is now trying to shift the blame.

Going forward, of course, this leaves both sides in an awkward position. Don Mattrick and Harold Ryan are not the best of buddies right now, to say the least.

But it seems like they have to work something out. Microsoft is still Bungie's publisher and owns a minority stake in the studio. And it would be a PR disaster of major proportions for Microsoft if it pissed off Bungie enough that the studio that created "Halo" stopped even consulting on future incarnations.

There has been lots of other relevant reporting on this topic elsewhere today. MTV Multi-player has Don Mattrick saying that Bungie is working on a new "Halo" game It's not clear exactly what that means (is it solely developing? Helping another developer?), but it's definitely my understanding that Bungie's plan on Wednesday was to announce an original project, not another "Halo" spin-off or sequel.

The L.A. Times quotes Don Mattrick saying that "Halo" was cut from the Monday presser simply due to time concerns. I think it's safe to say he's being less than totally forthright. It's possible, if doubtful, that Microsoft just couldn't fit a demo of "Halo Wars," one of its biggest first party titles coming out in the next year, in the 90 minute event.  But the fact that "Halo Wars" was never even mentioned, nor was the mysterious project Multi-Player reported, is conclusive proof in my mind that something else is going on.

The Times also quotes Mattrick comparing the absence of "Halo" to the absence of the "Grand Theft Auto IV" downloadable content from the press conference. But while neither got a demo, I have it here in my notes that some exec at the press conference specifically mentioned that the "GTA IV" episode is coming "later this year." That's more love than any new games with the word "Halo" in the title got.

Finally, the Times implied that Ryan's assertion that Bungie's publisher canceled the planned project announcement was referring to the absence of "Halo" from the Monday press conference. It is quite possible Microsoft was going to announce a new "Halo" game (that Bungie is perhaps working on, per Multi-Player) at Monday's press event and then pulled it.  But I know for a fact that Ryan was referring to an announcement planned for Wednesday and I'm pretty sure that it was non-"Halo."

Today at E3 I got to demo Microsoft and iNiS' upcoming karaoke game "Lips" and got some more details on the innovative new feature that will let players import songs from their iPod (or Zune, as Microsoft keeps reminding us) into the game.

It turns out the game can handle any DRM-free music file, which is really impressive. iNiS' Chief Creative Officer Keiichi Yano also promised there will be a cool solution to the question of showing lyrics to the song on screen, though he didn't provide details. (I would imagine it's a deal with Gracenote or another online music database)

Being a business reporter as well as a videogame critic, my thoughts immediately went to the financial end of this -- if the game can import any MP3, that means Microsoft doesn't have to have a licensing arrangement with the song's label or publisher. Meaning Microsoft doesn't have to pay the people who made the music. Yano confirmed this for me.

Activision and MTV certainly pay labels and publishers for the songs in "Guitar Hero" and "Rock Band," as does for "Singstar." I would also imagine that Microsoft is paying the rights holders for all songs included on the "Lips" disc, as well as any downloadable content.

Microsoft has some good lawyers, so I'm sure they're comfortable with the idea that they can legally use any song that users already own (regardless of where they got it) in the game. But it's not clear to me that the music industry would be cool with this arrangement. On the contrary, in fact, labels are increasingly looking to videogame as a source of revenue growth. They expect to make money when their songs are used in games.

And on the face of it, it doesn't seem like there's a reason why the source of the music (my iPod vs the game disc) should effect who gets paid. Half the people who bought "Guitar Hero: Aerosmith" may already own lots of Aerosmith CDs, but that doesn't mean Activision got out of paying to use the songs. Making the song into a game is arguably a transformative use for commercial gain.

I'm not saying I think Microsoft should have to pay. But based on everything I know about the music industry, I would think they won't be pleased that "Lips" owners can use their songs in the game for free. This is definitely something I'll be looking into more.

Many of you may have already seen the note on Bungie's website where President Harold Ryan said the newly independent development studio behind "Halo" had been planning to reveal "something exciting" it has been working on but that those plans "were just changed by our publisher."

Ryan didn't provide any more details, but I can shed a little light. The publisher in question is Microsoft. Bungie Studios has apparently had a conflict with Microsoft that let to the decision to excise any reference to new "Halo" products, even 2009's "Halo Wars"  or the mysterious Peter Jackson project, from Microsoft's press conference on Monday (an absence that surprised many gamers and observers). My understanding is that that call was made very recently, as in the past few days.

Separate from Microsoft's press conference, however, Bungie was planning to take the wraps off its first original, post-"Halo" project today (Wednesday). But the dispute with Microsoft apparently put the kibosh on those plans as well. That decision was made on Tuesday evening, just a few hours before Ryan posted his note.

This is all a bit hazy, of course. Assuming that Bungie's stake in any future "Halo" projects was clearly spelled out in the deal where it divested itself last year, what could the conflict have been that led to Microsoft choosing to not even discuss future plans for its top franchise? And given how massive the interest in anything new that Bungie is making would be, what kind of a fight could lead to those involved not wanting to announce it at E3?

I don't know the answers, at least not yet. But I'll keep reporting this in the days to come and will hopefully find out more. I should also note that I haven't yet reached anyone from Microsoft to comment and a spokesperson for Bungie didn't have anything to say.

From the perspective of videogames meeting traditional entertainment, I think the most intriguing news from Microsoft today was its partnership with Endemol to make an interactive version of "1 vs. 100."

No, not the idea of turning a game show into a videogame. That's been done.

But what's really interesting is that Microsoft is "programming" primetime "1 vs. 100" events. It's essentially a massively multi-player casual game and it only happens at certain times. It's part of a new tab in the Xbox Live interface called "Xbox Primetime."

So at 8 PM on a Thursday, for instance, thousands of people sign on to play as the one, the 100 (though I imagine it's more than 100 online), or watch in the audience. Everyone is playing together. There's even a  host who will run the game and respond live to what's going on. I'd call it a massively multi-player casual game.

I spoke to Xbox Live head John Schappert about it and he threw out scenarios like an 8 PM game focused on sports trivia and then one at 9 focused on entertainment.

Microsoft hasn't yet announced a business model for "1 vs. 100," which launches this fall along with the update to Xbox Live. But Schappert definitely didn't dissuade the suggestion that it will be advertiser supported. Given that this is a programmed event, it seems like the best opportunity I've seen for free, advertiser-supported gaming.

I don't know what Endemol's deal is with Microsoft, but this is an obvious strategy for any media company with a property that has options for huge numbers of people to interact. A live interactive version of "1 vs. 100" is much, much more compelling than playing a disc-based game on your own with canned responses from the host.

I think what's most innovative about "1 vs. 100" is that it's PROGRAMMED. Consider the fact that as more and more people get DVRs and watch video online, TV is becoming increasingly less programmed. And here videogames are becoming MORE programmed. If you have a DVR, there's really no reason to watch TV at 8 PM, unless it's a live sporting event. But now, for the first time, there's a really good reason to play a videogame at 8PM.

"1 vs. 100" is part of an entire new section of Xbox Live called Xbox Primetime, so we can expect to see more games with live events like this. And having a captive audience at a certain time is a fantastic way for Microsoft to sell advertising on Xbox Live and rapidly grow that revenue stream.

Microsoft unleashed a few new stats and predictions at its press conference today:

-Videogames head Don Mattrick confidently predicted that "Xbox 360 will sell more consoles worldwide this generation than Playstation 3." No mention of Nintendo, as the Wii is already surpassing the 360 despite launching a year later.

-Since the launch of the 360 in late 2006, Microsoft has made more than $1 billion in revenue from Xbox Live. That includes subscriptions for $5 per month / $50 per year as well as downloadable games and videos.

-Movies and TV shows account for more than 1/3 of paid downloads on Xbox Live in the U.S.

The list of studios and networks NOT on Xbox Live got even shorter today as NBC Universal has signed up to offers its tv shows. The only major studios not on there now are Twentieth Century Fox (though Fox TV shows are on there) and, for obvious reasons, Sony Pictures. And now every major television network is on Xbox Live.

Microsoft also today finally unveiled the partnership with Netflix that we all knew was coming. As expected, Netflix subscribers will be able to get movies available to "watch instantly" via the Internet on a PC on the Xbox 360. The one unexpected feature is that users can share the movie with friends so they can watch together. The friends do have to be Netflix subscribers, though, which isn't quite as cool as I had initially hoped.

It's all part of a huge redesign of Xbox Live that appears to make the service a bit easier and more intuitive to navigage, while also adding more features. Picture on right was borrowd from Kotaku, so thanks to them for managing to grab that.

It also integrates online avatars which can represents users in their profiles, in parties friends can form to play together and chat, and even in some new games (such as the previously mentioned "Scene It: Box Office Smash"). Color me a bit skeptical about these rip-offs of Nintendo's Mii's. Especially for the hard core fan base of the 360, which I'm guessing won't want to have a cartoon replica of themselves online.

But I asked Live head John Schappert about that over lunch with some Microsoft execs and he said there will be options that appeal to more core gamers, like the ability to dress up your avatar in the outfit of a game character like Master Chief, Dom from "Gears of War," etc. (Those are just examples, not promises).

The first news from today's Microsoft press conference at E3 is the new game announcements. More posts coming very (very) soon on the new features in Xbox Live, new video partners, and the long awaited Netflix partnership:

Since all of the biggest console titles ("Gears 2," "Fable 2," "Rock Band 2," "Resident Evil 5" <wow that's a lot of sequels>) have been previously reported, I thought the most exciting announcements were actually on the downloadable side, so let's start with the new titles for Xbox Live Arcade:

-A new "South Park" game. Literally no details besides an announcement that it's coming in 2009, but given how popular "South Park" episodes are on Xbox Live Video Marketplace and how often I hear random players on Xbox Live quoting episodes, this seems like almost a no brainer hit. Especially if they manage to capture teh show's humor at least as well as "The Simpsons Game" did.

-"Portal: Still Alive." A sequel to the best videogame of 2007 (I don't know if I've ever said that on this blog, but that's my call) coming later this year as a download. According to Glados, whose voice showed up at the press conference, there will be new levels and achievements. I do hope that in addition to new challenges, it will also expand the original game's awesome story.

-Sequels to "Geometry Wars" and "Galaga Legions," both coming this year as well.

And the new console games:

-"Lips." As I reported (with a lot of help from Kotaku) last week, there's a new music game exclusively for 360. It's a karaoke title made by "Elite Beat Agents" developers iNiS and lets players import music from an iPod or Zune into the game. Not sure exactly how that'll work, but if it can really make any song work, that'll be amazing. Or maybe it's only songs that have been pre-cleared for "Lips?"

-"You're in the Movies." Players use the Xbox Live camera to move around in mini-games where they do things like run, swat away bugs, dance, etc. Then the game puts those video clips in a trailer for a B movie with totally different context. The resulting videos can be shared online. Could be an amusing party game. Was certainly amusing to watch Microsoft execs like Don Mattrick and Shane Kim play.

-"Scene It: Box Office Smash." A new "Scene It" trivia game focused on movies that uses those little remotes that Microsoft introduced at E3 last year.