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Microsoft is trying to expand it's market and this conference has shown that. To the "Hardcore" gamers this seems lacking but that isn't what Microsoft is going after now. They have Gears 3, Halo Remake and 3rd party games to support the "hardcore" gamer. They have just about all the "hardcore" gamers they are going to get so now the focus is on the casual market so they can expand the market. Just wait till this holiday season when Kinect starts selling like mad again.

Forum dwellers act like exclusives are really important but that isn't entirely true. Sony is releasing many more exclusives than Microsoft and is outselling it by only a small amount. The exclusive they are releasing are no longer console sellers like they were when the generation started so focusing on the casuals is the next logical step.

In short no, Microsoft has not lost. They are appealing to a different market which is much larger than the "hardcore" market. I watched the conference with my 11 year old nephew and now he wants me to get Kinect so we can play. He loved it.