I know a little something about the MS games division (of the past -- I'm not too keen on the modern day, but I don't think its changed much), and I can tell you that they overspend like you would not believe, relative to other games development groups.
The ACES team, as an example, would assign a single artist to polishing a single aircraft (or two) in a game, for an entire project, whereas competing simulators (of the day) would have 1 artist per ~4 game aircraft models, and those artists were expected to handle everything else, including the terrain, the HUD, and the game shell/interface. That may have changed over the years, but when I heard about that kind of spending, I was both *really* jealous (as in, I wished my dev team of the time could spend like that), and kind of appalled at how much more they were spending than the typical game developer.
Given their spending, I'm kind of shocked they never really managed to pull off more decent games. They wrecked everything else they did 1st party, from MechWarrior 4, to Allegiance, to Outwars, to flight sims, IMO. Although... the MechWarrior RTS and Age of Empires RTS games were pretty decent, and of course when they purchased great studios (Lionhead, Bungie, Ensemble, etc.) and took a hands-off approach, they got great stuff that way as well.
Given that history, I am not at all surprised to see them looking at doing every exclusive for the X360 from a 2nd-party, publisher-only perspective. Use outside teams, and throw them away if they don't produce results. They don't seem to be able to save money by doing quality projects internally, so it all makes sense, from that perspective. Yes, that speaks pretty poorly about their internal management, but... that's what appears to be the issue, from what I've heard. Managing games and managing the next revision of Microsoft office product XYZ are completely different ball games -- yet they tend to pull staff from other areas of MS, rather than hiring specifically for games development, again as I understand it, "so I hear" from ex-MS games employees, etc.
