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Where did this sinking of $5B came from? It's $6.7 B already and counting.
And I sure hope Square Enix is not stupid enough to partner with MS.
MS partners are usually destroyed.

Fortunately they aren't partners. The situation for Infinite Undiscovery (or whatever the name) is that MS PAYS for the game, SE publish and Tri-Ace develops.
So, it's business as usual for MS in Japan: moneyhats! And I understand that gamers don't like that.
That makes one more console to buy, that no one wants, and that steals some games by using an unsustainable model (moneyhats).
It seems like you can't buy your way to marketshare, at least in Japan, and unfortunately, that's the usual MS business model. It seems like it doesn't work in most cases, like the Zune and countless other failed products showed.

I understand developers' fears too. You just can't associate yourself with such a failure in Japan, as the stigma will stick to you forever after that. Mistwalker already destroyed their brand new company's reputation. I can never understand why they did that, and I doubt making a DS game will save them.