I don't think a new Killer Instinct is really needed, although I'm really sad that Cinder is long gone :P
I believe (from what they have been doing, that is) they'll focus more on non-gaming software themselves and the now estabilished 360 franchises (Halo, Fable). I mean, they have the 3rd party software guaranteed, I don't see why they would close their studios if they wanted to go back to some franchises.
the words above were backed by NUCLEAR WEAPONS!







