GameDaily BIZ: During the Microsoft keynote you talked enthusiastically about the Xbox Live Community Games, but you didn't get into the business aspect. Can you talk a bit about the business model behind this?

Chris Satchell: We're not actually looking at that at the moment. We've got a beta coming in spring and what I really want to do is see the usage patterns through the beta to understand what would make sense, because really the big step and what's exciting is this: getting that pipeline there to democratize distribution and take those 10 million gamers and connect them with all those creators and ideas out there, that's the big, cool step. The other thing we can look at later, but what I really want to do is make sure we get that [first] bit right. When we talk to the community the biggest thing they want is just to have an audience that cares about their work. You can imagine, if you're a musician and you get really good and you never get any way to play for people that would be terrible. When you think about a community that's super engaged in gaming, Live's incredible, which is why you get numbers like 5.4 billion hours of gameplay. You talk about engagement and then you talk about size – so the pioneering step is to open that up.

BIZ: Right, but it's not like Microsoft is going to give these games away for free, and most of the developers who will use this are trying to get their start in the industry...

CS: And I think they get great exposure. I mean, we know people are going to be watching who's bubbling up, who's hot and looking to recruit those people. It happened already with DreamBuildPlay and I think it's going to happen with this. But we're just focused on getting that distribution right and getting that pipeline... and that pipeline is super important, because if you want to have this freedom of creativity you need to give the community tools to take responsibility for that. Otherwise it's the Wild West. I think a lot of companies are finding that just saying "we'll put anything up and then well if it breaks it's fine" ... that's just not sufficient anymore. That's why I really want to put the power in the hands of the community to manage that.

BIZ: So will the developers retain the rights to their IP with this service?

CS: Yes, they will. Yeah, absolutely they retain their IP.

BIZ: I noticed Microsoft talked about a rating system for content like blood and violence, but is there a quality rating like on Amazon as well, so that people can rate the really good games and the cream rises to the top?

CS: That is a great question because we didn't talk about it. The way I sort of view this is the community review process is looking at a couple things. Are you sticking with the basic guidelines? You're not infringing IP, it's not super objectionable content – we find it acceptable. Then they're saying, "Did you describe your game correctly so people can make an informed choice?" That's the community's role. Now, the gamers' role when they start playing it is to say how much I like this game. What we don't want to do is put the community in the position of being the arbiters of what's good and what's bad. It's more like we want to have lots of creativity, so let the gamers decide what they like and recommend it, and let it bubble up the lists. ... Of course we're going to focus on the Xbox 360 side, but we're also going to have a website so you can do detailed searches on the whole catalog of community games – because it's really much easier with a mouse and keyboard while sitting at your desk. So I think that's a great place to recommend games to your friends, search for stuff and go and download it later when you know what you want.

BIZ: Right, that was actually one of my questions for you. With Facebook and social networking all the rage these days, it seems creating a community social networking portal on the PC tied to the launch of community games would be a good idea.

CS: Yeah. There was a great idea someone brought up earlier – we haven't got this planned for this year, but there would be no objection to it – which is RSS feeds in a web API so another website could embed something like, "Hey, here's the hot, new games; this is what's rated, etc." I think that would be super cool.

BIZ: Regarding rating of the community games, I'm guessing the ESRB has no role in that whatsoever right?

CS: The ESRB is not going to be rating the games. The role they do have is we gave them a preview of this and we openly asked them for their feedback, because they offer a lot of experience in thinking about this. And just like the ESRB, we've gone out to rating bodies all around the world and asked for their feedback on what they think about [the community games project]. We're not asking them to rate the content, but it's more like, "Hey you have experience. Give us feedback." What's cool is they're so excited about what we're doing. They just love that someone is taking user-generated content seriously, and seriously enough to put this responsibility and pipeline behind it.

BIZ: So what's the plan to keep objectionable content away from kids that look through the community games?

CS: We completely respect family settings but we do it in the most restrictive way because we think that if somebody goes to the trouble of setting the family setting they probably want protection. So all our games come through as unrated, which means if you put parental controls on and turn on family settings you just won't be able to play them.

BIZ: Are game companies looking to make community games or is this reserved for new or garage designers just starting out?

CS: We haven't had them approach us and say they want to do this yet, but there's obviously nothing stopping them, aside from the fact that they'd have their very expensive engineers writing community games. I think one thing you will see is professional developers who are part of a big team, they might really love their work but also could have a cool idea and they want to be an auteur... and I think you're going to see some of that outletting in the industry where someone says [for example], "I have this crazy idea for a game about Tonka toys and Jello and I've got to make it!" I think you'll see some of that come along from the professional side. And obviously, I thoroughly believe the [publishers and developers] will be watching what's hot on there and who's hot and going after those people.

BIZ: Yeah I was going to mention... Microsoft handed out four development contracts and it wouldn't surprise me to see some publishers grant some contracts as well.

CS: I think they will. If you think about it, let's say you have a great game idea and you do the first part of it and you put it up [on the community server] and it bubbles straight up to the top of what's most downloaded... that's great to go back to a publisher and say, "Look I think people love this concept. How about we work together to flesh it out as a full Xbox Live Arcade game?" The XNA technology allows you to do that.

BIZ: Let's talk about the Zune a bit. Microsoft seems to be creeping into the handheld games business now with the Zune. Is this your answer to iPhone and iPod games? What's the strategy?

CS: Well, really the first part is that we have a vision for XNA Game Studio, which makes it really easy to build games and then really easy to move them across platforms, and we want to give you the biggest variety of platforms to do that (that we own). And so we did Windows, and then Xbox and now we've added Zune, and that's our focus for this year. This is always the way we work – first thing we do is get the development tools on the platform, just like we did with Xbox, we get the community excited and see if it really resonates, and then we think about how we take that farther. So this year it's all about making that toolset work, and then we'll think about what we do next.

BIZ: So in terms of support, how many game companies have signed up to make Zune games?

CS: Well, we haven't released [XNA Game Studio 3.0] yet. This is sort of a sneak peak, but it will be released later this year when everyone will get to do it. I think there's going to be a ton of interest. You heard during the keynote about the support from universities...

BIZ: Right, 400 universities have adopted XNA.

CS: Yeah and now you think, I can offer a gaming course or a computer science course where we not only learn to program multi-core architectures with Xbox 360, but we also can learn how to program a smaller embedded device. You know, how does that work? What works on that form factor? That is super powerful for universities, so we've already had them come up to us and say, "We've got to get this. Get it to us as soon as you can!" So all our university partners are very excited about this.

BIZ: Are you looking to leverage the Zune to have more connectivity with the 360 itself, whether it's a Sony remote play type of thing like they've done with their PSP and PS3 or something else?

CS: No, not at first. What we're really focused on is how we can use XNA Game Studio and the wireless networking in Zune to provide a very easy way for game developers to build peer-to-peer multiplayer games.

BIZ: Let's shift gears for a minute. Toshiba very recently officially gave up on HD DVD. So in retrospect, was supporting HD DVD with a separate player for 360 a mistake?

CS: I think it's great to give consumers choice and that's exactly what we did. But here's the real news: gamers buy consoles because of great games. We've got the best online service, the best dev tools, the best games coming this year, the best exclusives, and if you look at what Metacritic says about our cross-platform titles, we have the higher rated cross-platform titles... That's a winning formula, a leadership formula. That's what people buy consoles for, so we just feel really good about the games story. ... We had a record breaking year last year – seven games over a million units [sold], and six of the top ten games were on Xbox 360. That's what moves units. That's what gets us excited and gets gamers excited, so that's what we're going to focus on.

BIZ: There was a job posting recently that made mention of the next Xbox and the next version of Xbox Live. Other than the dashboard updates, should we expect a massive overhaul of Xbox Live anytime soon?

CS: I think we're always looking at how we can make it better, and I would say stay tuned throughout this year to see what we're going to talk about. I mean, this is February. C'mon we're not doing bad for February! We showed you a bunch of exclusives, we democratized game distribution, we've got XNA Game Studio on Zune... you've got to give us something to do in the next 10 months! [chuckles]

BIZ: EA recently forecast that Sony would sell two to four times as many PS3s than MS would sell 360s in Europe during this year. Europe seems more and more like a huge battleground. How will Microsoft change its approach to get a leg up on Sony there?

CS: I think we're doing the right things. I can't comment on EA's numbers. I don't know how EA got those numbers; that's just stuff they decide to look at, but what I know is we're focused on providing gamers with the very best choice. Nobody else has that story of the best AAA games, Xbox Live Arcade independent developers and the community – no one else has got that, not in the way we have. ... Of course we're focused on Europe and want to do great content for that region. And we have like more E [rated] and T [rated] games than any other platform. I think that the momentum we have is going to catch up and I think we're doing the right things to really engage the European customer.

BIZ: One of the big games this past holiday season on 360 was BioWare's Mass Effect. But now that they're with EA and EA's approach is almost always multiplatform, you may not be able to keep the trilogy exclusive to Xbox. So how much would Microsoft pay to keep Mass Effect 2 & 3 exclusive to Xbox 360?

CS: You'd have to ask EA what their plans are for their content. ... What I do feel good about is the exclusives we have. I feel good that we're going to get GTA IV day one and later in the fall exclusive downloadable content; that makes me feel really good. And as I said before, what we've seen on Metacritic is cross-platform games are better on our platform.

BIZ: Let's talk about the PC side for a minute. There's been a lot of talk about the "decline" of the PC games retail market and over a year ago Peter Moore talked about Microsoft's role in bringing PC gaming back to the forefront with the Games for Windows initiative and other things. What's Microsoft doing now to boost the PC games market?

CS: You know what's funny? The PC gaming market is super strong. NPD tracks North American retail data [but] the growth of online, both large online subscription games and casual games, is absolutely phenomenal. PC last year had probably the biggest year ever. The trouble is people only count retail revenue and what we're seeing with the PC platform is it's moving to an online and casual platform. It doesn't mean you're not getting great, AAA, system-pushing games like Crysis, but it means a lot of people are using it to play different types of games and I think that's absolutely fine. It's the platform to do that on. ... So you have to look at online revenue and casual revenue and when you add that up PC just had an absolute breakout year. It's actually a very healthy ecosystem.

BIZ: MMOs are one of the online revenue generators you're talking about on PC, but when will we see that on Xbox 360? Is Microsoft looking for a console MMO?

CS: We're open to talking to publishers and developers about any content. But you know, I can't feel bad for the fact that the platform everybody plays MMOs on is also a Microsoft platform. I just can't feel bad about that! [laughs]

BIZ: As always, it was great talking with you. Thanks.