The first thing you need to know about Seth Schiesel's public interview with Microsoft's Corporate Vice President in charge of Microsoft Game Studios is this: They're saving all their heavy ammunition for GDC.
Twice, Schiesel hammered Shane Kim on Microsoft's apparent weakness, as far as first party games for 2008, and twice Kim refused to take the bait. "I know more about our pipeline than you do," he said, deflecting suggestions Sony's first party ramp up would take the current number two console maker by surprise in 2008. When pressed to let us in on the secret, he declined.
So Kim wasn't there to talk about what Microsoft has up its sleeve this year, which dovetails with their presentation last summer at E3 in Santa Monica, where their "vision of the future" seemed to extend no further than Q4 2007. Perhaps we'll hear more about that in a couple of weeks in San Francisco. Perhaps not.
The second thing you need to know is Microsoft, unlike Mitt Romney, isn’t quite ready to admit defeat. Nintendo has been posting astronomical numbers in sales for their Wii console, which is still almost impossible to find in stores, months after its launch. But Kim doesn't think the fact the 360 is now trailing the Wii means they've lost the war.
"I think it's way too early to declare a winner," he said. "It's easy for people to focus solely on console unit sales." What he'd rather they focus on is attach rates, software sales and downloads, an area in which they're still beating everyone else, in spite of having sold fewer devices than Nintendo.
What Kim also doesn't want you to focus on is that Microsoft had at one time said the 360 would have a five-year lifespan. ("I don’t think we ever said the  generation would be five years long.") They're now planning to ride their current console for as long as it will bear their weight. As for how long, however, he was unwilling to say.
Dean Takahashi of the San Jose Mercury News, submitting a question from the audience, reminded Kim that Microsoft's party line had been that the 2007 holiday season would be a key moment in the console war; whoever won the 2007 holiday would win the war. By that metric, Microsoft has now lost. Takahashi asked Kim what the new metric for Microsoft would be.
"I remember a couple of weeks ago people thought the Patriots would win the Super Bowl," said Kim, pulling a punt fake and dodging the question entirely. "So I think we should concentrate a little less on pronouncements years in advance. Nobody at Microsoft thinks the war is over."
Whether it's over or not, it's clear Microsoft, through Kim, are on the defensive at DICE. Immediately following the presentation by the head honchos at Blizzard, who used the platform to expound on the wisdom of their then-radical business model - to only launch games guaranteed to be successful - Schiesel jumped right in with his first question: "Was not acquiring Blizzard when you had the chance your greatest missed opportunity?"
"It would have been nice," said Kim. "We took a look at them [several years ago], but it didn't work out for us."
Microsoft has, however, acquired a number of other developers, folding them into their megalithic Game Studios. Unfortunately a number of their acquisitions have since fled, including crown jewel Bungie, the developers of Halo, leaving some to wonder if Microsoft is as good at retaining talent as they are at acquiring it. Kim is quick to point out that buying talent means buying people, and sometimes people have their own ideas about the future.
"It is a very fluid industry," Kim said. "I can't control the actions of developers."
Speaking specifically about the departure of Bungie Studios, he said: "I believe at the root of it, you had a lot of really talented individuals who wanted to be independent."
According to Kim, rumors Microsoft had pushed Bungie away by closing creative doors, or shoving them through others, were just that - rumors.
"They could have pitched any number of games and we would have approved them," he said, then echoed Gore Verbinski's suggestions from last night that it's not really the executives who are holding the strings as far as development, it's the developers themselves. "At the end of the day, we're talking about human beings. I want to work with people who want to work for me."
Kim says he doesn't think Microsoft's biggest challenge now is the loss of developer talent, though, or even that the 360 doesn't appeal to mass market gamers like the Nintendo Wii does. He believes the console can be strong in the mass market, they just don't know it yet.
"There are multiple facets to competing for that audience," he said, conceding they could definitely do better in developing content for the mass market. "When your flagship products are Halo and Gears of War, it makes it hard to reach beyond hardcore gamers. We need to do a better job of telling people … we're trying to get to a mass market with the 360, but the generation has a long way to go."