In your book, the Xbox team members talk about how the powerful hardware of the Xbox allows for easier creation of artistic and inventive games. Yet so far we've seen very little of this claim reflected in the Xbox lineup. Do developers need more time to learn the nuances of developing for the Xbox or has it all just been marketing hype?

A lot of it has been marketing hype. On the other hand, look at Blinx. That Xbox game requires a hard disk drive to do innovative moves like rewinding the character's moves. Look at the comments of John Carmack about Doom III. It won't run on a PS2. It will be ported to run on the Xbox. I think many of the more creative, artistic games are going to be coming in 2003 and after. In particular, I think some of Peter Molyneux's work looks very promising.

Has the departure of an evangelist like Seamus Blackley hurt the long-term success of the Xbox?

I don't believe it has hurt the operational aspects of running the Xbox business. Seamus wasn't an operations guy with supervisory responsibilities. And Seamus really did wait until most of his job of getting developers, journalists, and gamers on board was done. I think his departure is a sad commentary about how grueling it is to work on a project like this. And I think a small number of people have lost faith in the Xbox dream. But the reality is most likely that they have not lost a single developer because of Seamus' departure.

What is the deal with Ultimate TV? It began as a separate entity that was actually in competition internally with the Xbox, but it looks like they will indeed be converging in the near future.

It is a possibility that this project code-named Freon will be introduced as an interim upgrade to the Xbox. But I have my doubts that they will try it unless they feel they need to juice a market like Japan. It represents a huge mid-course correction. I think that they will combine Ultimate TV in 2005 when they introduce Xbox 2. By that time, they will surely be able to solve the basic problem: how can you play a game at the same time the hard drive is being used to record a TV show.

With some talk of the HomeStation set-top box, do you think that Microsoft may be putting the cart before the horse since the Xbox has not yet established a firm foothold with its audience in terms of delivering quality games entertainment?

I don't think HomeStation itself will happen. It has been subsumed into the PC itself. Microsoft really has two bets right now: the Xbox and the PC. The PC will become more appliance-like, with new wireless technologies and new form factors that make it more useful in the home. The home for this initiative within Microsoft is eHome, and the first manifestation of the effort is the Windows XP Media Center Edition. Right now, I don't think Microsoft will do much with set-tops, especially with the failure of Ultimate TV.

What do you think of Xbox Live, Microsoft's online gaming strategy?

I think that the closed strategy that it represents will prevail in the long run over Sony's open system. It is simply more convenient, easy to use, hassle-free, and compelling. But the investment required for it is going to be very heavy for Microsoft, particularly in the costs of setting up data centers. Sony hasn't had to invest that much. Nintendo has invested even less. If the gamers subscribe gradually, and not in huge numbers, Microsoft will have made its investments too early. Sony will be able to up its ante when the gamers really show up. In that outcome, Microsoft's strategy will be a bad one. But if the gamers eat online gaming up, then its investments will pay off in a strategic advantage for the Xbox. I don't know what the outcome will be.

Let's talk about Microsoft's competition. What do you think of Nintendo and its GameCube in this current console war?

I think Nintendo is doing fine at the low-end and with the kids market. I think that the strategy of connecting to the Game Boy Advance is a good one. And I think their bets on winning franchises will mean that they will have the biggest hits. But I don't think that they're going to have nearly as many games as Microsoft. That may mean they will come in third place in the U.S. and perhaps in Europe too.

What are your thoughts on Sony and the upcoming PlayStation 3—and more specifically the "Cell" technology that is being developed to go into it?

Personally, I don't think they can pull off what they are promising right now. That is consistent for the grand claims they had for the PlayStation 2 (that it was more than a PC), which they backed off from as they actually produced the product. They are trying for a phenomenal increase in their processing power and they are allying with IBM because it's so expensive to develop these new chips. Microsoft, by contrast, merely has to wait for several generations of PC chips to be developed by Intel and Nvidia. My bet is that Sony won't have that much of an edge in processing power over the PC guys by 2005.