Sitting at a table with Chris Satchell, Shane Kim and many others talking about all things Microsoft during the second annual Blogger Breakfast.

I'm going to try and liveblog this to some extent, so hit the jump and stick around. Keep in mind this isn't a transcription, just me picking and choosing stuff from the conversation and posting it. I'll try to look for questions you have and ask them.

Me: I don't know how many people at this table have this issue, but between retail and debug units I'm on my eigth Xbox 360. Dean recently did a story about someone who was on their seventh. What are you doing about that.

Shane Kim: It's a pretty complicated piece of hardware. Some issues are going to be normal for any complicated piece of hardware. We have a ton of engineers who are working on that, constantly working on that.

When you do have a problem we handle that really well from a customer stand point. I think we know that there is room for improvement on that. We are really working hard to address that issue.

Gamer Andy: (Paraphrased) Do you think that one developer churning out a stream of bad games hurts the overall perception of Arcade? What are you doing about that?

Shane Kim: I do think we need to make it possible for developers and publishers to bring more content. If a publisher is going to produce crappy content, customers are going to turn their back on the developer.

Gamer Andy: But when you only have one game a week...

Shane Kim: It exacerbates the problem.

Some guy who's name I didn't catch: What happened to Viva Pinata and it being as important as Gears of War?

Shane Kim: That customer segment. I don't regret saying it is as important as Gears of War. Our aspirations in this generation is to win. In order to reach those goals, to win the generaiotn, you absolutely have to break into the mass market. Titles like Viva Pinata... our super important to that. That is a super important property to us.

The support from the core customer and core press has been awesome.

With titles like Kameo and Viva Pinata, you do have to acknowledge that the platform itself is still priced at the launch price, you're not at a mass market price yet.

Me: What about innovation outside of XBLA? Can we expect to see innovative retail titles hitting the console or do you think developers see those sort of games as something that better fits on the arcade?

Chris Satchell: It's great that they have an outlet. In XBLA they can be creative. We have a lot of professional developers being creative.

Shane Kim: I think that arcade and XNA help to mitigate the business pressures that Chris is talking about, the fact that this is such a risky business. You do have a lot of risk adverse publishers out there.
Hopefully we created another avenue for creators to come up with great ideas.

Zonk: You recently said that 70 percent of the users have downloaded content from marketplace. When you guys see things like certain publishers charging online for strategy or cheats I think a lot of gamers see that and it sets the tone for marketplace.

Shane Kim: We provide guidelines for publishers. Business practices, when it comes to publishing great titles or crappy titles. That's a publisher decision in my opinion. If a publisher makes a bad decision, that publisher is held accountable for that.

My general impression is that it really tends to go toward the publisher and developer.

Zonk: Are you thinking of standardized tiers of content. Like you need to have this much content to charge this much.

Chris Satchell: It's really hard to set yourself up as the arbiter of that. We have to be careful we don't try to step in too much and by doing that and stifle innovation.

Shane Kim: I don't know if it's that different than the retail experience.

Robert Summa: But the average gamer isn't that savvy, I don't think. So is there no plan to standardize that.

Shane Kim: I don't think so. I think this is the best way, what Chris said.

Me: How worried are you about the rumors that Sony is working on something that will blend avatars and achievements?

Looooooong pause...

Chris Satchell: There is flippant answer and there is a serious answer. If there is innovation and consumers like it then I think it's cool that they are working on it. I think it's interesting. It sounds like it is not integrated into the game experience. I don't want to have to go to the dash every time I want to do anything.

Shane Kim: Chris is being more polite than I would be.

The truth of the matter is there have been a lot of promises coming out of the other camp. I look at it as 'Hey, it's along those lines.

That's all about software and we're the software company in this competition.

(The question is) Are you going to deliver that , when are you going to deliver that. How much credibility have you already burned up to get that point.

Me: And that was the last question. I noticed a lot of you wanted to hear about backwards compatibility so I cornered Chris Satchell after the thing broke up and asked him about it.

He said that Microsoft still has a team working on it, but that they won't continue to do so forever.

"At some point we're going to focus less on it," he said. "When you get to the end of this year there will be a reduced focus on backwards compatibility. There are so many 360 games out there. I don't know if it's important anymore."

All right, show's over. On to the Sony keynote. Make sure to watch our liveblog, it's going to be HUGE.

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