Schappert called the move a "targeted cost reduction which will allow a greater investment in our hit titles and digital businesses." The reduction in titles, which Schappert later revealed to number more than a dozen, goes hand in hand with the closing of facilities and layoffs as part of the company's restructuring plan.

Schappert could not comment on which titles were cut, citing the difficulties inherit in announcing the cancellation of titles they had never announced in the first place. He mentioned reoccurring yearly titles, The Sims, and Hasbro titles as being the company's best-sellers, going on to say that anything that looks like it wouldn't measure up to the profitability of those titles had been cut.

"In a way, if you could array our title slate up...we've cut the bottom third of it."

Microsoft's John Schappert will once again become EA's John Schappert when the founder of EA's football giant Tiburon returns to the company as its Chief Operation Officer next month.

Microsoft indicated to Kotaku that Schappert will not be replaced.

Schappert has spent the last two years in the upper ranks of Microsoft's Xbox 360 team where he has been serving as corporate vice president of Xbox Live software and services. He received his most prominent role yet from Microsoft earlier this month as he took the stage as the host of the company's Xbox 360 media briefing.

As COO, Schappert will effectively be the number two at EA under CEO John Riccitiello. An EA press release announcing the move, defined Schappert's role. He will be "responsible for worldwide publishing, the Online Platform Group, EA Interactive, Central Development Services and other divisions of the company."

"After nearly two decades working in or around this company, I've got EA in my blood," Schappert said in EA's press release. "This is a team that is intensely focused on quality and innovation. I'm looking forward to rejoining EA as chief operating officer and helping grow the business on new platforms and in new markets."

Schappert's new boss, John Riccitiello, celebrated his hire. "We are thrilled to welcome John Schappert back to EA," he said in EA's release. "He has a great track record as a leader and innovator in our industry. His years of experience with EA and in Microsoft's Xbox business, provide him great insight into recognizing what consumers want."

Schappert replaces John Pleasants, who held the COO job for a little over a year. "When we informed Mr. Pleasants of the agreement with Jon Schappert he elected to pursue another opportunity," EA's head spokesperson Jeff Brown told Kotaku. [UPDATE: IndustryGamers reports that Pleasants has taken the job of CEO at MySpace development studio Playdom]

In a company statement issued to Kotaku, Microsoft wished Schappert well: "John has been part of the executive team that in the last two years has strengthened our game studios and LIVE services teams integrating our content and Xbox LIVE services strategy, and successfully launched the New Xbox Experience. We wish John the best of luck."

When asked via e-mail who would replace Schappert, a Microsoft representative indicated that the company's gaming group would proceed with its existing team: "At this time, Marc Whitten and Phil Spencer will lead their respective businesses, Live Services and Microsoft Game Studios, reporting directly to Don Mattrick. Microsoft has complete confidence in the leadership of Marc and Phil and that their teams will remain focused and on track as we ramp up for this holiday."

Schappert founded Tiburon in 1994 before selling the studio to EA and ascending the executive ranks at the company. He reached COO of of worldwide studios and executive v.p. of EA's Online Platform and Central Development Services Group before departing for Microsoft in 2007, where he would oversee the expansion of Xbox Live and the introduction of the New Xbox Experience.

Schappert is the second major Xbox figure to leave Microsoft for EA in a little over two years, though the flow of top men between the companies appears to flow both ways. Shortly after E3 2007, Microsoft's then-corporate-v.p. of Microsoft's Xbox 360 and Games for Windows group, Peter Moore, departed the company to helm EA Sports. Moore had keynoted Microsoft's E3 briefing that year. He was replaced with former EA head of worldwide studios Don Mattrick.

NOTE: The original version of this story stated that Schappert would not be immediately replaced by Microsoft. A Microsoft rep has clarified that Schappert will not be replaced. The team is articulated above is the team for Microsoft gaming going forward.

[This post is the third in a series that recounts the chain of questions and answers I solicited from the people I interviewed during E3. I asked each of my interviewees to ask a question of the next one. Hence: Chain Interview.]

In a hotel room suite on the Wednesday of E3 week, I asked the next chain interview question to Sony's Peter Dille. He had just let me play Gran Turismo on his white PSPGo and answered a batch of questions about Sony's E3 showing. Dille was happy to answer Schappert's question, but admitted to having trouble doing so simply due to a lack of regular use of Xbox Live.

Peter Dille, senior vice president of marketing for Sony Computer Entertainment of America responds: "I don't spend a lot of time on it… Xbox Live has been out for a while and Microsoft's done a really good job getting people involved in online gaming. And that's good news for the industry."

Dille surprised me, and I told him so. I thought he would have made a remark about Microsoft charging for online play, but he didn't take the bait. Instead, he took the opportunity to keep the chain going for my next interview, located on floor below.

Peter Dille asks Sony Computer Entertainment vice president of product development Scott Rohde: "What advantages do you see in developing for PS3 compared to other platforms?"

Armed with that query, I headed over to Rohde's room. We talked about Sony's U.S. studios, whose efforts he oversees. He let me videotape his PSPgo's sliding action. And then I lobbed him the softball.

Scott Rohde responds "What developers have discovered over the past three years — you've heard [Sony Computer Entertainment president] Kaz [Hirai] make reference to this in other interviews — it's kind of the machine that just keeps giving. As you peel off new layers of the onion, you kind of find out more capabilities that the machine can do. When people start taking advantage of the [PS3's seven] SPUs and the Cell [processor] they really find that, \Wow, we can throw more and more tasks and processes at those SPUs and we have all this freedom on the main processor to do more.'"

I pointed out to Rohde that Dille was asking for a comparison to other platform. His answer implied that the same kinds of things couldn't be said about the other major consoles. Fair? "Absolutely," he replied.

My next interview later in the day would be with Microsoft's corporate vice president of strategy and business development for the company's interactive entertainment division. That'd be Shane Kim, former head of first-party game development for the Xbox 360. This would be Sony's chance to turn things back on Microsoft and keep the chain connected. Question, please?

Rohde prefaced his question by noting that I always ask him about sports games, largely because Rohde used to run Sony's San Diego studio which produces the PlayStation's basketball and basebell games.

Scott Rohde asks Shane Kim: "[Stephen] identifies me as a sports guy and, at heart, I am. I would love to know if Microsoft has any thoughts about getting back into first-party sports development."

Shane Kim's answer, and more links in the chain – including the most awkward question of the week – will run here tomorrow.

[Scott Rohde Pic via GameTrailers]

[This post is the second in a series that recounts the chain of questions I solicited from the people I interviewed during E3. I asked each of my interviewees to ask a question of the next one. Hence: Chain Interview.]

Yoshio Sakamoto, longtime designer of many Metroid games responds: "I want him to be there forever. [pause] That's quite a question!"

Sakamoto gave me this answer over much laughter. But Miyamoto had it easy, asking a question of one of his co-workers. Sakamoto had a tougher challenge. I explained that I was next going to interview Xbox Live software and services corporate vice president John Schappert (aka the guy who delivered most of Microsoft's E3 press briefing.) I needed a question. Sakamoto, through his translator, obliged.

Yoshio Sakamoto asks Microsoft corporate vice president of Xbox Live software and services John Schappert: "Do you like Metroid?"

And he can't resist throwing in a second question: "Do you like Mr. Miyamoto?"

Later in the day, in a meeting room on the second floor of Microsoft's always-gleaming, always-white E3 Xbox 360 booth, Schappert reached the finish line of my interview with him when I sprang Sakamoto's two questions.

John Schappert responds: "I do like Metroid. And I think Nintendo has made absolutely amazing games. I grew up playing Nintendo. I grew up as a Nintendo SNES programmer… the Metroid on the SNES was phenomenal."

Note that Schappert founded Madden development studio Tiburon and had been making games for multiple hardware generations. The SNES was not an alien object to him. And to the second question about Miyamoto?

"He's my hero. And I proudly have an original Mario drawing that he made for me in my office. He is my inspiration in the industry. I think he crafts some amazing experiences and I think that he is an icon for us all to look up to."

Schappert was my final interview of the day. I'd start the next day with a Sony interview. I needed a Schappert question for it.

John Schappert asks Sony Computer Entertainment of America senior vice president of marketing Peter Dille: "What do you think of Xbox Live?"

Peter Dille's answer will run tomorrow, along with two more links to the chain.

GameTrailers TV host Geoff Keighley asked the (deep breath) Corporate Vice President of Live, Software and Services for the Interactive Entertainment Business where exactly the hardware powering Natal comes from, resulting in a not-so-nimble dodge from Mr. Schappert.

"It uses wonderful brand new Microsoft technology," the CVP responded. "Wonderful technology." Wonderful technology that Microsoft purchased and built upon to make a hands-free experience? Because John's description of a "depth camera, RGB camera, full array microphone with a proprietary on-board CPU chip" sounds awfully familiar.

When pressed on the subject, Schappert says, "I have no idea what's going on." This is must squirm TV, folks. Watch!

E3 09: John Schappert Extended Cut HD [GameTrailers]

We asked each of the companies to write up a welcome letter to new owners of their consoles. They did the rest. We are running them in the order they were received. Stay tuned for Sony and Nintendo welcome letters.

And now a word from John Schappert, Microsoft's corporate Vice President of Interactive Entertainment LIVE, Software and Services Business

Welcome to the Xbox 360 community!

I’ve been a gamer for over 20 years, logging countless hours playing thousands of games. But from the first moment I turned on my new Xbox 360, I knew we were entering a new era of home entertainment. I signed up for Xbox LIVE, and before I knew it I was connecting with friends, playing Geometry Wars in high definition, and trying to earn the Pacifism achievement (which still eludes me). I was amazed at how much fun I was having before I even put a disc in the tray. I hope your first experience in this new era of games and entertainment is as magical to you as it was to me!

The Xbox 360 is an amazing game machine. We have approximately 1,000 games, including blockbusters you can’t play anywhere else, like Gears of War 2, Halo 3, and Fable 2. We also have great party and family games, like Rock Band 2, Guitar Hero World Tour, Scene It: Box Office Smash, Lips, and Banjo Kazooie: Nuts and Bolts. No matter what games you like to play – sports, music, racing, action, shooters, role playing games – you’ll always find the best, most quality experiences on Xbox 360.

But Xbox 360 is more than a gaming machine. Xbox LIVE opens up a whole new world of digital entertainment that’s always evolving and adding new content every day. It’s also a vibrant social network, where you can stay connected with your friends and interact with over 17 million Xbox LIVE members in 26 countries. Xbox LIVE lets you get even more from your gaming experience – with thousands of downloadable game add-ons, song tracks, new levels, and many other ways to extend your favorite games. And with over 30,000 movies, TV episodes, and music videos, from more than 45 global network and studio partners, there’s something for everyone on Xbox LIVE. You can join Xbox LIVE for free or become a Gold member to gain access to everything LIVE has to offer.

Here are some Xbox LIVE highlights:

• Make Some Friends. Break out your favorite game and play online; you’ll always be able to connect with new people and make new friends. You can even jump in to any number of regularly scheduled theme nights to meet even more LIVE members.
• Get the Party Started. You can create an Xbox LIVE Party with up to seven of your friends, where you can stay connected and chat with each other, no matter what you’re doing on Xbox 360. One friend can be watching a movie, another playing Uno, another playing Gears of War 2 – or you could all be playing together. You’ll always stay together and be connected as a party.
• Xbox LIVE Arcade. Xbox LIVE Arcade brings bite-sized games to the living room – from arcade classics like Pac-Man and Teenage Mutant Ninja Turtles, to new award-winning, exclusive titles like Braid and Castle Crashers.
• Video Marketplace. The Video Marketplace offers downloadable TV episodes and movie rentals in both standard and high-definition, all delivered digitally without having to leave your living room. Check out some of the latest offerings, such as hit TV shows like Heroes, Lost, South Park and Family Guy, and blockbuster movies like The Dark Knight, Wall-E and Forgetting Sarah Marshall.
• Netflix (U.S.) With a Netflix membership you gain access to unlimited viewing of over 12,000 streaming movies and TV shows at DVD quality, with many in high definition. And, if you’re not a Netflix member, click on the Netflix logo to sign up for your free trial!
• Xbox LIVE Community Games. Community Games is dedicated to bringing user-created games to the market. Here you’ll find innovative new experiences brought to life by amateur developers around the world – gamers who are now creators.
• Inside Xbox Channel. This is your place for free original content delivered daily, including game previews, coverage of gaming industry events, and tips and tricks for new releases.

Xbox 360 delivers more entertainment than any other device connected to your television. This is just the beginning of what you’ll find on Xbox 360 – home to more games and on-demand movies and TV shows than any other device connected to your TV. With new gaming and entertainment content delivered daily, you’ll always be able to find fresh, new experiences at the touch of a button.

On behalf of the Xbox team, I want to thank you for joining the Xbox 360 and Xbox LIVE community!
See you online,

John

I’m certainly in the fan club that would love to see Kojima-san’s masterpiece come our way. It would be wonderful to play Metal Gear Solid on the Xbox. It could become another of the many franchises that started their life on another console that are now coming our way.

I can’t speak on behalf of Konami, but I can shed more light on the fact that we definitely have the power to run MGS4.

There are a lot of recent examples that are in true high-def on our platform and aren’t on PS3. We’ve got an amazing amount of horsepower and graphics power.

WHEN WILL THIS END?! Guess when MGS4 is on the Xbox 360, that's when. Ungh.

360 can handle MGS4, says Microsoft [MCVUK]

I wouldn’t go so far as to say we’re recession-proof, but we expect to be hit much less than an auto company, for example... We expect to do very well in the year-end shopping season.

Good thing video games don't cost like 20 grand, huh? Microsoft also expects to do reasonably well with its recent price cut. As Microsoft exec John Schappert pointed out: "When you look at people, who are certainly more price-conscious than ever, that price is something people are going to be looking at." Keyword: "look."

Sony, Microsoft Bullish on Game Systems [WSJ via VG247]

"I don't know if we are going to tie ourselves to a spring fall release schedule as much," he said. "I think one of the things that I worked with the team with when I joined. Lets do a big release. Spring and fall sounds like there is a lot of distance between the two but there is an awful lot of... it's pretty hard to make a new dashboard because you have to certify it against every revision of the hardware, and there's a bunch of different specs. It's a pretty time consuming and challenging thing to do. Which is why we only did it twice a year."

"I like staying focused on bigger and more impactful releases, so maybe it will be twice a year, maybe less frequently. You know, to be determined. I think it's going to be more about: Whats the next big launch? What are we bringing? When can we bring it? How can we do it in a big way."

Schappert also said that new updates would likely include new content for avatar customization and that the company is still looking at the possibility of adding text search to the ever expanding Marketplace line up.

"Don't worry," he said. "We already have plans well into next year about what we're delivering next."

[Pic]

While no longer the cheapest gaming console, the Wii is still seemingly more family friendly, more attractive to non-gamers and maybe, I believe, more interesting to new-comers to this form of entertainment who haven't yet bought a high definition television.

Schappert, though not a big fan of the recession proof concept, still thinks that the 360 will be the console of choice for those looking for a way to forget their troubles through gaming.

"I don't know about the whole recession proof moniker," he said. "I'm not going to subscribe to that myself. I've heard others bandy that about.

"I think what the world and the U.S. Is going through now is certainly unprecedented and it's startling and it effects all of us. And it's certainly worrisome. That being said. I think when people are walking in and they want to buy a game platform and they're interested in entertainment, you know gaming is the largest form of entertainment, I think we are pretty fortunate to have the lowest priced, best value, next-gen machine on the market."

On October 9th at midday, Schappert will present his keynote address "A Canvas for the World” which will apparently lay out how the Xbox 360 will bring people together to enjoy "the next wave of interactive entertainment experiences."

No, we don't really know what that means either —- but we bet it is pretty flippin' important. Who knows? Maybe MS are on a roll - by this time next year there could be an Xbox Elite in every self-respecting Japanese home.

Tokyo Game Show - John Schappert Keynote Address [Gamerscore Blog]

That may be in the future. In the near term, we want to launch these with great customization and a great library of accessories this fall. I think there is a lot more we can do with them. You will see us continue to add experiences that make use of the avatar. Our goal is not to create a sterile environment where you move furniture around. It's about how can we make our gaming experiences better.

Q&A: Microsoft game exec John Schappert talks about Xbox Live, Netflix deal, and Blu-ray [VentureBeat]

This isn't some 2-minute clip, so make sure to dim the lights and pour yourself a glass of wine before partaking. The satin robe is optional.

We're sitting here in Mascone's South Hall. The show should be starting in about 20 minutes or so.

I'm told by multiple sources that Microsoft has at least one big announcement planned for their talk today. If you recall yesterday we posted our best guesses for today's talk saying that the show would have Microsoft announcing (again) Live Anywhere, an XNA Arcade (perhaps in blade form) and Gears of War 2. They're still best guesses, but we've heard rumblings that at least two of them are sort of right.

I'm still going back and forth on Gears of War 2, not because I doubt its existence or that it's ready to be shown, but because I don't know if the Game Developers Conference is the best place to announce a triple A title. Fortunately, we're going to be finding out in the next hour.

Hit the jump to follow the live blogging and make your own predictions.

Oooooh ho ho. This just in from Mike McWhertor, sitting two seats over. The official Gears of War 2 press release just hit... in Italian. It coming to the 360 this November. The release will be hitting the site in a second or two.

We just tracked down a Microsoft spokeswoman who told us no comment, but the look on her face when I told her that the press release had leaked out early said loads more. She said to watch the conference for any announcements.

Five minutes until the show starts and they just started playing the James Bond music from GoldenEye.... hmmmm I wonder what that could mean.

Jamil Moledina, executive director for the GDC, just took the stage. He's talking about how change is important in gaming. Now he's talking about John Schappert, who started as a programmer. He founded Tiberon in 1994. In 2002, Schappert left Tiberon to head EA Canada, then he become head of EA Studios. Last year he moved over to Microsoft where he manages all platform technologies. And here he is... we didn't see him there.

"As the new guy there's an expectation I would come out with a gaming tattoo or giveaway a truckload of TVs. Sadly I don't have any tats or trucks."

He's walking us through his personal gaming history... starting with Desert Strike.

Now he's on to Madden, talking up the old-school history of the game.

He's popped up the old "We See Farther" poster now and now he's on to the Xbox 360 and how glad he is to be working for Microsoft.

Man, he's all over the place in this intro. I suspect he wants to get to the good stuff.

Last year our industry had it's biggest year ever. Obviously we are quite the mass media.

As of 2007 gaming is bigger than the music industry on a global basis.

One reason why the demand for the Xbox 360 was so high last year was because of the games you all delivered for it. Games like BioShock, Halo 3, Madden NFL 08, Guitar Hero 3, Assassins Creed, Mass Effect ad Call of Duty 4: Modern Warfare.

These seven titles sold over one million units each on the Xbox 360 last holiday season.

Games sell better on Xbox 360, because they simply play better on Xbox 360.

He's rolling out the metacritic scores to "prove" that the Xbox 360 has better games, even when the games are on multiple platforms.

Now he's moving on to Xbox 360 Achievements. This morning the Xbox 360 community has now unlocked over one billion achievements. (A little One Billion Achievements Unlocked Achievement just popped up on the screen.)

Gamers have spent more than $250 million on the Xbox Live Marketplace, that is just for gaming content, not subscriptions or video sales and rentals.

Halo 3 saved films is tremendously popular. The Halo community uploads 100,000 pieces of content every day. That's 30 percent more than YouTube on a daily basis.

They're showing a video clip with Ken Levine, Todd Howard, Eron Egozy and other developers talking about how wonderful Live is and how they like not having to worry about the backend for it.

Over three million downloaded songs for Rock Band alone, according to Egozy.

Video is over. "And that's why I'm so happy to be here today."

You are the ones helping drive all of this growth.

I'm so excited for the potential for Xbox Live and XNA Studios. Just look at Poker Smash it was the work of three guys who scraped together their money to put it together.

We have to unleash this potential and it will take two things to happen. The democratization of development and the democratization of distribution.

Chris Satchell, chief XNA Architect, just took to the stage to talk up the platform.

Today I'm here to talk about the community side. Eighteen months ago, he reminds us, Microsoft released the XNA Game Studio, which allows people to make games for the Xbox 360.

There have been more than 800,000 downloads since it was announced. Nearly 400 universities worldwide are now using the studio on their campuses.

They also launched Dream, Build, Play which gave would-be developers four months to create a game. The result was hundreds of great games, four of which received publishing agreements for Live Arcade.

They're showing a video now of one of the developers, James Silva, staring... Larry Hryb.

Little silly.

Now they're showing pictures of him as a child an interview with his "second grade teacher." His first girlfriend who said it was really doomed from the start. Cut to Hryb crying.

Parents talks about he could have sold shoes for a living or been a product manager for Microsoft.

And Satchell is back on stage introducing Silva to the stage.

Silva is showing two player coop play in his game The Dishwasher: Dead Samurai. The game is about a dishwasher who goes crazy and kills everyone. Looks kind of neat.

He says winning the contest will let him put off growing up for a few more years.

I'm excited about getting to play Dishwasher, I'm excited about getting to play the other three finalists. But what about the other ones, it's a shame you wont be able to play.

I think we will be able to change all of that, starting today.

For the first time ever you will be able to have access to community created games through Xbox Live Arcade.

If we are going to unleash this creativity, we need to put the power in the community.

They're going to do that but democratizing game distribution which means: create, submit, peer review and play.

Let's take a look at this pipeline.

Submit: The first part is you have to create your identity. You will have to build your reputation, as your fame grows this is what captures it.

Next you need to tell the community what 's in your game.

Peer Review: It's not going to be us reviewing it's going to be your peers. First they will look for prohibited content.

Play: Ten million people on Xbox Live will be able to play your game through XNA Creators Content.

Now they're showing a couple of games created on XNA.

On to a video of community games.

What they haven't done is explain exactly how it will be delivered to games, my guess is on a blade... Hmmm? Why does that sound so familiar.

Right now you can go to Xbox Live Markketplace and you can download free trials of The Dishwasher and a number of other XNA games. According to the screen behind Satchell it's a free trial of the games.

Wouldn't it be great if you could take all of this content mobile.. What if you had a Zune wouldn't it be great if you could take those games with you on your Zune.

Well this year you can.

He's showing Zurai a Shump on the Zune. He's controlling the ship with the touch pad. Now he paused the game and pulled up a song to listen to from the Zune while playing the game. Neat integration.

That's only part of it, with XNA Game Studio you can build online multiplayer games for your Zune. You can take games from Windows to Xbox to Zune.

This year we compete the (XNA Studio) vision, we democratize game distribution.

Satchell just brought Dr. Michael Capps of Epic to the stage to show off the next version of the Unreal engine running on the Xbox 360.

He's talking about Gears, oh you know what's coming in a few. Now he's onto their backend Unreal Engine, showing off some of the games that used it including BioShock, Mass Effect and Los Odyssey.

It's been about a year and a half since we made Gears and launched it. We've been pretty busy since that 18 months ago, we've added a lot of awesome new features to the engine. I want you to think about what Gears might have looked like if we launched it today.

Tim Sweeney is on the stage to talk it up.

They added a new ambient lighting technique that helps to make the characters and object pop a bit more.

He's showing a scene with more than 100 locust running through a street.

They've also improved the water technology. Now there is light bouncing off the water, and more realistic movement.

Improvements with their Matinee software now allows you to do real-time preview in-engine.

They've also added Ageia's soft body physics tool. Oh man, they just showed a cube of meat rolling down a hill in a level. Pretty nasty.

They've also added some real-time structural analysis tools to the engine to support destructible environments.

"These are just a few of the things we've added to the Unreal Engine 3."

And he's off.

Thanks Tim, Mike and Chris. John's back on stage.

By the end of the year we expect to have over 1000 games for the Xbox 360 making it the largest and most creatively diverse platform of this generation.

He reminds us that there a number of announcing top-tier titles coming for the Xbox 360.

But the hits keep coming all year long.

April 29 will see Grand Theft Auto IV along with downloadable episodes starting Fall 2008.

Also we'll see Halo Wars and Too Human.

This is just Feb 20 and these are just the announced titles.

It's one thing to talk about these games, but another to see them.

John just brought Temco Team Ninja's Tomonobu Itagaki to show off Ninja Gaiden 2 on the 360.

"There's something I've been thinking about a lot lately, that people think the industry has lost some of its vitality. "

He said he flew in just to show Ninja Gaiden 2 to prove those people wrong. He's showing off a new build that's never been seen before, a special build prepared just for GDC.

The title screen just popped up and it says GDC Special Edition. Ooops, he got a reconnect controller message.

Wow, that's one big sword. He's in a level that seems to be in an underground cavern filled with some sort of bats and meaty-looking long-legged creatures.

Running across a bridge now into an arena filled with creatures that have chainsaws and missile launchers for arms. I wonder how they go to the bathroom?

Now he's fighting some sort of skeletal cenipede with a scythe for a tail.

There appears to be some sort of pyramid in the distance.

Oh the game allows you to record clips as you play which you can later upload to Xbox Live.

OK, back to the beating the crap out of creatures, this time a bunch of blade-handed ninja. The graphics are absolutely bad-ass and very fluid.

He's running across a land bridge, fighting these small dragons annnnnd the reconnect controller message just popped up. (Probably a low battery)

Cut scene just started, it shows this demon talking, smack-talking the human race. Hey, I'm human, you can't call me a monkey.

He's delivering an ultimatum: Submit or Die. That's the end of the demo. Pretty tight.

Itagaki reminds the crowd that it's exclusive for the Xbox 360, shipping in early June around the world. Here in North America the game will ship on June 3.

John's back, save points, Ninja cinema, does it get any better than that.

No John, it doesn't.

Now Peter Molyneux is taking to the stage to show some of Fable 2.

He will be talking up two new features and doing a live demo.

Money, we all love it, we all like it. In Fable 2 it's very important. You don't get money for doing quests, you get money for doing jobs or gambling.

He's showing one of the in-game games, which is like roulette and craps and he rolled lucky 17, which he bet on.

Here's the surprising thing, what you are seeing there is actually an export to Live Arcade game. I can take the money I win from that game and move it into Fable 2.

They will be releasing this Live Arcade game a few weeks before the release Fable 2, so you can play this game and save up your money and be rich when Fable 2 launches.

I can take this money and buy stuff.

I just wanted to point out I am a woman, that's not a confession, I just wanted to point out you can play a woman in the game.

In Fable you can get married and you can have babies, so I have been pregnant. There is no labor mini game.

Transferring money from the Xbox Live game to Fable is one feature here's another.

We are going to show off the next big thing. I've played role-playing games my life, and I live them. But what I really love is coop, dynamic coop.

At any point you can say I want a friend here in this game now. The henchman he plays in the game will be based on his hero in his game.

That's the first cool thing, the second cool feature any experience or gold he gets in my game he can bring back into his game.

You can keep on earning experience in another person's game.

His dog just noticed something in the distance and Molyneux pulled a "lookout trigger" which shows him what his dog was looking at.

Now he's showing the combat system.

The gaming combat in this world is going to be amazing. One button for swords, another button and swords. You can also switch to magic.

Enough of death and mayhem, lets go and meet my family.

Down here I have a little farmhouse I bought with my money and moved my family.

We lived here five years, we had a baby and I haven't been back for six months.

The boy just ran up to greet his mom, all in in-game graphics.

His husband just came out to greet her and the henchman coop player shot the man dead.

That can happen, Molyneux points out.

John's back up on stage to wrap things up, it sounds like.

"We are all the future of our platform."

Oh oh, the screen just turned red. And it looks like we're about to see our first taste of Gears of War 2.

It's showing silhouettes on a blood red backdrop. A man fighting a locust and then chainsawing him.

Then that gear and death's-head logo just hit the screen.

Gears of War 2, it says.

Nice, now they have CliffyB chainsawing his way through the screen.

"Sometimes the rumors you read on the internet are true."

Gears of War 2 will be exclusive to the Xbox 360 this November, 2008.

Thanks for your time guys, I need to kill some locust enjoy the rest of GDC.

New Xbox 360 SKU Revealed Yes, the Xbox 360 is in short supply, leading internet prognosticators to conclude that yet another Xbox 360 hardware version is being readied, but we don't buy it. Still, Microsoft could show up with something more developer friendly, say, with a standard hard drive. Just don't count on it.

Microsoft Adopts Blu-ray HD-DVD is dead, long live Blu-ray! Now that the hi-def format war has been officially called, will Microsoft move on, giving Xbox 360 owners an add-on that finally plays Pirates of the Caribbean in 1080p.

Resident Evil 5 Is Exclusive To Xbox 360 Capcom's zombie killer would be a good get, but the publisher-developer says it's not happening. Don't worry, PlayStation 3 owners, we'll still get to enjoy RE5's mandatory 5GB install.

Gears of War 2 Is Episodic Downloadable Content Hey, wouldn't it be neat if Gears of War 2 was offered as DLC? Errr. Yeah. It might make for a slew of Xbox Live Gold sign ups, but would piss off just about everyone who doesn't have a hard drive.

Zune Gets Gaming Functions, Live Anywhere Microsoft's Shane Kim said "never say never" about a Zune gaming, but we expect that everything from Sync to Zune to Surface will be able to play Bioshock's hacking pipe game at some point.

Netflix Comes To Xbox 360 Oh, it would totally cock up the existence of Xbox Live Video Marketplace, so we're not sure how Microsoft would benefit from such a thing, but you never know. Wait, I think we actually know. Not happening (at least not today).

Rare's The Fast and the Furriest Shown We don't expect Rare to show off Banjo Kazooie until maybe E3, but this title, which is rumored to feature Xbox Live Vision cam controls might be a neat show-off for developers.

Microsoft Buys Epic Games For $3 Billion Gamepro sounds certain that Epic would be a smart acquisition at $1 billion, but Mark Rein puts a higher price tag on the Gears of War and Unreal dev. We'll one up you, Mark, and make it a cool three billion.

The keynote kicks off at 10:30 PST, in just about an hour. Stay tuned and make your own harebrained predictions in the comments.

Tomorrow John Schappert, Microsoft Veep of Live, Software and Services, will be taking the stage to deliver the first keynote for the Game Developers Conference proper.

While in the past, GDC hasn't been a place for announcements, that changed in 2006 when Sony rolled out such doozies as Home and LittleBigPlanet to an audience of mostly game developers. This year expectations are high that Microsoft will be making some sort of announcements of their own.

On paper the keynote is about how Microsoft plans to tap into a "wellspring of talent and innovation from the broader development community" but we'd be surprised if they didn't use their time on stage to also drop a little bomb or two. Hit the jump for our best guesses.

Gears of War 2: This has almost moved beyond rumor and become fact. Word of some possible Gears 2 announcement has been making the round for weeks now. The question has almost become not if they will be announcing the sequel to the amazing Epic shooter, but who will be working on it. (Our money's on former EA Chicago head Kudo Tsunoda) We expect to hear both bits of news at the keynote in the morning.

Live Anywhere: Despite the fact that they have the stage to themselves, Microsoft (like Sony last year) still probably feels it's necessary to somehow tie the announcement of a big triple-A title to something relevant to the conference. Our money is on Live Anywhere. Earlier today in his Casual Games keynote, Chris Early talked about how neat it would be to play the casual "flow game" from Bioshock while standing in line at the bank and then go back home and use his plays in the game to unlock stuff, making his brief bit of casual play matter in a bigger game. That, to me, sounds like it could be the long-ago announced and nearly forgotten mobile implementation of Live Anywhere... perhaps tied to big games like Bioshock (which already has a mobile game in the works) and Gears of War 2.

XNA Arcade: Obviously something has to be said about Microsoft's casual game development tool, XNA. They even have an area in their XNA space at GDC still underwraps until 11:30 a.m. tomorrow. (Right after the keynote). Our money is on Microsoft unveiling a broader distribution model for XNA produced games, like, perhaps, a new blade on Xbox Live.