Joystiq: We've also been playing a lot of Xbox Live Arcade. We actually chose for our favorite launch title Geometry Wars, even above all the boxed retail games.

CE: [Laughs] Thank you.

Joystiq: It made a few people angry. A few of our readers [who had not yet played the game], because they couldn't understand why we would select an arcade title (of all things!) above these games that took millions and millions of dollars to make and that have also got marketing budgets to match. There's sort of a disconnect between what the hardcore market expects in games now. [Some Joystiq readers] were completely taken aback by the idea that an arcade game could compete with the experience of these multi-million dollar titles. Is the gaming market destined to remain bifurcated like that forever?

CE: If by bifurcated you mean that there can be small titles that are fun and approachable and you can play in a relatively short period of time and there are other titles that are very deep and take a longer learning curve, I think that yeah, you probably will always see that differential that goes on because they appeal to different elements of even the same person at different times. There are times when [a person wants] to play a military simulation at a detailed level--there's a lot of learning that goes on there, there's a lot of deep strategy. The game takes a long time and if that's fun for you then you're not going to find that exact experience in a casual game. But that same person who enjoys that military simulation game also can find fun in playing Geometry Wars or something else that you're playing at a different point in time. I would liken it at some level to Television from a concept that nobody watches one show or one type of show or even 30-minute shows versus movies. I think you'll always see the difference.

The interesting thing that Arcade brings out is that for the first time it enables access to the console platform for a development cost that's significantly less than something that costs 10 to 20 million dollars to make. So for several hundred thousand dollars you can now experiment as a developer and have a channel to bring what can be very innovative and fresh content that people may not be willing to take a 10 million dollar chance on but certainly can for a couple hundred thousand dollars and see that success.

Joystiq: I've been talking to a Microsoft employee who's actually a member of the PMS Clan which is a pretty hardcore group of women who game together. They typically play first-person shooters and she is completely addicted right now to Geometry Wars. It's really funny how many Microsoft employees it seems are playing the game. Do you have any sort of data on how pervasive the phenomena is. Is it the most popular Xbox Live title?

CE: I actually don't have any data as to whether it is or it isn't. I can only deal anecdotally the same way you have. In hearing comments in the halls of people saying they had no idea how fun it was, or they had no idea that they were competing with their girlfriend or boyfriend for time because they found these arcade games. In some cases people are saying, "well I was going to do more on fill-in-the-blank-retail game but I got sucked in to Hexic for two hours last night… But I managed to earn this achievement or that achievement!" Those kind of things are kind of warming.

What it really does is that it really speaks to the core concept of these games having to be all about being fun. Because it doesn't take that much to get them started, it doesn't take that much to get into them. When you start up the Bankshot Billiards game, right away you're moving one of the levers (or the mouse if it's the PC version) and you see that it's connected to the cue stick. And sure enough you press a button and it fires the cue stick and the cue ball. Maybe you miss the first time but you know what? Fifteen seconds and you know how to play the game.

Joystiq: It is pretty simple.

CE: It's a simple game mechanic in many cases with a lot of discoverable play later. You'll realize later that there's power and angle and English that you can put on the ball and things like that. So it's not necessarily easy to master but it's easy and approachable to get into. The time between when you pick up the controller or you pick up the keyboard and the mouse and start the game to that first reward that you get to, "wow, this is fun!" is short. Less than a minute usually between the time when you match the first three hexagons and things disappear on the Hexic screen, or when you sink the first cue ball, or when you start having to fire off against the shapes or the aliens in whatever game it happens to be--that time is relatively short to the fun factor.

Joystiq: Right. That's ultimately why we chose Geometry Wars because there was no other game that we were able to pop in--I mean, we played Kameo for 11 hours straight--but there was no other game that really got the living room as excited as that game. We were actually yelling and laughing out loud and it was an experience that I hadn't had since I used to hang out in arcades as a juvenile delinquent. When you were watching someone who is really good at a game at the console, standing there [in an arcade environment] you just marvel at his score and you watched him come close to the high score. You watched him break through it--that sort of excitement has not been present for a very long time in gaming.

How did the whole service evolve to have the master scoreboards and achievements. What drives the product evolution here?

CE: Xbox Live Arcade is an area that started with Xbox One as a... There was an experiment that was done on Xbox One. And what we really did was start to take a look at some of the things that worked with Live and some of the things that worked in the web space for a long time and try to put a face on it that made it more relevant. For example, leader boards have been important for years. Even in the arcades you talk about, it was great to see who the top 10 were. But you know what? Maybe you got there but I never did. In the cases where I could see where I was, maybe I was 10,000th or 2,000th or wherever it was on those lists. But what's important to me is how I rate against my friends--people I know.

That's where the idea gets born out of the leader boards that are relevant to you: the achievements and being able to compare how you do versus somebody else. The fact that you can even get achievements. It's achievements on Xbox Live Arcade, it's badges on MSN Games, and they're all about--as you well know--what you can accomplish as part of the game. In MSN Games, for example, on the website, those badges went live in August and we've had tens of millions of people earn badges [in just about three months]. It's been much more wildly successful than we ever anticipated. It's just all about that fun of "I made it to the next thing" and it's not necessarily just about the one element of the score. It's being able to be part of that community where you're seeing how you're doing vis a vis the other people that you care about. It's what you said about watching the high score of the person there in the room with you.

Joystiq: How have the badges changed the behavior of gamers. Have you noticed the average session time increase? Have you noticed the stickiness of any of the games increase? I just read an article on a blog that says what you've kind of accomplished here is you've turned a single experience that typically lasts anywhere from a couple minutes to 10 minutes and turned it into a pervasive or persistent experience--almost massively multiplayered the arcade. As a result of that you should be seeing a lot of data that indicates people playing a lot more than they used to.

CE: We do. It is a meta game around the games themselves. There are a couple different versions so to speak of that meta game. One is the meta game within and around a particular game, so as you earn the badges or the achievements in a particular game like Hexic you are participating in that meta game. And then on the Xbox overall the concept of your gamer cred is a meta game there as well. And what we've seen happen with badges and achievements is that people do play more often. They do play for longer periods of time. And particularly on the website as there are promotional or special purpose badges that exist only for a short period of time. That really motivates people's play behavior as well. If you've played all of the games possible on the Xbox Live Arcade, and there's many, many more games on the website and you might find that you have a few that are favorites. [Then] you suddenly see that now for Zuma there's a special badge that you have to play at least 25 times and achieve a total score during that time of whatever that score has to be, but that's only available for the next week, we see people's play behavior change too. They're really out to get that one digital badge [via an opportunity] that will go away at the end of the week. It drives a lot of play around the site as well.

Joystiq: What are the key metrics that you use to judge whether the badges are a success. I'm sure that overall you've got a good feeling about them, but what key metrics do you watch in observing player behavior?

CE: We look at how many badges are awarded. How many badges are awarded per person, and how does that drive their session play in terms of frequency and then time online.

Joystiq: But ultimately the revenue model behind the entire casual games space is not ad sales on the portal, is it? I'd imagine that there are several: ad sales on the portal (MSN Games), in addition to Xbox Live memberships, in addition to--well, what are they?

CE: There's a variety of business models and they really do vary somewhat by platform. You're correct in the Xbox. That is Live memberships and it is fees that you would pay to purchase a downloadable game. On the website there is advertising and the fee that you would pay to purchase a downloadable game, but you don't have that membership or that subscription fee in that case. And in a few cases like Messenger games there's a subscription element as well. You can subscribe to games for a certain period of time. [Excised from interview: a bit of back and forth requesting sales data about Xbox Live Arcade titles. At the time of the interview, no such data was available for public release.]

Joystiq: How do you select games? At this point Xbox Live on the 360 is very navigable and it's not too difficult to go through the five categories from social sports to action. It's all relatively easy to understand. But I'd imagine that as you add more and more games that the diversity can become confusing or even overwhelming and there's no way--as far as I can tell--for users to rank or even sort titles by any sort of user feedback metric. How is the service going to grow as you get perhaps even hundreds or even more games in there? What are the plans to keep it as navigable as it is right now?

CE: It's certainly a key concern and something that we've struggled with for years on websites as well as we have hundreds of games available on the website as well--to make sure that things are as easily navigable and easily discoverable by the customer. You're correct in that there's not a clear reference or rating mechanism there today. Although, many sites, even sites like yours, really help along those lines in helping people--helping guide people to what they find is fun.

We do plan to continue to grow the content base and our strategy for doing that is finding games that complement the portfolio overall. We don't want to see ten different versions of pool out there, or 20 different poker games, or things like that. What we will have is multiple versions based on one taking a different approach or taking an advance beyond or something like that. In that way it's somewhat of a managed portfolio. And we talk with our developers to that end as well, to talk about where there are holes in the portfolio and where there are opportunities for development in addition to seeing what people are creating and taking great new ideas and bringing them forth.

The navigation is a--I don't want to say it's a problem today, but it's something we'll watch and that we're aware of that we'll continue to be aware of and will continue to offer decent solutions as we go forward.

Joystiq: Without any user feedback mechanism, people are relying on you to pick a lot of good games. So far you seem to have accomplished that. How do you make that go/no-go decision? Is it you making that decision? Or is it a panel of internal gamers that ultimately decide whether something makes it or not?

CE: Well there's certainly an internal process that it goes through and it ends up in executive review of those games and those game concepts to make sure that we've gotten feedback all the way along from people who love to play the games and from the business and to make sure it's viable for our developers to make sure that they are incented to go ahead and make a great game.

The net result comes down to a committee of folks who decide which games to go with and which games not to. And in that process we also look at the timing of the console and the audience and the demographic that's there, as well as whatever other platform. As you might imagine, we are continuing picking games for each of our platforms and games that go up on the web aren't necessarily the games that go up at the same time on the Xbox 360.

As you might imagine, the demographics of the Xbox 360 around the launch are going to be much more of the committed console gamer who will sit in line all night long to get their console. They're not going to have the same preferences as the demographic of women who are 30 to 50 who might be playing on the website. They're not going to be looking for the same games. So part of our secret sauce or magic is trying to match as best as possible the game experiences to the people who are going to be playing on those platforms.

Joystiq: One game that I think probably doesn't live up to the Xbox Live Arcade experience is Gauntlet. Have you played the game on Xbox Live Arcade?

CE: Of course!

Joystiq: A key component of Gauntlet in the arcades is that you are really careful with your health because you've got so little of it and it's constantly ticking away and you've got to shove in a quarter if you want more health, essentially. Or if you're really good at the game, then you can survive long enough to make it through. There's this idea of something that's really at risk--your quarter--in order to continue the experience. But on Xbox Live Arcade all you've got to do is hit the Y button over and over and over and essentially you've got unlimited health and the game quickly breaks down once you realize that. What do you think about that failure to replicate the arcade mechanic?

CE: It's certainly an interesting point and one that was debated long here. At the end of the day we decided that we would allow players to make the choice of how they wanted to play. And for those folks who wanted to simulate that experience, the experience comes from the willpower now required not to press the Y button. As opposed to the folks who don't want to have that limiting start over experience if they're not that good of a player to allow them to enjoy the game to the fullest.

Joystiq: I respect that decision but I'm wondering also if you had a proposal on the table to charge just one Microsoft Point per hit of that button.

CE: That's an interesting concept. Frankly I don't know whether we did or we didn't.

Joystiq: Because when we tried to play it multiplayer it very quickly devolved into, "Well gosh, it's easier for me to just run into all the guys and pump up my unlimited points." Nobody really had the willpower.

CE: [Laughter]

Joystiq: I can't imagine that anybody that discovers [the ability to gain unlimited health] retains the willpower, but it's just like in Geometry Wars: there's an achievement, for instance, that's tied to the ability to survive the first 60 seconds without firing a shot. There's no achievement associated with laying off the Y button.

CE: Maybe that would be a good addition.

Joystiq: Speaking of additions, do titles once they're placed within the service tend to evolve over time or is it once they're there, that's it? Do you continue to tweak them?

CE: In general: bugs will get fixed. Because of the short cycle of the development of the games it's more likely that you'll see a secondary version of Bejeweled and then Bejeweled 2, which will incorporate many of the features that would come through any kind of a patch or an update.

Joystiq: Are secondary versions going to be free for people who have purchased the full version of the first iteration?

CE: To the extent that they're fixes or enhancements to the game as it is, absolutely. To the extent that they're new versions of the game, then no, that would be an additional game.

[Excised off-the-record information from this section of the interview.]

Joystiq: That is to an extent... is it going to be feasible at some point for someone to play Geometry Wars on Windows Vista? Is that a title that will be offered on Vista?

CE: I don't see why not at this point, though we haven't made title decisions with respect to Vista.

Joystiq: Are the games that are currently distributed with Vista definitely in, are they just kind of a sample of what is on offer?

CE: You mean in the Beta version? Let's be clear about the distinction between pack-in games or in-box games and games that would be available through somebody playing it in a Vista environment. If you think about Windows XP, there was a certain set of games that were available when you bought the operating system. And then there's a whole bunch more games that you can get by playing at MSN games. What I'm talking about is the games that are available above and beyond what's there at time of pack-in.

Joystiq: Are there any pack-in games that will be tied in to this universal or single identity from the beginning, so that when I fire up, say, MineSweeper on Vista am I going to automatically be plugged in to a global leader board, and will it prompt me for my single-identity sign-in at that point?

CE: In general no, and that's part of the consent decree that Microsoft has been part of.

Joystiq: So you're somewhat limited in what you're allowed to do in terms of that level of integration.

CE: Correct.

Joystiq: For the Vista gamer, it's going to be largely--it's going to be a pull. It's not going to be automatically there. They're going to have to go out and seek the casual games experience.

CE: The same way that you could say that for a Windows gamer today. You think, "I want to play a casual game" and you'll have a choice as a Vista owner from a variety of places that you can play. One of those places that we hope will be very attractive for you to come and play is at Microsoft's game service. But Vista itself doesn't restrict you from where you're going to play and have a casual game experience.

Joystiq: I didn't expect that it would restrict. I was just hoping, perhaps, that we would get some cross-pollination because so far PC gamers and console gamers tend to be very separate populations and they don't interact very much, and this seemed to hold promise for that.

CE: Well I think that the casual games service that we're building actually holds the promise for that, because you'll be able to see on your Xbox that there's more things, more badges, more achievements that you can do that add to your gamer cred or reputation (or however you want to view it) by playing games on both platforms or in fact by playing cross-platform games as well.

Joystiq: So someone who's really looking to work on his gamer cred or gamer score will probably want to go onto Vista to earn those easy achievements--maybe not just the easy ones.

CE: Right. Correct. And those people that are motivated by the collecting behavior (of collecting achievements or collecting badges) just the way that you see now when you go and load up Geometry Wars, there's a dozen badges you can earn. You go and you explore those. As we drive to that point, there's no reason why one of those badges, for example, might be, "Play this on a different base platform" and earn that badge.

Joystiq: Ahh, that's a cool idea. Those badges are really a flexible platform for influencing all sorts of behaviors. Was that an innovation that came from within Microsoft or are other sites doing the badge idea? I know that we've even posted on Joystiq that they seem very similar to the Activision achievement patches that could be sewn on to a sweater.

CE: I wasn't familiar with those. The real concept behind it comes from asking what are the motivational or loyalty programs. Those have been around for years: mileage programs or things like that, offering status. One of the big challenges that--not just Microsoft--people have been working on for years in the online community space is "how do you allow consumers to differentiate themselves?" Because you and I, when we both log in, we are essentially the same, right? In that digital world we're just a collection of bits.

How do we begin to establish different identities and differentiating ourselves becomes a key element to the community? One of the ways is by allowing people to pick their own avatar and self express in some forms. But another way is to allow people to earn and achieve those differentiators and have that be part of something you can be proud of and show off: "In fact I am different because even though we may have picked the same avatar and remarkably similar name, I am clearly a much better Geometry Wars player or pick the game player because my score's higher or I've earned more badges or because whichever method you want to go to." Differentiation ends up being key.

Joystiq: Just in hearing you talk about this, you've got a very high... sophistication of language in talking about player need states. It's almost as if you've gone through the Maslovian hierarchy of needs and said, "Ok, which gamer falls into which category?" Are you able to share more of what you think the basic need states of a gamer are when you're putting together your casual games? Do you have a framework?

CE: There is a framework. While most people don't like to hear it reduced to a framework or anything like that--so it's not something that we generally want to talk about, but the basic element is fun. If you don't have fun with what it is that you're doing--especially in the casual games space--it's very easy to click right away. It didn't cost you much to download that trial version, or play that web version of the game. "Now I'm going to spend another 60 seconds and download another game because that one wasn't fun." The first need that you need to satisfy is the "fun" once you've delivered the game to them.

There's argument actually whether the first need is to create interest in the mind of the player for a particular game. To say: why would you pick Geometry Wars first over Joust first. Fun ends up being one of the first things that you have to solve once you get to the game. And then there's a variety of things beyond there. At some point you begin to get beyond game play and you get to the socialization side of things.

It's not just that I have fun. Is there something else that I can discover in the character's behaviors beyond that? Like collecting or the ego side of display, or differentiation. There's less of a Maslovian hierarchy of those needs. It's more that there are different types of players where those desires are stronger in some people and not as strong in others. There are some people who will play multiplayer games competitively and never ever socialize with any of the other players. That's just not an important thing for them. It's more important to have the challenge of playing against someone else who's not an AI.

There are other folks where the game is far less important, but being able to socialize in the course of the game is one of the key elements. From our standpoint, it's recognizing what those different elements are and how do we combine them in games that match the interests of those demographics.

Joystiq: The holy grail of gaming in general is to pull in the gamers who haven't typically been engaged. Casual gaming has done a better job of capturing the female demographic than the hardcore game, and there's no surprise there. What are the strongest needs in that 35- to 50-year old female demographic.

CE: We find that there are a number of things that strongly motivate behavior there. One's the ability to have an approachable game that doesn't take a long time to learn. it's the ability to a game that has a relatively short play cycle or has the opportunity to have a short play cycle. You may play a five-minute version of a game, you may play it longer, but the fact is that you can turn it on and turn it off. In many cases it's a game that you can do while you're doing something else. That's both in terms of a break from work or wherever, but also a game that you can play while you're socializing.

When you're talking about multiplayer, more card and cooperative puzzle type games tend to apply to here as opposed to a more action-oriented game where you're focused much more on the game than on anything else. From the needs standpoint, we actually worried a little bit about the badges and achievements side. [We were] not 100% certain that that would be motivating for our female demographic and we were pleasantly suprised that that was not the case. That there's quite a bit of... there's just as much obsessive behavior on women's part as there is on men's part [laughs] for earning badges! We were pleasantly surprised with that. Some of what we do is grounded in more traditional social sciences and sociological studies in looking at what people do, and some of it is--as I pointed out with the badges there--what we learn as we go along. I think one of the areas where I don't know if we're different but it certainly is a strong focus for us is that we do a lot of testing of the features that we look to bring out and the mechanisms of play ... to make sure that what we're delivering is in fact the best product that we can.

Joystiq: I actually want to get into more of that testing mechanic. Can you walk me through the typical process for a new feature that you're thinking about bringing out?

CE: It really depends on what type of feature you're talking about. Whether it's a user function of a site...

Joystiq: How about a game that is soon to launch or a game that has recently launched if you're not able to talk about anything that's coming up.

CE: Let's talk about badges for example. That's an area where we've seen both things happen. So what we do with badges is we come up with a concept of what we think is going to be fun and what we think is going to be appealing and what we're trying to accomplish with putting a feature like that in place, and then we'll do and do a variety of user group studies and usability studies that could involve panels of people talking about how things might be. It could involve people looking at prototypes and giving their feedback, to the point where we have a working prototype and where you actually watch people in their interaction with the process. Even to the scientific level where we have usability studies where player's eye motions are tracked to see what it is they're looking at at different points in time during the process.

By doing those different types of things we see what's successful and what's not successful from our basic premise. We always start with a basic premise and we refine that through all of our usability studies. Then we'll go into a more traditional form of a closed beta group or an open preview. Then we continually monitor that as time goes on to make sure that what we're doing does in fact match with what we were expecting. Then paying very close attention to the feedback that we get along the way too. As you well know, there's no shortage of people who will let you know exactly what they think about whatever the particular feature is.

Joystiq: I was hoping to give you an opportunity to talk about some features that you do have in the works. Are you able to?

CE: In general we don't do that. We don't talk about things that are not released yet.

Joystiq: How do you actually source all of these games. I get the sense from what I've seen on Xbox Live Arcade and on MSN Games that it's mostly third-party development. Does Microsoft Games also have first-party development of casual games.

CE: We absolutely do. We have an internal studio that works on casual games. They're the people that builtHexic on the Xbox 360 and Mozaki Blocks and [garbled] on MSN Games. We also realize that while we can make great games here, we also don't have the bandwidth to make every game in the world. We really depend on, or are dependent on the third-party game community as well. That's really where innovation will happen as well as with us.

The thing about the Microsoft side of the games studio is we'll write the games that maybe other people won't make the investment in in order to show and exemplify features and showcase the different abilities of the particular platform. More so because we want to show those off because that might be the best commercial reason to do that. That might be the biggest differentiation I see. We're hopefully all focused on making games that are fun for people to play.

Joystiq: Can you give an example of say a feature that was perhaps something you would have cut if you were concerned solely with commercial success but that you put in to show off abilities.

CE: Look atHexicfor example.Hexicis available as a web game. If you play the web version of the game you'll notice that it's significantly different from a look and feel from the Xbox 360 version of the game. It's the exact same game mechanic, but there's a lot more--there's a lot richer sound along with it. There's a lot richer graphic rendition of it.

The animations are different. The results of making the matches are different. All that is significant extra cost to go to that point. What we're showing off are some of those showcase features of the Xbox 360: the ability for it to render in high-definition; the ability for you to have badges and achievements tied to elements within the game; the richer sound events and so on. None of those would have to be done. If you look for example on the web side of things, the badges on the web side are much less frequently related to events that happen within the game. Whereas if you look on the Xbox 360, the ability is there for many in-game events to spawn badges.

One of the elements that's been very successful on the Xbox 360 is that, is the [achievement]. You talk about survive for the first 60 seconds without firing a shot. That's clearly an in-game thing as opposed to a score or completion or win of a game. By driving that from our first party side, we show the examples to the development community of how powerful that can be and as a result, there's a lot that do involve badges or achievements from inside the game. I think we'll see that trend now switch to the web world as well where we'll have a lot more badges or achievements that take place as a result of activities within the game as opposed to just at the end of the game.

Joystiq: Does Microsoft also share some of the code or infrastructure that you use to more fully take advantage of the Xbox 360 so that others can more readily use them?

CE: Infrastructure absolutely. And code from a code example standpoint, absolutely we do.

Joystiq: How long didHexictake to make from conception to launch?

CE: Generally you'll see three to six months depending on the game and the complexity of the game.

Joystiq: What was the development budget?

CE: I would say that it ranges. The lowest I've seen has been around $50,000. Most commonly you'll see between $100,000 and $200,000. You have the opportunity on Xbox Live Arcade games to go higher than that because you're pulling in a different graphical richness or sound richness than you are onto a web game or a messenger-based game.

Joystiq: What's the highest-budget Xbox 360 Live [Arcade] game that's out right now?

CE: Not everybody shares with us their budgets, but I'd be surprised if any of them went over a half-million dollars. That's Xbox Live Arcade.

Joystiq: That's a pretty low entry fee into the Xbox 360.

CE: Yes it is. That's to the point that I was trying to make earlier. With development budgets along those lines, large studios or small studios are able to approach the console market without having the $10- to $20-million development budget and risk associated with that. So studios large and small are much more willing to take some risk and creativity to try that thing that they've always thought would be a fun game but nobody was quite willing to bank it with $15 million of a development budget.

Joystiq: We should see some more diversity then of titles and people taking risks. If it's going to cost a developer between $50- and $200-thousand to create the game, what's the actual revenue model like for a third-party developer. Let's say I have a game and I approach you and I say "here's my game." It meets your quality control standards. How do you split the revenues with me when people convert from demo to full game?

CE: We share a percentage of those revenues back with the developer, and it's more than half that goes back to the developer.

Joystiq: More than half to the developer. Is there a sort of setup fee or anything like that? There's no system of advance-and-royalty earn back is there?

CE: With Xbox Live Arcade we're acting more as a game service as opposed to a publisher. You think of a traditional developer who goes and says, "I need some funding to go make a particular game." In a few cases in the very beginnings of Arcade we looked at what games we wanted to make sure are there and we looked at whether we needed to fund some of that development.

From an ongoing model perspective what we see already and expect to continue to see is certain organizations that emerge as publishers that are interested in publishing titles on the Xbox 360. We've already seen interest from the traditional publishers in creating Live Arcade games and we expect that there are some publishers that deal more just in the online space as opposed to a core publisher as well. And for those developers who don't have funding, that would be their course to find funding for their games or game ideas.

Joystiq: I was talking with someone who creates casual games and who was considering putting together a proposal for the Xbox Live Arcade and one concern we developed was: how are Microsoft Points managed?

I imagine that there are problem some points that are given out as freebies for one reason or another so that the exchange rate of dollars-to-points is not exactly $1 per 80 points. It's probably somewhat lower. Is there an internal exchange rate that you're shooting for? If people are paying for these [games] with points and then you convert points to dollars, what exchange rate do you use with the developer when that conversion happens?

CE: There's a relatively complex formula that goes through all that, and it's actually outside my group, so I don't even know what that formula precisely is. From the same standpoint if you use your credit card to pay for something there's a credit card fee different than if you paid cash and everything. Frankly if you buy points in one place versus points in another place more it might go ... you can imagine that if you buy points from Microsoft the funds available are different than the funds available if you buy points from a retailer who needs to share in that revenue stream.

The net result is that the use of points overall results in a much better platform for people to purchase and opens up that purchase capability to folks beyond what was just with the original Xbox a credit card. That we've seen as being very successful as well.

Joystiq: By lumping point transactions into relatively larger blocks of points you avoid being eaten alive by credit card fees and then you can then subdivide and allow gamers to buy things like 25-cent items without the overhead of a transaction fee.

CE: That's exactly right.

[Excised more off-the-record remarks from this section of the interview.]

Joystiq: Wow. We were kind of wondering about the choice of "Microsoft Points" as the name. We were figuring it had to do something with the intended use of them and didn't know that it would be that widespread. [Excised lots of "no comment" on future release-related questions. We had to try, but Chris would not slip up and divulge any secrets.]

Joystiq: So we've pretty much used up most of the hour but I wanted to give you the chance to mention anything that we haven't yet touched on that you feel is important.

CE: The important thing that keeps me excited about the whole premise and what we're doing is that level of joy you talked about when you said you couldn't remember sitting around a couch and cheering for people to do things. That's the level of fun we like to bring to people regardless of the platform.

If you could just imagine for a second that MSN Games demographic: Mom who's playing Bejeweled on her desktop at lunch who now happens to get to that on the Xbox 360 and plays through that... instead of feeling alienated from that machine because it's her son's or her boyfriend's or husband's or whatever now actually has a role there and feel much more a part of things and can share in that experience with everybody else. That's the core of what we're looking at from a Microsoft Casual Games experience.

It doesn't matter the platform. We're opening up fun experiences for people on all kinds of different platforms.

Joystiq: Thank you very much for the time you spent with us. I know an hour's a lot of time and I really appreciate it.

CE: Certainly my pleasure. I have a lot of fun talking about it.

[Updates: removed some off-the-record remarks from the interview transcript.]