Why the Marvel MMO didn’t make sense anymore. When “Banjo” is coming out. Whether “Mass Effect” is still a 360 trilogy. What will be the best-looking game on Xbox 360….

Last Thursday at the DICE gaming summit I met with Shane Kim, head of Microsoft Games Studios, in a conference room across the hall from where he had sat for a public interview with the New York Times’ Seth Schiesel. We discussed his publishing philosophy and reviewed the status of Microsoft’s major first-party gaming franchises one by one.

Our sweeping conversation covered “Halo,” “Gears of War,” “Alan Wake, ” and the host of other big Microsoft-backed games under his watch. Kim acknowledged that his studios’ line-up is more slender than the in-house offerings of Sony and Nintendo, adding that he hoped MGS’ reputation is one of “high-quality premium experiences.”

No, MGS won’t be set up to produce a lot of games, certainly not one a month, a rate I threw at Kim. “I know for us it’s been very fruitful to focus and to really get our attention and resources focused on key things,” he said. “I’m actually very comfortable with the volume of titles we have.”

Kim was a good sport, even gamely answering my question about whether the view that “Call of Duty 4” — not an MGS title — was the best-looking game on the Xbox 360 last year would drive Kim to ensure his label has the best-looking 360 title in 2008. He said: “I hope ‘Fable 2‘ is going to be really beautiful and that it will be considered the best-looking game.”

What follows is a game-by-game breakdown of my chat with Shane Kim.

Let’s start with the Marvel MMO and his explanation of why it’s not being made anymore…

“Marvel Universe Online“

Microsoft announced in September 2006 that “City of Heroes” makers Cryptic Studios would develop a massively multiplayer game set in the Marvel Comics universe. But last November, rumors swirled that development of the game had been shut down.

First, I asked if the game was truly canceled. He said: “I’ll confirm. Marvel and we have agreed to end development on the MMO. It was an amicable decision…. It’s just something that we felt that, for us and for them, it would be better if we ended development. Which is disappointing, because that had a lot of promise. But sometimes you have to make these decisions.”

Cue the natural follow-up: What went wrong?

“I don’t think it’s necessarily a case of what went wrong,” Kim told me. “I don’t know that that’s the right way to put it. For us we look at our priorities and all of the things we have to do. It’s a tough space. It’s a very competitive space. And it’s a space that’s changing quite a bit. …When we first entered into the development and agreement of the development of ‘Marvel Universe Online,’ we thought we would create another subscription-based MMO. And if you really look at the data there’s basically one that’s successful and everything else wouldn’t meet our level or definition of commercial success. And then you have to look [and say]: ‘Can we change the business model for that? Is that really viable given how far we are in development? And so forth. Does Marvel want to do that?’ There’s a whole bunch of factors.”

I asked if he meant that he would have wanted — but was too far in development — to consider other business models for the Marvel MMO such as an ad-supported version. “Item-based or transaction- based,” he chimed in, expanding the possibilities further. “Clearly there are emerging models that have come about. At the end of the day, all of those combined for us to say, look, it’s probably in the interest of both parties for us not to continue.”

Kim made it clear the Marvel project is done, but said that the cessation of development of two MMO’s during his tenure — the other being “True Fantasy Live Online” — wouldn’t discourage him from greenlighting a new one, “if the right opportunity came along.”

“Fable 2“

Kim is clearly excited about this one, referring to it as a major part of Microsoft’s 2008 holiday season. “I’m trying to do [lead creator Peter [Molyneux]’s job a little bit, because Peter was accused of over-hyping “Fable” 1. And so we’ve been keeping Peter really focused. I obviously believe it’s going to be a huge title.

He confirmed that Molyneux’s Microsoft-owned Lionhead Studios isn’t just doing “Fable 2″ at the moment. “They’ve got other things that they’re working on,” Kim said. “Peter’s a very creative guy, so he’s got other ideas that they’re always processing.” Lionhead fans, Kim said he’s never seen Molyneux’s mystery project “Dimitri,” itself the subject of many Molyneux interview teases, but that “Peter’s talked about it to me a bunch.”

Molyneux is scheduled to make a major presentation on “Fable 2″ at the Game Developers Conference in San Francisco next week.

“Gears of War“

Kim wouldn’t confirm the existence of “Gears of War 2,” a game widely expected by reporters to be slated for this fall. He did seem to like my suggestion that any sequel’s release date be called Re-Emergence Day (”That’s a good idea,” he chuckled).

He told me that, “no, no, no, no, no,” the newly-hired Kudo Tsunoda, former lead creative force behind EA Chicago, shouldn’t be considered “Gears” creator Cliffy B’s boss. Tsunoda is just in charge of “Gears” business for MGS, Kim said, part of a reorganization of MGS conducted a couple of weeks ago to add more senior leaders to the publisher.

“Too Human“

He’s pumped for this “Too Human”: “I don’t think we did the title a favor by unveiling the title as early as we did. It just wasn’t ready. We’ve been very careful about how we’ve nurtured that one along. I’m still a big believer in Silicon Knights and the vision they have for ‘Too Human.’”

“Alan Wake“

He said “not necessarily” when asked if the mysterious and seldom-seen “Alan Wake” is a 2008 game, but called the game “very different, very ambitious.”

“Mass Effect“

The EA acquisition of “Mass Effect” creators BioWare shouldn’t change the series. “It will be and has been and will continue to be a very important exclusive piece of content for Xbox 360,” Kim said. So could the series ever end up on PlayStation 3, as analyst Michael Pachter predicted? “The future is an awful long time. I suppose there’s some scenario.” But Microsoft would be publishing it? “You never know how things are going to go. We really care about our relationship with EA. BioWare’s been a good partner for us. We’re very happy with the success of “Mass Effect” and we want that to continue. From a platform perspective, is it the most important that Microsoft Games Studios publishes it or [rather] that it’s exclusive to the platform? That’s the way we have to think about it.”

And it’s still a trilogy, all three parts slated for the 360? “As far as we’re concerned, absolutely.”

“Crackdown“

Kim said Microsoft owns the intellectual property to last winter’s surprisingly well-received “Crackdown” and added that, even though developer Real Time Worlds has moved on to other projects, there is enthusiasm at MGS for doing more. “Ken Lobb, my creative director, loves ‘Crackdown.’ It’s his personal favorite. Ken would develop it himself if he could.” But, for now, Kim said, there is nothing announced.

“Banjo Kazooie 3“

I was asking about whether Microsoft-owned development studio Rare was going to stick to all-ages games or whether it would be tasked with making M-rated games again as well. Kim said both directions may still be taken, adding “I’m super-excited about what they’re doing with ‘Banjo.’ I think ‘Banjo’ is going to be a big hit for us this holiday.”

“Viva Pinata“

One year ago, a rumor at DICE was that the Xbox 360’s “Viva Pinata” fantasy gardening game was going to be spun off into a DS title. The DS project was hinted at in interviews. What of it a year later? “There’s still a hint,” Kim said. “I think we can look at that as an important component of trying to build the ‘Viva Pinata’ property.”

“Halo“

I asked if there would be any more core “Halo” games in the vein of the three existing ones, something central beyond the upcoming “Halo Wars” real-time strategy game and the announced mystery “Halo” project with Peter Jackson. Kim said: “Without getting into specifics about what types of game, I think the ‘Halo’ universe is very rich and there’s definitely an opportunity there. You’ve mentioned ‘Halo Wars’ and the series we’re working on with Peter. Those are two very ambitious projects in and of themselves. I think we can expand the universe and what we do there.”

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That’s about all we covered during our 30-minute chat. Did I miss anything?