BS: Natal is obviously a much more inclusive type of environment for players. How do you foresee Microsoft as a company trying to attract people to it? Is the scenario: the box is in the home on the back of the hardcore kid who bought it, and now the mom is going to be interested in it? How do you see yourselves pushing that forward?

SK: All of the above. I do think that today, obviously, given the core gaming base that we have -- we have 30 million Xbox 360s out there today -- we've already seen this with NXE and Netflix, that there's greater usage in existing Xbox 360 homes. Do I think it's helping sell Xbox 360 more people? Absolutely.

But where we're seeing a lot of benefit is in those existing homes, where we're getting great usage, and I do think that's part of the reason why our Live membership has grown so much now to 20 million members.

In the future, as we continue to add more content, we expand the social networking integration, and create gaming experiences like Natal -- based on Natal for a broader audience -- I think you're going to see Xbox 360 become much more appealing to a much wider fan base.

BS: The social networking and the accessibility, it strikes me more as something that would support people that came to the console that were more casual -- rather than drawing them in, necessarily.

SK: That's right. You know, I'd love for this to be the case, that people went out and bought a 360 and said, "I did it specifically because I want to have the Facebook experience on my television instead of on my computer." But the more that we add functionality like Last.fm, like instant-on 1080p HD, and so on and so forth, I think it really starts to make those kind of scenarios more realistic.

You look at what we're doing in the UK with SkyTV. With Sky, we're delivering live television programming now over Xbox Live, something we don't do in the U.S. today. That's again another compelling reason why you might go out and buy an Xbox 360 even if you're not a core gamer.

BS: Will Natal be usable on arcade consoles that don't have a hard drive?

SK: Yeah, I believe that.

KG: How far off is it? I'm sure there's no specific date, but you're showing it here, so?

SK: No. There's no specific date. It's not in 2009, but we have delivered development kits this week, so it's more real than not. That was not concept technology. That's real technology. We wouldn't be able to send dev kits for partners if there wasn't anything to start building off.

So, there's still a lot of work for us. There's no question about that. We feel really good about the progress that we've made. We've been working on it for quite some time. Now was the right time to unveil it to everybody, and I think the reaction that we received validates that decision.

KG: How does the marketing shift? It seems like it's going to aggressively evolve once Natal changes the situation. You and I have talked about going after casuals before -- but this goes way beyond just launching Banjo-Kazooie.

SK: Oh yeah. It's going to be the launch of Xbox 360.

KG: It's going to be like a relaunch?

SK: Absolutely. It will be that big. Now, the good news is that it's not a new hardware architecture; we're not forcing customers to have to go buy a new console because it will work with every existing Xbox 360 out there. But in terms of its importance and scale of what we're talking about, yeah, absolutely, it will be like the launch of a new Xbox.