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April 1, 2004; Vancouver, BC --- Speaking on the condition of anonymity, a high-ranking Microsoft executive has contacted the Armchair Empire with startling revelations regarding Microsoft’s foray into the console world.  This on the heels of a high-profile ruling by the European Union’s highest court regarding Microsoft’s marketing tactics.

“Xbox 2 is dead in the water,” says the source. “The costs associated with the recent ruling in Europe and those from a few years ago here in the States coupled with the cost of making the hardware are huge!  More than what's being reported by the press.  And even though the gaming and hardware division are mostly separate from the main operations, they still control the cash so it makes Xbox 2 cost prohibitive.  It would be folly to continue.”

The source also revealed the reasoning behind the latest price-cut of the Xbox saying, “We’re waving the white flag and clearing everything out – we need the space for other projects.  Do you have any idea how much square-footage a massive inventory of Xboxes occupies?  It’s massive!  We can’t stack them more than four feet high because there’s too much danger associated with falling consoles.  Hell, the legal people even made us put a warning like that in the original packaging!”

When asked about the much-anticipated sequel to Microsoft’s best-selling Halo the source was not shy about speaking his mind.

“Halo 2 has been [in development] since the last one came out and there’s still no firm release date – it’s a big money sinkhole,” he said. “With the anticipated slash and burn of projects as we pinch pennies, Microsoft will be selling development houses or cutting them loose.”

Calls to Bungie, the developer responsible for Halo and the upcoming Halo 2, went unanswered but there has been speculation at the recently wrapped Game Developer’s Conference in San Jose, California, that enquiries had been made by Bungie executives to secure a publishing deal with Vivendi Universal, Atari or Take 2.

Recently, Microsoft quietly announced that it will no longer be publishing Double Fine Productions', Psychonauts.  While there are rumors LucasArts is one of the interested publishers, nothing can be confirmed though there is a history between Double Fine's lead, Tim Schaffer, and LucasArts.  Microsoft also postponed any new additions to its XSN sports line for at least a year as they address issues of quality and has dropped High Voltage Software, which produced several sports titles for Microsoft.

When asked for comment on these moves our source said, "The real question is, who's next?  If I were working at Rare, I'd be looking over my shoulder."

One of Microsoft’s most successful ventures has been in the online arena, via their Xbox Live service. Once again, our source offers some jarring predictions and one key piece of information that has never been reported elsewhere.

“Xbox Live was mostly the result of bet between Bill Gates and Ed Fries, not market forces or the usual marketing/PR crap,” he said. When asked to elaborate on the nature of the bet, our source was strangely mute. “In this case the details don’t matter – but Ed’s not working at Microsoft anymore and Bill keeps getting richer.  But the end result is that December 31, 2004 is the last day for Xbox Live.  At least in its current subscription service model.  Effective January 1, 2005 it will be pay-to-play by the hour.  Nothing has been finalized yet, but word is that it will be set at $0.50 per hour on top of a $20 per month connection fee.”

Microsoft's woes would likely have the most impact on Sony and Nintendo who would likely benefit most from Microsoft's withdrawal from the console business.  When contacted for comment, Nintendo and Sony representatives asked, “Does the date of this story have anything to do with these revelations?”