Microsoft ( MSFT) may be a behemoth and a monopolist, but when it comes to video games, it's just an upstart. In the latest round of the video-game wars, the company lost billions of dollars while being crushed by industry giant Sony ( SNE). Corporate Vice President J Allard, who heads Microsoft's video-game efforts, is promising a different result this time. Under his leadership, Microsoft has unveiled its next-generation console, the Xbox 360, which the company promises will appeal to everyone from core game geeks to nongamers. Indeed, Allard has boldly predicted that a billion people will eventually play games on the new console. But the company again faces a challenge from Sony, which is introducing its own next-generation machine. And it still has many questions left to answer that will likely determine the fate of the 360, which in turn will affect the companies developing games for it. At the E3 conference in Los Angeles last week, I spoke with Allard about the challenges for the 360. Q: Why do you expect the Xbox 360 to do better in the marketplace than the Xbox did? A couple of factors: Xbox -- not only did we enter the market, what, 19 months behind Sony -- so we got a very, very late start -- but we were a brand-new team. The day we approved this project, we had never sold anything directly to Target and Wal-Mart. We didn't have a business relationship with Electronic Arts ( ERTS). We didn't have our online service developed. We had never shipped a console game before as a company. So we were developing a lot of new competencies as a company and assembling a new team. As talented as the team was that we pulled together, we hadn't really jelled as a team yet. So we had a lot of work to do. This time with Xbox 360, we've got the experienced team, we've shipped a lot of console games and built some incredible franchises. And we've got the relationships that we need and built out partnerships. The other material thing, obviously, is we're not going to give the 20-month head-start to our competitors.